<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 October 11, 1997
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 class of the registrant's common
stock as of October 11, 1997:
Class A Common Stock - 3,994,529 shares
Class B Common Stock - 4,514,790 shares
---------
8,509,319 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>
16 Weeks Ended 28 Weeks Ended
------------------------- ------------------------
October 11, October 12, October 11, October 12,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales and other revenues $ 465,650 $449,099 $ 809,574 $ 784,943
Cost of merchandise sold, including
warehousing and transportation 350,779 339,919 610,926 594,517
--------- -------- --------- ---------
Gross profit 114,871 109,180 198,648 190,426
Selling, general and administrative 100,446 95,444 172,709 176,180
Depreciation and amortization 5,935 5,633 10,311 14,697
--------- -------- --------- ---------
Operating profit (loss) 8,490 8,103 15,628 (451)
Interest and debt expense amortization 5,822 3,824 8,885 6,837
--------- -------- --------- ---------
Income (loss) before income taxes
and extraordinary item 2,668 4,279 6,743 (7,288)
Income taxes (benefit) 843 1,540 2,019 (2,915)
--------- -------- --------- ---------
Income (loss) before extraordinary item 1,825 2,739 4,724 (4,373)
Extraordinary item, net of tax (3,278) -- (3,278) --
--------- -------- --------- ---------
Net income (loss) $ (1,453) $ 2,739 $ 1,446 $ (4,373)
========= ======== ========= =========
Earnings (loss) per common share
Per primary share outstanding:
Before effect of extraordinary item $ .21 $ .33 $ .56 $ (.52)
Extraordinary item (.38) -- (.39) --
--------- -------- --------- ---------
Net income (loss) $ (.17) $ .33 $ .17 $ (.52)
========= ======== ========= =========
Assuming full dilution:
Before effect of extraordinary item $ .21 $ .31 $ .52 $ (.52)
Extraordinary item (.33) -- (.33) --
--------- -------- --------- ---------
Net income (loss) $ (.12) $ .31 $ .19 $ (.52)
========= ======== ========= =========
Dividends per share $ .11 $ .11 $ .22 $ .22
========= ======== ========= =========
</TABLE>
See notes to condensed consolidated financial statements.
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MARSH SUPERMARKETS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
October 11, March, 29 October 12,
1997 1997 1996
---- ---- ----
(Unaudited) (Note A) (Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 47,467 $ 12,529 $ 10,628
Accounts receivable 27,286 25,634 24,040
Inventories (a) 97,440 88,262 94,418
Prepaid expenses 3,864 5,362 3,795
Recoverable income taxes 1,508 941 2,154
Deferred income taxes -- 650 2,090
--------- --------- ---------
Total current assets 177,565 133,378 137,125
Property and equipment, less allowances for depreciation 234,434 232,681 234,671
Other assets 38,243 29,572 21,514
--------- --------- ---------
$ 450,242 $ 395,631 $ 393,310
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to bank $ -- $ 10,755 $ 9,000
Accounts payable 58,264 54,132 54,225
Accrued liabilities 42,696 42,140 42,597
Current maturities of long-term liabilities 2,802 7,097 7,258
--------- --------- ---------
Total current liabilities 103,762 114,124 113,080
Long-term liabilities:
Long-term debt 208,139 141,264 141,740
Capital lease obligations 3,923 4,165 4,578
--------- --------- ---------
Total long-term liabilities 212,062 145,429 146,318
Deferred items:
Income taxes 7,686 7,865 8,497
Other 12,445 12,765 12,254
--------- --------- ---------
Total deferred items 20,131 20,630 20,751
Shareholders' Equity:
Common stock, Classes A and B (Note B) 24,784 24,784 24,784
Retained earnings 98,074 98,474 96,195
Cost of common stock in treasury (5,909) (7,488) (7,503)
Deferred cost - restricted stock (2,337) -- --
Notes receivable - stock options (325) (322) (315)
--------- --------- ---------
Total shareholders' equity 114,287 115,448 113,161
--------- --------- ---------
$ 450,242 $ 395,631 $ 393,310
========= ========= =========
</TABLE>
(a) less LIFO reserve, October 11, 1997 - $17,754; March 29, 1997 - $17,592;
October 12, 1996 - $18,633
See notes to condensed consolidated financial statements.
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<PAGE> 4
MARSH SUPERMARKETS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
28 Weeks Ended
---------------------------
October 11, October 12,
1997 1996
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 1,446 $ (4,373)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 10,311 14,697
Amortization of other assets 2,755 2,793
Debt extinguishment costs 3,278 --
Changes in operating assets and liabilities (4,741) (1,835)
Other operating activities (1,787) 2,282
--------- --------
Net cash provided by operating activities 11,262 13,564
INVESTING ACTIVITIES
Net acquisition of property, equipment and land (12,726) (18,222)
Other investing activities (3,403) (1,151)
--------- --------
Net cash used for investing activities (16,129) (19,373)
FINANCING ACTIVITIES
Payments on short-term borrowing, net (10,755) (6,000)
Proceeds of long-term borrowing 172,000 37,580
Repayments of long-term debt and capital leases (109,662) (26,091)
Debt acquisition costs (5,718) --
Debt extinguishment costs (3,278) --
Purchase of shares for treasury (1,817) (27)
Stock options exercised 881 --
Cash dividends paid (1,846) (1,847)
--------- --------
Net cash provided by financing activities 39,805 3,615
--------- --------
Net increase (decrease) in cash and equivalents 34,938 (2,194)
Cash and equivalents at beginning of period 12,529 12,822
--------- --------
Cash and equivalents at end of period $ 47,467 $ 10,628
========= ========
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE> 5
MARSH SUPERMARKETS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except per share amounts or as otherwise noted)
OCTOBER 11, 1997
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 March 29, 1997. The balance
sheet at March 29, 1997, 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 "1998" and "1997" relate to the fiscal
years ending March 28, 1998 and March 29, 1997, respectively.
The condensed consolidated financial statements for the sixteen and twenty-eight
week periods ended October 11, 1997 and October 12, 1996, respectively, were not
audited by independent auditors. Preparation of the financial statements
requires management to make estimates that affect the reported amounts of
assets, liabilities, revenues and expenses for the reporting periods. 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 twenty-eight week period ended October 11, 1997, are
not necessarily indicative of the results that may be expected for the full
fiscal year ending March 28, 1998.
NOTE B -- COMMON STOCK
Class A Common Stock and Class B Common Stock each have 15 million shares
authorized. On October 11, 1997, March 29, 1997 and October 12, 1996, there were
3,994,529, 3,850,698 and 3,850,651 shares of Class A Common Stock outstanding
and 4,514,790, 4,544,855 and 4,542,672 shares of Class B Common Stock
outstanding, respectively.
In June 1995, the Company authorized an increase in its previously announced
stock repurchase plan from $2.0 million to $4.0 million. Through October 11,
1997, the Company has repurchased 307,617 shares at an aggregate cost of $3.9
million. The Company intends to purchase the remaining shares, from time to time
in the open market, at prices of $17 per share or less. The total number of
shares that could be affected by this plan represents approximately 4% of the
currently outstanding common stock.
NOTE C -- RESTRICTED STOCK
In September 1997, the Company granted 150,750 shares of restricted Class A
Common Stock, under the 1991 Employee Stock Incentive Plan, to certain key
employees. The grants will vest ratably on each of the first four anniversaries
of the date of grant and carry restrictions on the sale or transfer of those
shares.
NOTE D -- EXTRAORDINARY ITEM: DEBT EXTINGUISHMENT
On August 5, 1997, the Company sold $150.0 million of 10-year 8 7/8% Senior
Subordinated Notes (144A Notes) in a private offering under Rule 144A
promulgated under the Securities Act of 1933. The 144A Notes are guaranteed by
all of the Company's subsidiaries (other than three inconsequential
subsidiaries). The net proceeds to the Company from the offering of the 144A
Notes were approximately $144.1 million, net of an issue discount and fees and
related costs.
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<PAGE> 6
The Company used the net proceeds from the offering of the 144A Notes described
above (i) to repay approximately $60.9 million in principal amount of senior
unsecured indebtedness, approximately $0.9 million in accrued interest and
related prepayment fees of approximately $5.0 million; (ii) to repay all
borrowings outstanding under its revolving credit agreements of approximately
$20.1 million; (iii) to repay all borrowings outstanding under notes payable to
banks of approximately $15.0 million; and (iv) for general corporate purposes,
including capital expenditures. Pending application of the $42.2 million of net
proceeds to be used for general corporate purposes, the Company has invested
such proceeds in short-term, interest-bearing securities. The prepayment
penalties, plus $240,000 in unamortized debt acquisition costs, were charged to
income during the sixteen weeks ended October 11, 1997. The after tax charge of
$3,278,000 represents $.33 per fully diluted share.
On September 3, 1997, the Company and guarantor subsidiaries filed a
registration statement on Form S-4 (File No. 333-34855) to enable the Company to
offer to exchange its 8 7/8% Senior Subordinated Notes, Series B (the "Exchange
Notes" and together with the 144A Notes, the "Notes"), for all outstanding 144A
Notes. The guarantor subsidiaries are wholly-owned subsidiaries of the Company
and have fully and unconditionally guaranteed the Notes on a joint and several
basis. The guarantor subsidiaries comprise all of the direct and indirect
subsidiaries of the Company (other than three inconsequential subsidiaries). The
Company has not presented separate financial statements and other disclosures
concerning the guarantor and non-guarantor subsidiaries because management has
determined that such information is not material to investors.
NOTE E -- ACCOUNTING CHANGES
Effective March 30, 1996, the Company adopted Statement of Financial Accounting
Standard No. 121 (FAS 121), "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of." The statement establishes
accounting standards for recognizing and measuring the impairment of long-lived
assets, and requires reducing the carrying amount of any impaired asset to fair
value. The Company estimated fair values based on its experience in the
acquisition and disposal of similar assets. To reflect the change in accounting
policy, the Company recorded a non-cash charge to operating earnings of $7.5
million ($4.6 million after tax, or $.47 per fully diluted share), in the first
quarter of 1997, primarily related to the adjustment of building and equipment
carrying costs and leases of eight supermarkets and twelve convenience stores,
of which $4.9 million is included in depreciation and amortization, and $2.6
million is included in selling, general and administrative expenses. The Company
expects prospective annual earnings to improve approximately $900,000 ($565,000
after tax, or $.06 per fully diluted share) as a result of adopting FAS 121.
NOTE F -- INCOME TAXES
During 1997, the Company implemented a corporate restructuring pursuant to which
the Company's supermarket and Village Pantry operations were organized as
wholly-owned limited liability companies and their intellectual property was
transferred to a passive investment company. As a result of the restructuring,
the Company anticipates state tax loss carrybacks for the current and one
succeeding fiscal year resulting in significantly lower effective tax rates.
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following discussion includes certain forward-looking statements. Actual
results could differ materially from those reflected by the forward-looking
statements in the discussion, and a number of factors could adversely affect
future results, liquidity and capital resources. These factors include softness
in the general retail food industry, the entry of new competitive stores in the
Company's market, the stability of distribution incentives from suppliers, the
level of discounting by competitors, the timely and on budget completion of
store construction, expansion, conversion and remodeling, the level of margins
achievable in the Company's operating divisions, the ability to minimize
operating expenses, the ability to service the Company's increased indebtedness,
the ability of the Company to continue to hire, train and retain employees
needed in the business, and the risks associated with the sale of cigarettes and
other tobacco products. Although management believes it has the business
strategy and resources needed for improved operations, future revenue and margin
trends cannot be reliably predicted.
Results of operations for interim periods do not necessarily reflect the results
that may be expected for the fiscal year ending March 28, 1998.
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>
Second Quarter Year - to - Date
-------------------------------- ---------------------------------
Percent of Revenues Percent Percent of Revenues Percent
1998 1997 Change 1998 1997 Change
---- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Sales and other revenues 100.0% 100.0% 3.7% 100.0% 100.0% 3.1%
Gross profit 24.7% 24.3% 5.2% 24.5% 24.3% 4.3%
Selling, general and administrative 21.6% 21.3% 5.2% 21.3% 22.4% (2.0%)
Depreciation and amortization 1.3% 1.3% 5.4% 1.3% 1.9% (29.8%)
Operating profit (loss) 1.8% 1.8% 4.8% 1.9% ( 0.1%) n/m
Interest and debt expense amortization 1.3% 0.9% 52.3% 1.1% 0.9% 30.0%
Income taxes (benefit) 0.2% 0.3% (45.3%) 0.2% ( 0.4%) n/m
Income (loss) before extraordinary item 0.4% 0.6% (33.4%) 0.6% ( 0.6%) n/m
Extraordinary item, net of tax (0.7%) - - (0.4%) - -
Net income (loss) (0.3%) 0.6% n/m 0.2% ( 0.6%) n/m
n/m = non-meaningful comparison
</TABLE>
SALES AND OTHER REVENUES
Consolidated sales and other revenues of $465.7 million increased $16.6 million,
or 3.7%, in the second quarter of 1998, compared to the same quarter of 1997.
Supermarket revenues increased $9.9 million, Convenience Store Distributing
Company (CSDC) revenues increased $7.8 million and Crystal Food Services
revenues increased $1.1 million, while Village Pantry revenues decreased $2.2
million. Retail sales (excluding fuel sales) increased 2.1%. Sales in comparable
supermarkets and convenience stores (including replacement stores and format
conversions) increased 1.5% from the second quarter of fiscal. Approximately
$2.8 million of the increase in CSDC revenues resulted from passing on higher
manufacturer cigarette prices to customers.
For the twenty-eight weeks ended October 11, 1997, consolidated sales and other
revenues of $809.6 million increased $24.6 million, or 3.1%, compared to the
same twenty-eight weeks of the prior year. Supermarket revenues increased $12.4
million, CSDC revenues increased $13.9 million and Crystal Food Services
revenues increased $1.8 million, while Village Pantry revenues decreased $3.8
million. Retail sales (excluding fuel sales) increased 1.5%. Sales in comparable
stores (including replacement stores and format conversions) increased 1.0% from
the same twenty-eight weeks of 1997. Approximately $3.5 million of the increase
in CSDC revenues resulted from passing on higher manufacturer cigarette prices
to customers.
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<PAGE> 8
GROSS PROFIT
Gross profit is calculated net of warehousing, transportation, and promotional
expenses. Gross profit increased $5.7 million, or 5.2%, to $114.9 million in the
second quarter of 1998 from the comparable quarter of 1997. As a percentage of
revenues, gross profit increased to 24.7% from 24.3%. The majority of the gross
profit improvement was achieved by the supermarket division. CSDC and Crystal
Food Services also contributed to the gain, while Village Pantry gross profit
decreased slightly as a result of lower sales.
For the twenty-eight weeks ended October 11, 1997, gross profit increased $8.2
million, or 4.3%, to $198.6 million, from the comparable year earlier period. As
a percentage of revenues, gross profit increased to 24.5% from 24.3%. The
supermarket division accounted for approximately seventy percent of the
improvement with increases also contributed by CSDC and Crystal Food Services.
Village Pantry gross profit was essentially the same as the year earlier period.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased $5.0 million, or 5.2%, to
$100.4 million in the second quarter of 1998, from the second quarter of 1997.
As a percentage of revenues, SG&A expenses increased to 21.6% from 21.3% in the
comparable year earlier quarter. The increased expenses were primarily
attributable to an increase of $1.9 million in supermarket division selling
expenses primarily in wages, fringe benefits, supplies and store occupancy
costs, a $0.2 million increase in advertising expenses, a $1.6 million increase
in general and administrative expenses primarily in wages, payroll taxes and
fringe benefits, a $0.8 million increase in selling expenses in Crystal Food
Services, and $1.4 million in cost reduction related consulting fees expensed in
the current quarter. The increase in supermarket selling expenses was partially
offset by a $0.3 million reduction in casualty and Workers' Compensation losses
and a $0.7 million reduction in state gross receipts tax. Wage expense in stores
open both quarters, excluding supermarket conversions to the LoBill format,
increased 0.9%. The Company improved labor scheduling techniques in the current
year, resulting in the reduction of labor hours, while continuing to maintain
high customer service levels.
For the twenty-eight weeks ended October 11, 1997, selling, general and
administrative expenses decreased $3.5 million, or 2.0%, to $172.7 million, from
the comparable twenty-eight weeks of 1997. As a percentage of revenues, SG&A
expenses decreased to 21.3% from 22.4% in the comparable period of 1997. In
1998, store operating expenses increased $3.9 million, general and
administrative expenses increased $2.0 million and $1.4 million in cost
reduction related consulting fees was expensed. The increase in store operating
expenses was partially offset by a $1.2 million decline in casualty and workers
compensation losses and a $1.6 million reduction in state gross receipts tax.
Additionally, advertising costs decreased $1.2 million in 1998 from 1997.
Expenses in 1997 that did not recur in 1998 included $2.6 million in FAS 121
charges related to future lease obligations and the write-down of land values
for impaired stores, $2.4 million from the decision to curtail the accrual of
benefits under the Company's qualified defined benefit pension plan, $1.3
million for recruiting and relocation of certain personnel hired during the
first quarter of 1997, consulting fees and the decision to sever certain
employees, and a $0.5 million charge to merchandising allowances related to a
supplier contract. In identical stores, wages increased 0.6% from the comparable
twenty-eight weeks of the prior year.
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DEPRECIATION AND AMORTIZATION EXPENSE
Depreciation and amortization expense in the second quarter of 1998 of $5.9
million increased $0.3 million, or 5.4%, from the second quarter of 1997. As a
percentage of revenues, depreciation and amortization expense was 1.3% for the
second quarter of both 1998 and 1997.
For the twenty-eight weeks ended October 11, 1997, depreciation and amortization
expense decreased $4.4 million, to $10.3 million, from the comparable period of
1997 that included $4.9 million in FAS 121 charges primarily related to the
write-down of eight supermarkets and twelve convenience stores. As a percentage
of revenues, depreciation and amortization expense was 1.3% for the twenty-eight
weeks ended October 11, 1997, compared to 1.9% for the comparable weeks of the
prior year.
OPERATING PROFIT
Operating profit (earnings from continuing operations before interest, taxes and
debt extinguishment costs) was $8.5 million for the second quarter of 1998,
compared to $8.1 million in the comparable quarter of 1997, and was 1.8% of
revenues in both quarters. The gross profit improvement of $5.7 million was
partially offset by the $5.0 million increase in selling, general and
administrative expenses and the $0.3 million increase in depreciation and
amortization.
For the twenty-eight weeks ended October 11, 1997, operating profit was $15.6
million, compared to a $0.4 million operating loss for the comparable year
earlier period. The $8.2 million improvement in gross profit combined with the
$3.5 million decrease in selling, general and administrative expenses and the
$4.4 million decrease in depreciation and amortization accounted for the
operating profit improvement.
INTEREST EXPENSE
Interest expense in the second quarter of 1998 increased $2.0 million, or 52.3%,
from the second quarter of 1997. For the twenty-eight weeks ended October 11,
1997, interest expense also increased $2.0 million, or 30.0%, to $8.9 million
from the comparable prior year period. The second quarter and twenty-eight week
increases resulted from the issuance of $150.0 million in principal amount of
the Notes, consummated in August, 1997, as previously discussed.
INCOME TAXES
For the quarter ended October 11, 1997, the effective income tax rate was 31.6%,
compared to 36.0% for the comparable prior year quarter. For the twenty-eight
weeks ended October 11, 1997, the effective income tax rate was 29.9%, compared
to 40.0% for the comparable period of the prior year. The 1998 second quarter
and twenty-eight weeks effective tax rate is lower than the statutory rate due
to contributions, tax credits and an anticipated state tax loss carryback
resulting from restructuring the Company's supermarket and Village Pantry
operations.
INCOME BEFORE EXTRAORDINARY ITEM
Income before debt extinguishment for the quarter ended October 11, 1997 was
$1.8 million, or 0.4% of revenues, compared to $2.7 million, or 0.6% of revenues
for the year earlier quarter. For the twenty-eight weeks ended October 11, 1997,
income before debt extinguishment was $4.7 million, or 0.6% of revenues,
compared to a loss of $4.4 million, or (negative) 0.6% of revenues, for the
twenty-eight weeks ended October 12, 1996.
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<PAGE> 10
EXTRAORDINARY ITEM: DEBT EXTINGUISHMENT
In August 1997, the Company consummated the issuance of $150.0 million in
principal amount of 144A Notes, as previously discussed, and a portion of the
proceeds was used to repay $60.9 million in principal amount of senior unsecured
indebtedness and $5.0 million in related prepayment penalties, and to repay
amounts outstanding under revolving credit facilities. The prepayment penalties,
plus $240,000 in unamortized debt acquisition costs, were charged to income
during the sixteen weeks ended October 11, 1997. The after tax charge of
$3,278,000 represents $.33 per fully diluted share.
NET INCOME (LOSS)
Net loss for the sixteen weeks ended October 11, 1997 was $1.4 million, or
(negative) 0.3% of revenues, compared to net income of $2.7 million, or 0.6% of
revenues, for the comparable period of the prior year. For the twenty-eight
weeks ended October 11, 1997, net income was $1.4 million, or 0.2% of revenues,
compared to a net loss of $4.4 million, or (negative) 0.6% of revenues, for the
comparable period of the prior year.
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 first twenty-eight weeks of 1998, the following stores opened or were
under construction:
<TABLE>
<CAPTION>
Square
Store Type Category Feet Location Status
---------- -------- ---- -------- ------
<S> <C> <C> <C> <C>
Supermarket Remodel 75,000 Westfield, IN Under construction
Supermarket Remodel 80,000 Fishers, IN Complete
LoBill New 42,000 Hamilton, OH Open
LoBill Conversion 23,000 Connersville, IN Complete
</TABLE>
For 1998, in addition to the projects listed above, the Company plans to open
one LoBill supermarket and five new convenience stores and acquire several sites
for future development. Additionally, the Company plans to upgrade supermarket
front-end systems and scale equipment, and begin implementation of new
generation inventory procurement/distribution software.
The estimated cost of these projects in 1998, including routine capital
expenditures, is expected to be $25.0 to $30.0 million. Of this amount, it is
anticipated that equipment leasing will fund approximately $2.0 million. As of
October 11, 1997, the Company had expended $12.7 million for capital
expenditures.
The Company's plans with respect to store construction, expansion and remodeling
may be revised from time to time, in light of changing conditions, such as
competitive influences, its ability to successfully 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 that
some of 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.
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<PAGE> 11
As presented in the Condensed Consolidated Statements of Cash Flows, net cash
provided by operating activities was $11.3 million for the first half of 1998, a
$2.3 million, or 17.0%, decrease from the $13.6 million reported for the first
half of 1997. Working capital increased $54.4 million from March 29, 1997. The
significant changes in working capital were a $34.9 million increase in cash and
equivalents, a $9.2 million increase in inventory, a $1.5 million increase in
accounts receivable, a $4.7 million increase in accounts payable and accrued
expenses, a $10.8 million decrease in notes payable to banks and a $4.3 million
decrease in current maturities of debt. The increase in cash and equivalents
results from residual proceeds of the $150.0 million Notes. The increases in
inventory, accounts receivable, and accounts payable and accrued expenses are
due primarily to seasonal trends.
In August 1997, in connection with the issuance of the 144A Notes, the Company
repaid $35.0 million borrowed on existing revolving credit facilities and short
term borrowing arrangements, entered into a new $30.0 million revolving credit
facility with a bank lender and amended a $20.0 million revolving credit
facility. As a result, the Company has $50.0 million of availability under its
revolving credit facilities, of which $1.2 million was utilized at October 11,
1997. Commitments from various banks for short-term borrowings provide an
additional $20.0 million of available financing at rates based upon the then
prevailing federal funds rate. At October 11, 1997, no amounts were outstanding
on short-term bank credit lines.
The Company believes the remaining net proceeds of the offering of the Notes,
borrowings under its revolving credit agreements and notes payable to banks,
cash flows from operating activities and lease financings will be adequate to
meet the Company's working capital needs, planned capital expenditures and debt
service obligations for the foreseeable future.
11
<PAGE> 12
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
The Company held its Annual Meeting of Shareholders on August 5, 1997
(the "Annual Meeting"). At the Annual Meeting, shareholders voted to
elect three directors for terms of three years each and until their
successors are duly elected and qualified. The table below sets forth
the number of votes cast for and withheld with respect to each nominee
for director:
<TABLE>
<CAPTION>
Nominee For Withheld
------- --- --------
<S> <C> <C>
Don E. Marsh 3,057,371 20,402
William L. Marsh 3,057,609 20,164
Stephen M. Huse 3,057,287 20,486
</TABLE>
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) Form of Restricted Stock Agreement, dated
as of September 15, 1997
(b) Form of Employment Contract, dated as of
June 1, 1997
Exhibit 11 Statement Re: Computation of Earnings Per Share
Exhibit 27 Financial Data Schedule for the quarter for which
this report is filed (for SEC use only).
(b) The Company filed a Form 8-K, dated July 17, 1997, announcing
the sale of the 144A Notes and a Form 8-K, dated
August 5, 1997, announcing the consummation of the offering
of the 144A Notes.
12
<PAGE> 13
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.
November 24, 1997 By: /s/ Douglas W. Dougherty
------------------------------
Douglas W. Dougherty
Vice President, Chief Financial Officer
and Treasurer
November 24, 1997 By: /s/ Mark A. Varner
-----------------------
Mark A. Varner
Chief Accounting Officer,
Corporate Controller
13
<PAGE> 14
<TABLE>
<CAPTION>
Exhibit Index Page Number
------------- -----------
<S> <C> <C>
Exhibit 10 (a) Form of Restricted Stock Agreement, dated as of September 15, 1997 15
(b) Form of Employment Contract, dated as of June 1, 1997 19
Exhibit 11 Statement Re: Computation of Earnings Per Share 31
Exhibit 27 Financial Data Schedule (for SEC use only) 32
</TABLE>
14
<PAGE> 1
Exhibit 10 (a)
RESTRICTED STOCK AGREEMENT
under the
Marsh Supermarkets, Inc.
1991 Employee Stock Incentive Plan
(CLASS A COMMON STOCK)
THIS RESTRICTED STOCK AGREEMENT (the "Agreement") is made and entered
into as of the 15th day of September, 1997 (the "Effective Date"), by and
between MARSH SUPERMARKETS, INC., an Indiana corporation (the "Company") and
((FirstName))((LastName)) ("Executive").
1. RESTRICTED STOCK AWARD. The Salary Committee of the Board of
Directors of the Company (the "Board") hereby awards Executive 19,970 shares of
the Company's Class A Common Stock (the "Restricted Stock"), subject to the
terms and conditions of this Agreement and the terms and conditions of the 1991
Employee Stock Incentive Plan (the "Plan"). In the event any term of this
Agreement conflicts with or is inconsistent with the provisions of the Plan, the
provisions of the Plan shall control.
2. RESTRICTIONS AND CONDITIONS.
(a) Commencing on the Effective Date, Executive agrees that Executive
has no right to, and covenants not to, sell, transfer, pledge, assign or
otherwise transfer (collectively, "Transfer"), in whole or in part, all or any
part of the Restricted Stock and that Executive's right to the Restricted Stock
shall be subject to the risk of forfeiture hereinafter set forth (collectively,
the "Restrictions"); provided, however, that the Restrictions shall lapse and be
of no further force and effect as follows:
(i) Upon each of the first four (4) anniversaries of the
Effective Date, provided that the Executive's employment with the
Company has not terminated, the Restrictions shall lapse and be of no
further force and effect with respect to twenty-five percent (25%) of
the shares of Restricted Stock herein granted (each such anniversary
herein referred to as a "Lapse Date").
(ii) Notwithstanding (i) immediately above, the Restrictions
may lapse and be of no further force and effect upon an earlier date or
dates in accordance with this Agreement or the Plan; provided, however,
that in no event shall any of the Restrictions lapse within six (6)
months of the Effective Date.
From and after each Lapse Date, the shares of Class A Common Stock with
respect to which the Restrictions shall have lapsed (the "Unrestricted Shares")
shall no longer be Restricted Stock and shall be owned by Executive free and
clear of the Restrictions, but, except as otherwise provided in the Plan, shall
be subject to the limitations set forth in paragraphs 4, 5, 6 and 7 hereof
(collectively, the "Limitations"). As soon as reasonably practicable after the
Restrictions shall have lapsed with respect to all of the shares of Restricted
Stock or as otherwise provided by the Plan, the Company shall deliver to
Executive a Certificate (hereinafter defined) for the Unrestricted Shares.
(b) Except as provided in the Plan or this Agreement to the contrary,
Executive shall have all of the rights of a shareholder of Class A Common Stock
of the Company (the "Class A Stock") from and after the Effective Date,
including the right to vote the Class A Stock and the right to receive any
15
<PAGE> 2
cash dividends on the Class A Stock declared by the Board and paid by the
Company. Pursuant to Section 3 below, stock or other security dividends or stock
splits issued with respect to Class A Stock shall be treated as additional
shares of Restricted Stock that are subject to the same restrictions and other
terms and conditions that apply to the Restricted Stock (including the
Restrictions and the Limitations) with respect to which such dividends or splits
are issued.
(c) Except as otherwise provided in the Plan, upon Executive's
termination of employment with the Company for any reason prior to the fourth
anniversary of the Effective Date, all shares of Restricted Stock subject to the
Restrictions as of the date of such termination (the "Termination Date") will be
forfeited, and Executive hereby authorizes the Company to use the Stock Power
(hereinafter defined) to cause the transfer agent for the Class A Stock to
transfer to the Company the shares of Restricted Stock represented by the
Certificate and to issue a Certificate in the name of Executive for the shares
of Unrestricted Shares, if any, as of the Termination Date. As soon as
reasonably practicable after the Termination Date, the Company shall deliver to
the Executive a Certificate for the number of shares, if any, of Unrestricted
Shares as of the Termination Date.
3. ADJUSTMENTS. In the event of any change in the outstanding shares of
Class A Stock which requires an adjustment in stock options and/or restricted
stock awards under the Plan or otherwise pursuant to the Plan, any such
adjustment or adjustments will also be made to the Restricted Stock and to the
Unrestricted Shares as of the effective date of any such change.
4. CERTIFICATE; RESTRICTIVE LEGEND. Executive acknowledges that the
stock certificate issued in the name of Executive for the all or any portion of
the shares of Class A Stock awarded to Executive pursuant to this Agreement (the
"Certificate") shall bear the legend set forth below and any additional legend
required by applicable securities law or by the National Association of
Securities Dealers, Inc. or any stock exchange or stock association on which the
Class A Stock is listed or quoted:
THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO THE
TERMS AND CONDITIONS OF A RESTRICTED STOCK AGREEMENT, DATED AS
OF SEPTEMBER 15, 1997, BETWEEN MARSH SUPERMARKETS, INC. AND
THE REGISTERED HOLDER HEREOF, INCLUDING LIMITATIONS ON THE
RIGHT TO SELL, TRANSFER, PLEDGE, ASSIGN OR OTHERWISE TRANSFER
ALL OR PART OF SUCH SHARES.
Executive acknowledges that the Certificate evidencing the Restricted Stock
shall be held in the custody of the Company until the Restrictions shall have
lapsed with respect to all of the shares of Restricted Stock and understands
that it is a condition precedent to the effectiveness of this Agreement and the
award of the Restricted Stock that Executive deliver to the Company a duly
executed irrevocable stock power with respect to the Restricted Stock endorsed
in blank (the "Stock Power").
5. NON-TRANSFERABILITY. Prior to delivery of the Certificate to
Executive, Executive's rights hereunder as to the Unrestricted Shares shall not
be transferable otherwise than by will or by the laws of descent and
distribution (and then only as provided in the Plan) and the terms hereof shall
be binding on the executors, administrators, heirs and successors of Executive.
After delivery of the Certificate, the Unrestricted Shares shall be transferable
subject to the limitations described in paragraphs 4, 5, 6 and 7 hereof
(collectively, the "Limitations").
16
<PAGE> 3
6. COMPANY'S RIGHT TO PURCHASE. Executive acknowledges and agrees that,
after delivery of the Certificate to Executive, the Company shall retain the
right to purchase at the Price (hereinafter defined) all or any part of any
Unrestricted Shares which Executive intends to Transfer. Prior to each Transfer
of all or any part of the Unrestricted Shares, Executive shall give written
notice to the Company of Executive's intention to effect a Transfer and the
number of Unrestricted Shares which Executive intends to Transfer (the
"Notice"). The Company shall have the right, but not the obligation, to purchase
the Unrestricted Shares encompassed by the Notice for a period of five (5)
business days after its receipt of the Notice (the "Option Period"). If the
Company elects to purchase the all of the Unrestricted Shares encompassed by the
Notice, the Company shall mail written notice to Executive of its intention to
purchase such shares (the "Response") prior to the end of the Option Period and
shall purchase such shares at the per share closing price of the Class A Stock
on either the date that the Company received the Notice or the date that the
Company mailed its Response, whichever per share price is the greater (the
"Price"). If the Company fails to mail timely the Response with respect to the
Unrestricted Shares encompassed by the Notice, Executive shall be free to
transfer the Unrestricted Shares encompassed by such Notice after the Option
Period; provided, however, that if the Transfer of all or any portion of the
Unrestricted Shares encompassed by such Notice is not consummated within ten
(10) business days after the Option Period, all or such portion of such
Unrestricted Shares encompassed by such Notice which are not then transferred by
Executive shall be subject to the Limitations. Notwithstanding anything to the
contrary contained herein, all Unrestricted Shares which are not encompassed by
any Notice shall remain subject to the Limitations.
7. PERMITTED TRANSFER. Notwithstanding paragraphs 4 and 6 hereof, after
receipt of the Certificate for the Unrestricted Shares, Executive may make a
gift of the Unrestricted Shares to his or her spouse, children, grandchildren or
other lineal descendants, in trust or otherwise, free of the Company's right of
purchase described in paragraph 6 hereof, provided that Executive, after the
gift, retains the right to vote such shares, whether in a fiduciary capacity or
otherwise and provides the Company with documentation evidencing such retention
(a "Permitted Transfer"). Following a Permitted Transfer, the shares encompassed
by such Permitted Transfer shall remain subject to the Limitations in the hands
of the transferee, and any subsequent Transfer of all or any part of the shares
encompassed by the Permitted Transfer shall be subject to the notification
requirements and Company's right of purchase described in paragraph 6 hereof.
8. TAX ELECTION. Executive may elect, but shall not be required to
elect, to apply the tax rules of Section 83(b) of the Internal Revenue Code (the
"Code") to the issuance of Restricted Stock. If Executive makes an affirmative
election under Section 83(b) of the Code, Executive shall notify the Company in
writing within thirty (30) days after making such election.
9. AMENDMENT; CHOICE OF LAW. This Agreement may be amended as provided
in the Plan. This Agreement shall be governed by and construed in accordance
with Indiana law.
10. DEFINITIONS. Any terms not defined herein shall have the meaning
set forth for such terms in the Plan.
IN WITNESS WHEREOF, the parties have caused this Restricted Stock
Agreement to be duly executed as of the Effective Date.
MARSH SUPERMARKETS, INC. MARSH SUPERMARKETS, INC.
By: By:
---------------------------- -----------------------------------
Don E. Marsh, President Stephen M. Huse, Chairman
and Chief Executive Officer Salary Committee of the Board
Attest:
-----------------------------
P. Lawrence Butt, Secretary
"Company"
-------------------------------
((FirstName))((LastName))
"Executive
17
<PAGE> 1
Exhibit 10 (b)
EMPLOYMENT CONTRACT
THIS AGREEMENT ("Agreement"), made and entered into as of June 1, 1997
(the "Effective Date"), by and between MARSH SUPERMARKETS, INC., an Indiana
corporation with its principal office at 9800 Crosspoint Boulevard,
Indianapolis, Indiana, and _________ of ___________________________, Indiana
46060 (the "Executive")
R E C I T A L S:
A. Executive has been an employee of the COMPANY (as such italicized
term and each other term hereinafter italicized is defined in Section 7 below)
since _____ and is currently serving as ____________________________.
B. The Salary Committee of the BOARD OF DIRECTORS and the BOARD OF
DIRECTORS believe that Executive's services have been a key factor in the growth
and success of the COMPANY and that it is in the best interests of the COMPANY
that Executive's talent and experience will continue to be available to the
COMPANY.
C. Executive is willing to continue to serve the COMPANY on the terms
and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and in consideration
of the mutual terms and conditions hereinafter set forth, the COMPANY and
Executive agree as follows:
1. TERM. The term of this Agreement shall be for a period (the
Term")which commences on the Effective Date and ends on the earlier of (i)
payment of or provision for the severance benefits provided for in this
Agreement, or (ii) the EXPIRATION DATE as determined in Section 11 below.
2. EMPLOYMENT.
(a) Duties, Salary and Benefits. At all times during the Term, COMPANY
shall employ Executive as __________________________________ of the
COMPANY and Executive agrees that in such position Executive will
perform such duties and functions as requested by the BOARD OF
DIRECTORS and consistent with such position. Executive shall devote his
best efforts to the business of the COMPANY for which Executive shall
be paid an annual base salary of not less than $000,000 per year,
payable at such times as salaries of the officers of the COMPANY are
paid, together with such other additional base or incentive
compensation as the SALARY COMMITTEE of the BOARD OF DIRECTORS may from
time to time determine appropriate. Executive shall also be entitled to
participate in any insurance (life, accident, disability, health and
hospitalization), pension, retirement, profit sharing, stock plan, or
any other plan or benefit afforded by the COMPANY to persons serving in
positions at levels comparable to Executive's or employees generally to
the extent that Executive is eligible to participate or to receive such
benefits in accordance with the provisions of any such plan and
applicable laws and regulations. The COMPANY shall provide Executive
with membership in and expenses related
18
<PAGE> 2
to Food Marketing Institute and other management or professional
organizations of which Executive is a member on the Effective Date or
may be a member during the Term, a reasonable expense reimbursement
plan and legal and tax planning services all in accordance with
present practices. Nothing herein is intended or shall be construed to
require the COMPANY to institute any new plan or benefit except as
specifically set forth herein, but it is agreed that during the Term
the aforesaid benefits shall not be more restrictive or in lesser
amounts or quality than Executive is presently receiving, except to
the extent required by applicable law, regulations or rules governing
plans intended to be qualified under the CODE.
(b) Insurance and Indemnity. Subject to the availability thereof, the
Company will procure and maintain at all times during the Term a
Directors' and Officers' Liability Insurance policy or equivalent
insurance policy to cover Executive's acts and omissions as an employee
of and as counsel to the COMPANY. Further, in addition to any rights as
an executive or an officer existing and assumed under the COMPANY'S
Restated Articles of Incorporation, Bylaws, or any agreement with the
COMPANY, the COMPANY shall indemnify (including the advancement of
expenses) and hold harmless Executive, to the fullest extent permitted
by Indiana statutory and case law; and COMPANY hereby covenants that,
from the Effective Date and continuing after the DATE OF TERMINATION,
regardless of whether severance benefits are payable, it shall so
indemnify (including the advancement of expenses) and hold harmless
Executive or his estate against losses, claims, damages, liabilities,
costs, expenses, judgments, and amounts arising out of or in connection
with any claim, action, suit, proceeding or investigation, or threat
thereof (whether brought by or in the right of the COMPANY or
otherwise), civil or criminal, or in connection with any appeal related
thereto, in which Executive or his estate may become involved, or is
threatened to be involved as a party or otherwise, by reason of having
been an officer of or counsel to the COMPANY or a member of any
Committee appointed by the BOARD OF DIRECTORS, or arising from any
actions taken or omissions to act prior to the DATE OF TERMINATION, or
which arises out of or pertains to any of the actions contemplated by
this Agreement.
(c) Covenant to Remain. In the event any other corporation, person or
GROUP begins a tender or exchange offer, circulates a proxy to
shareholders or takes other steps to effect a CHANGE IN CONTROL,
Executive agrees not to leave voluntarily the employ of the COMPANY and
to render services to the COMPANY commensurate with Executive's
position, until such other corporation, person or GROUP has abandoned
or terminated efforts to effect a CHANGE IN CONTROL or until a CHANGE
IN CONTROL has occurred.
(d) Right to Terminate. Subject to the provisions contained in Sections
2, 3, 4, 5 and 6 of this Agreement regarding severance benefits, it is
specifically understood between the parties that either the Executive
or the COMPANY shall have the right to terminate Executive's services
at any time or for any reason, with or without a CHANGE IN CONTROL.
3. SEVERANCE BEFORE A CHANGE IN CONTROL. If a CHANGE IN CONTROL shall
not have occurred while Executive is an employee of the COMPANY, the parties
contemplate that a severance of the employment relationship will ultimately
occur as a result of one of the following circumstances and desire to set forth
Executive's rights in such an event:
(a) CAUSE or Resignation. If Executive's employment is terminated by
the COMPANY for CAUSE or if Executive resigns, Executive shall receive
any BASE SALARY earned through the DATE OF TERMINATION.
19
<PAGE> 3
(b) RETIREMENT. If Executive's employment is terminated by RETIREMENT,
whether voluntary or by the COMPANY, Executive shall receive the
LIFETIME MEDICAL BENEFITS, together with Executive's BASE SALARY
through the DATE OF TERMINATION.
(c) Death. If Executive's employment is terminated as a result of
Executive's death, Executive's spouse shall receive LIFETIME MEDICAL
BENEFITS and the COMPANY shall pay a one (1) year continuation of
Executive's BASE SALARY to such persons or entities as Executive shall
have directed prior to death (or if no such designation is made, to
Executive's estate), payable as and when the salaries of the COMPANY'S
officers are paid.
(d) DISABILITY. If Executive's employment is terminated as a result of
DISABILITY, Executive shall receive LIFETIME MEDICAL BENEFITS,
Executive's BASE SALARY through the DATE OF TERMINATION, together with
a two (2) year continuation of Executive's BASE SALARY, payable as and
when the salaries of the COMPANY'S officers are paid.
(e) OTHER. If Executive's employment is terminated for any reason not
enumerated in the immediately preceding paragraphs (a) through (d),
Executive shall receive LIFETIME MEDICAL BENEFITS, Executive's BASE
SALARY through the DATE OF TERMINATION, together with a three (3) year
continuation of Executive's BASE SALARY, payable as and when the
salaries of the COMPANY'S officers are paid.
(f) Salary Continuation Reduction and Termination. Any salary
continuation otherwise payable for any year under the provisions of
Sections 3(c), 3(d) or 3(e) above shall be reduced by the supplemental
retirement benefit paid or payable to Executive or Executive's spouse
for that year (or payable under the assumption that Executive elects
early commencement of benefits) under the terms of the SUPPLEMENTAL
RETIREMENT PLAN. For purposes of calculating this offset, the benefits
payable under the SUPPLEMENTAL RETIREMENT PLAN shall be the reduced
benefit, if any, under the terms of the SUPPLEMENTAL RETIREMENT PLAN
assuming Executive elects to commence payments at the later of
Executive's DATE OF TERMINATION or the earliest date at which benefits
can commence under the SUPPLEMENTAL RETIREMENT PLAN. Any salary
continuation otherwise payable to Executive under the provisions of
Sections 3(c), 3(d) or 3(e) above shall terminate on the date Executive
attains age 65.
(g) Covenant Not to Compete and Confidentiality. Any salary
continuation or severance benefits payable under the provisions of this Section
3 are expressly conditioned upon Executive's compliance with the covenant not to
compete and confidentiality undertaking set forth in Section 8.
4. SEVERANCE FOLLOWING A CHANGE IN CONTROL. If a CHANGE IN CONTROL
shall have occurred while Executive is still an employee of the COMPANY, this
Agreement shall continue in effect from the date of the CHANGE IN Control for
the Term. Upon Executive's termination as an employee after a CHANGE IN CONTROL,
Executive shall be entitled to the following:
(a) If following a CHANGE IN CONTROL Executive's employment shall be
terminated for CAUSE, RETIREMENT, Death or DISABILITY, the COMPANY'S
obligations under this Agreement shall be the same as set forth in
Sections 3(a) through 3(d) of this Agreement, respectively, as if there
had not been any CHANGE IN CONTROL.
20
<PAGE> 4
(b) If following a CHANGE IN CONTROL Executive's employment is
terminated by Executive for REASON or by the COMPANY for any reason
other than CAUSE, RETIREMENT, Death or DISABILITY, then Executive shall
be entitled to the BENEFITS UPON CHANGE IN CONTROL.
(c) Golden Parachute Savings Provisions. In the event the COMPANY
determines that any payment or benefit to Executive under this
Agreement, or any other payment to Executive in the nature of
compensation, made as a result of a CHANGE IN CONTROL, would result in
the payment of an EXCESS PARACHUTE PAYMENT and provides to Executive,
within thirty (30) days after the DATE OF TERMINATION or Executive's
actual date of termination, whichever date first occurs, an OPINION,
the BENEFITS UPON CHANGE IN CONTROL shall be adjusted so that the
PRESENT VALUE of the BENEFITS UPON CHANGE IN CONTROL does not exceed
three hundred percent (300%) of Executive's ANNUALIZED INCLUDIBLE
COMPENSATION minus One Dollar ($1.00), or such other formula to
determine a PARACHUTE PAYMENT as may be in effect pursuant to an
amendment of Section 280G(b)(2)(A)(ii) of the CODE, in accordance with
the written instructions of Executive of the payments Executive elects
to have reduced or delayed in order to avoid any payments being deemed
EXCESS PARACHUTE PAYMENTS. If Executive does not agree with the OPINION
or the calculation presented and is unable to resolve any such dispute
with the COMPANY within ten (10) days after receipt of the OPINION,
Executive may seek a judicial determination of Executive's rights under
this Agreement. Any reduction in benefits will be applied against the
BENEFITS UPON CHANGE IN CONTROL pursuant to or described in this
Agreement in the order of priority designated by Executive.
5. BENEFITS UPON CHANGE IN CONTROL. In the event a CHANGE IN CONTROL
shall have occurred while Executive is an employee of the COMPANY, the COMPANY
shall:
(a) Pay to Executive, as severance pay in a lump sum on the fifth (5th)
day following the DATE OF TERMINATION, the following amounts:
(i) Executive's BASE SALARY through the DATE OF TERMINATION at
the rate in effect at the time NOTICE OF TERMINATION is given,
and an amount equal to the sum of any bonus or other awards
made to Executive, if any, which has not yet been paid to
Executive.
(ii) In lieu of any further BASE SALARY payments to Executive
during the Term subsequent to the DATE OF TERMINATION, an
amount equal to the TERMINATION PAYMENT.
(b) Executive's rights to vesting of deferred compensation benefits
under the SUPPLEMENTAL RETIREMENT PLAN shall be determined by the terms
and conditions of such plan, but with the determination of whether a
CHANGE IN CONTROL has occurred for purposes of that plan being made
under the definition of CHANGE IN CONTROL under Section 7(h) of this
Agreement.
(c) The COMPANY shall maintain in full force and effect, for the
continued benefit of Executive and Executive's dependents,
beneficiaries and estate, to the extent applicable, all life and
accident plans, programs or arrangements in which Executive was
entitled to participate immediately prior to the DATE OF TERMINATION,
provided that continued participation by Executive is possible under
the general terms and provisions of such plans, programs or
arrangements, until the earliest of the third anniversary of the DATE
OF TERMINATION, the date Executive is eligible to participate in
similar plans, programs or arrangements provided by any subsequent
employer, or the date Executive attains age 65 (the earliest of these
three dates is
21
<PAGE> 5
hereafter referred to as the "Coverage Termination Date"). In the
event that participation by Executive in any such plan, program or
arrangement is barred or would violate any applicable
non-discrimination rule, the COMPANY shall arrange to provide Executive
with benefits substantially similar to those which Executive is
entitled to receive under such plan, program or arrangement for such
period.
(d) Executive shall receive, in addition to any other amounts or
benefits which may be paid to Executive, LIFETIME MEDICAL BENEFITS.
(e) The TERMINATION PAYMENT shall not be included as part of
Executive's last twelve (12) months of EARNINGS for purposes of
calculating Executive's benefits under the PENSION PLAN. In lieu of the
TERMINATION PAYMENT being included in EARNINGS, but in addition to the
benefits to which Executive is entitled under the PENSION PLAN, a lump
sum cash payment at Executive's normal RETIREMENT date (or early
RETIREMENT date if Executive should so elect) in an amount equal to the
ACTUARIAL EQUIVALENT of the retirement pension benefit to which
Executive would have been entitled under the terms of the PENSION PLAN,
without regard to "vesting" thereunder, determined as of the DATE OF
TERMINATION, deeming Executive to be 100% vested, assuming Executive
had accumulated three (3) additional years of continual service (after
termination pursuant to Section 4(b) at Executive's BASE SALARY rate in
effect on the DATE OF TERMINATION, reduced by (y) the single sum
ACTUARIAL EQUIVALENT of any amounts to which Executive is entitled
pursuant to the provisions of the PENSION PLAN. In the event there is
less than thirty-six (36) months remaining from the DATE OF TERMINATION
until Executive's normal RETIREMENT date, the thirty-six (36) month
period of additional accruals shall be reduced to a period not to
exceed the time period from the DATE OF TERMINATION until Executive's
normal RETIREMENT date.
(f) The COMPANY shall pay all legal and accounting fees and expenses
incurred by Executive in contesting or disputing Executive's
termination following a CHANGE IN CONTROL or in seeking to obtain or
enforce any right or benefit provided by this Agreement if Executive is
successful, in whole or in part, whether as a result of a court
judgment or otherwise.
(g) Executive shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or
otherwise, nor shall the amount of any payment provided for herein be
reduced by any compensation earned by Executive as a result of
employment by another employer or otherwise after the DATE OF
TERMINATION.
6. SEVERANCE BEFORE OR AFTER A CHANGE IN CONTROL. Regardless of the
reason for Executive's termination of employment whether before or after a
CHANGE IN CONTROL, Executive shall be entitled to:
(a) Executive's rights under option agreements or grants under the 1987
Stock Option Plan, the 1991 Employee Stock Incentive Plan or any other
similar type of plan adopted by the BOARD OF DIRECTORS after the
Effective Date, which rights shall be determined under the terms and
conditions of the respective plans, including the determination of
whether a CHANGE IN CONTROL has occurred for purposes of each such plan
under the definition thereof in such plan; and
(b) Whatever benefits Executive is entitled to receive by reason of
Executive's participation in the COMPANY'S various welfare and
retirement plans, in accordance with the respective rules of
22
<PAGE> 6
each of such plans, except that the determination of whether a CHANGE
IN CONTROL has occurred for payment of benefits under the SUPPLEMENTAL
RETIREMENT PLAN shall be made under the definition of CHANGE IN CONTROL
contained in Section 7(h) of the Agreement.
7. DEFINITIONS. The following definitions shall be applicable to and
govern the interpretation of this Agreement:
(a) ACTUARIAL EQUIVALENT: An amount determined by using the same
methods and assumptions utilized under the PENSION PLAN immediately
prior to a CHANGE IN CONTROL.
(b) ACT: The Securities Exchange Act of 1934.
(c) ANNUALIZED INCLUDIBLE COMPENSATION: The average of the Executive's
total compensation from the COMPANY that was included in the
Executive's gross income for federal income tax purposes during the
period ending December 31 immediately preceding the CHANGE IN CONTROL
and beginning five (5) years before such December 31, consistent with
the definition of that term in Section 280G(d)(1) of the CODE and the
Treasury regulations promulgated thereunder.
(d) BASE SALARY: Executive's full annual base salary at the rate in
effect on the DATE OF TERMINATION, whether due to RETIREMENT, Death,
DISABILITY or otherwise.
(e) BENEFITS UPON CHANGE IN CONTROL: The benefits more particularly
described in Section 5 of this Agreement.
(f) BOARD OF DIRECTORS: The Board of Directors of the COMPANY.
(g) CAUSE: The delivery to Executive of a copy of a resolution
certified by the Secretary of the COMPANY as having been duly adopted
by the affirmative vote of not less than three-quarters of the entire
membership of the BOARD OF DIRECTORS at a meeting of the BOARD OF
DIRECTORS called and held for that purpose (after reasonable notice to
Executive and an opportunity for Executive, together with Executive's
counsel, to be heard before the BOARD OF DIRECTORS) finding that, in
the good faith opinion of the BOARD OF DIRECTORS, Executive was guilt
of an act or acts of dishonesty constituting a felony and resulting or
intended to result, directly or indirectly, in substantial gain or
personal enrichment of Executive at the expense of the COMPANY and
specifying in detail the particulars.
(h) CHANGE IN CONTROL: The happening of any one of the following
events:
(1) The COMPANY shall cease to be a publicly-owned corporation
having its outstanding common stock traded in the over-the-counter
market or other national exchange; or
(2) Any person or entity, including a GROUP, is or becomes the
beneficial owner, directly or indirectly, of securities of the
COMPANY representing 35% or more of the combined voting power of
the COMPANY'S then outstanding securities that may be cast for the
election of directors of the COMPANY; or
23
<PAGE> 7
(3) During any period of two (2) consecutive years, individuals
who at the beginning of such period constitute the BOARD OF
DIRECTORS cease for any reason to constitute at least a majority
thereof, unless the election, or the nomination for election by
the COMPANY'S shareholders, of each director of the COMPANY first
elected during such period was approved by a vote of at least
two-thirds of the directors then still in office who were
directors at the beginning of any such period; or
(4) The shareholders of the COMPANY approve (a) any merger,
consolidation or other business combination of the COMPANY with an
other PERSON or any affiliate thereof, other than a merger or
consolidation that would result in the outstanding Class A Common
Stock of the COMPANY immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into common stock of the surviving entity) at least sixty percent
(60%) of the outstanding Class A Common Stock of the COMPANY or
such surviving entity outstanding immediately after such merger or
consolidation; (b) a plan of complete liquidation of the Company;
or (c) any sale, lease, exchange or other transfer (in one
transaction or a series of transactions) of all, or substantially
all, of the assets of the COMPANY.
(5) Notwithstanding the occurrence of any of the events set forth
in the immediately preceding paragraphs (1) through (4), the BOARD
OF DIRECTORS may determine that an event otherwise constituting a
CHANGE IN CONTROL shall not be considered a CHANGE IN CONTROL for
purposes of this Agreement because such event had been approved by
the BOARD OF DIRECTORS prior to its occurrence. Such determination
by the BOARD OF DIRECTORS shall be effective only if it is made by
the BOARD OF DIRECTORS prior to the occurrence of the event which
would otherwise be a CHANGE IN CONTROL
(i) COBRA: The right of continuation coverage of medical benefits under
Section 601 et seq. of the Employee Retirement Income Security Act of
1974 and Section 4908B of the CODE, as either of such statutes may be
amended.
(j) CODE: The Internal Revenue Code as amended and in effect at the
time.
(k) COMPANY: Marsh Supermarkets, Inc. and any successor to its business
and/or assets which executes and delivers the agreement provided for in
Section 9 or which otherwise becomes bound by all of the terms and
provisions of this Agreement by the operation of law.
(l) DATE OF TERMINATION: The date on which (a) Executive delivers
NOTICE OF TERMINATION to the COMPANY if Executive's employment with the
COMPANY is terminated by Executive; or (b) NOTICE OF TERMINATION is
given by the COMPANY if the COMPANY terminates Executive's employment;
provided, however, if Executive notifies the COMPANY within thirty (30)
days after receiving NOTICE OF TERMINATION from the COMPANY that a
dispute exists regarding Executive's termination, the DATE OF
TERMINATION shall be the date on which such dispute is finally
determined, either by mutual written agreement of the parties or by a
final judgment, order or decree of a court of competent jurisdiction
(the time for appeal therefrom having expired and no appeal having been
perfected).
(m) DISABILITY: Executive shall be deemed disabled so as to permit
Executive termination for DISABILITY if a licensed physician of
Executive's choosing states, in writing, that Executive is unable, for
either physical or mental reasons, or both, to perform a substantial
portion of
24
<PAGE> 8
Executive's ordinary duties and that Executive's condition
has existed for at least six (6) months and will more probable than not
extend for an additional six (6) months into the future.
(n) EARNINGS: The same definition as the term "Earnings" as defined and
computed in the PENSION PLAN.
(o) EXCESS PARACHUTE PAYMENT(S): As defined in Section 280G of the
CODE.
(p) EXPIRATION DATE: The date which three years after the date on which
either the COMPANY or Executive notifies the other party that this
Agreement is being terminated; provided that, during such three year
period, neither a severance of Executive's employment relationship with
the COMPANY nor a CHANGE IN CONTROL shall have occurred.
(q) GROUP: Same definition as the term "group" as used in Section
13(d)(3) of the ACT.
(r) LIFETIME MEDICAL BENEFITS: Coverage for Executive and the
Executive's spouse for their respective lifetimes under the COMPANY'S
group medical, dental and vision plans, programs or arrangements
(individually and collectively referred to hereinafter as the "Medical
Plan"), at no expense to Executive or to Executive's spouse, as if
Executive had continued as an employee of the COMPANY, provided that
such continued participation is possible under the terms and provisions
of the group Medical Plan. Any future increases in benefits available
to employees of the COMPANY generally under the Medical Plan shall also
be provided to Executive and to Executive's spouse, at no expense to
Executive or to Executive's spouse. In the event that participation in
the Medical Plan by Executive as a former employee or by Executive's
spouse is barred, or if the benefits provided to Executive and to
Executive's spouse (after taking into account any Medicare benefits
provided by Title XVIII of the Social Security Act) are reduced to a
level below the level of such benefits on the DATE OF TERMINATION, or
if Executive or Executive's spouse elects at any time by notice, in
writing, to the COMPANY, the COMPANY shall arrange to provide both
Executive and Executive's spouse with benefits substantially similar to
those which they were eligible to receive under the Medical Plan
immediately prior to the DATE OF TERMINATION, such benefits to be
provided at the COMPANY'S expense by means of individual insurance
policies, or if such policies cannot be obtained, from the COMPANY'S
assets. These benefits shall continue after the death of Executive to
Executive's spouse, if Executive's spouse survives Executive, for
Executive's spouse's lifetime. If at any time after the DATE OF
TERMINATION, Executive should accept employment with another employer
and if either Executive or Executive's spouse, or both, should be
covered under that employer's medical benefit plans, then on the
effective date that such coverage commences, the obligation of the
COMPANY to provide Medical Plan benefits to whoever of Executive or
Executive's spouse, or both, is covered under the medical benefit plans
of the other employer shall terminate. The Medical Plan benefits
provided to Executive and to Executive's spouse after the DATE OF
TERMINATION are intended by the parties to be in lieu of the
continuation coverage rights of Executive and his spouse under COBRA.
LIFETIME MEDICAL BENEFITS shall also include the requirement that, if
any Medical Plan benefits provided to Executive or to Executive's
spouse are subject to federal and/or state income taxes, including the
alternative minimum tax, the COMPANY will pay to Executive or to
Executive's spouse, the full amount of such taxes, plus such additional
amount as may be necessary so that the net payment after taxes is
sufficient to reimburse Executive or Executive's spouse for all taxes
imposed on the provision of Medical Plan benefits.
25
<PAGE> 9
(s) NOTICE OF TERMINATION: Written notice indicating the specific
termination provision of this Agreement relied upon and setting forth
in reasonable detail the facts and circumstances claimed to provide the
basis for termination of Executive's employment under the provision so
indicated. For purposes of this Agreement, a purported termination
shall not be effective without a NOTICE OF Termination.
(t) OPINION: An opinion of independent accounting advisors to the
COMPANY immediately prior to the CHANGE IN CONTROL that Executive will
be considered to have received EXCESS PARACHUTE PAYMENTS if Executive
were to receive the full amounts owing pursuant to or described in this
Agreement and setting forth with particularity the smallest amount by
which the payment due Executive would have to be reduced to avoid the
imposition of any excise tax or the denial of any deduction pursuant to
Sections 280G and 4999 of the CODE.
(u) PARACHUTE PAYMENT: A "parachute payment" as determined in
accordance with Section 280G of the CODE.
(v) PENSION PLAN: The Employees' Pension Plan of Marsh Supermarkets,
Inc. and Subsidiaries or any successor plan, as in effect on the DATE
OF TERMINATION.
(w) PERSON: Same definition as the term "person" in Sections 13(d)
and 14(d) of the ACT.
(x) PRESENT VALUE: The present value of the amount of cash paid, the
fair market value of property transferred, or the fair market value of
benefits provided under each paragraph of this Agreement (and of any
other payments to Executive in the nature of compensation, contingent
upon a CHANGE IN CONTROL) shall be determined as of the time this
Agreement becomes operative (or such other time as may be established
by Treasury regulations issued under Section 280G of the CODE utilizing
a discount rate equal to 120% of the interest rate factor specified in
Section 1274(d) of the CODE, as in effect at the time of the present
value calculation (or such other rate as may be established by Treasury
regulations issued under Section 280G of the CODE).
(y) REASON: If, in Executive's sole judgment, there is a change in the
stature of the position in the COMPANY held by Executive at any time
previously, occasioned by a change in the nature or scope of
Executive's responsibilities or duties, a change in the location where
such duties are to be performed, or a reduction in the aggregate
compensation paid to Executive for the performance thereof, or for any
other reason.
(z) RETIREMENT: Severance by the COMPANY or by Executive of Executive's
employment with the COMPANY based on Executive attaining age of
sixty-five (65), which is the COMPANY'S normal retirement age.
(ab) SUPPLEMENTAL RETIREMENT PLAN: The Supplemental Retirement Plan of
Marsh Supermarkets, Inc., effective April 1, 1987, or any successor
plan in effect on the DATE OF TERMINATION.
(ac) TERMINATION PAYMENT: An amount equal to the product of (x) the sum
of Executive's annual base salary at the highest rate in effect during
the twelve (12) month period immediately preceding the DATE OF
TERMINATION plus the amount of the highest annual bonus awarded to
Executive during the twenty-four (24) months ended on the DATE OF
TERMINATION (whether or
26
<PAGE> 10
not fully paid), multiplied by (y) the number three (3); provided,
however, that in the event there are fewer than thirty-six (36) whole
or partial months remaining from the DATE OF TERMINATION until
Executive's normal RETIREMENT date, the amount calculated pursuant to
this paragraph shall be reduced by multiplying it by a fraction, the
numerator of which shall be the number of whole or partial months so
remaining to Executive's normal RETIREMENT date and the denominator of
which shall be thirty-six (36).
8. NON-COMPETITION/CONFIDENTIALITY.
(a) Noncompetition. During the period Executive is employed by the
COMPANY and during the period after termination of employment prior to
a CHANGE IN CONTROL while salary continuation payments are being made
pursuant to Section 3 of this Agreement, Executive will not:
(i) directly or indirectly own, manage, operate pr participate
in the ownership, management, operation or control of. or be connected
as an officer, employee, partner, director or otherwise with , or have
any financial interest in, or aid or assist anyone else in the conduct
of, any of the following types of businesses: retail supermarkets,
convenience food stores, food and drug combination stores or a
convenience store distribution business in Indiana and Ohio or any
other area where such business is being conducted by the COMPANY or any
of its subsidiaries (provided that ownership of five percent (5%) of
less of the voting stock of any publicly held corporation shall not
constitute a violation hereof); or
(ii) directly or indirectly employ, solicit for employment, or
advise or recommend to any other persons that they employ or solicit
for employment, any person, who at the time of such employment,
solicitation, advice or recommendation, is an employee of the COMPANY
or any of its subsidiaries, provided, however, that this subparagraph
(ii) shall not be construed to prevent Executive form engaging in
generic nontargeted advertising for employees generally.
(b) Unauthorized Disclosure. During the period Executive is employed by
the COMPANY hereunder, Executive shall not, without the prior written
consent of the BOARD OF DIRECTORS, or a person authorized thereby,
disclose to any person, other than a person to whom disclosure is
necessary or appropriate in connection with the performance by
Executive of Executive's duties as an officer of the COMPANY, any
confidential information obtained by Executive while in the employ of
the COMPANY with respect to any of the COMPANY's products,
improvements, designs or styles, processes, methods of marketing or
distribution, systems, procedures, plans, proposals, or policies, the
disclosure of which Executive knows, or should have reason to know,
will be damaging to the COMPANY or its subsidiaries or its affiliates;
provided, however, that confidential information shall not include any
information known generally to the public (other than as a result of
unauthorized disclosure by Executive) or any information of a type not
otherwise considered confidential by persons engaged in the same
business or a business similar to that conducted by the COMPANY.
Following termination of Executive's employment with the COMPANY for
any reason prior to a CHANGE IN CONTROL, Executive shall not disclose
any confidential information of the type described above except as may
be required in the opinion of the Executive's counsel in connection
with any judicial or administrative proceeding or inquiry.
(c) Specific Performance. Executive acknowledges and agrees that, in
the event of a breach of Section 8(a) or Section 8(b) of this Agreement
by Executive, the COMPANY would be
27
<PAGE> 11
irreparably harmed and that monetary damages would be an inadequate
remedy in favor of the COMPANY. Accordingly, Executive and the Company
agree that in the event of such a breach, the COMPANY shall be entitled
to injunctive relief against Executive.
(d) Following a CHANGE IN CONTROL. The covenants and other provisions
contained in this Section 8 shall terminate upon the occurrence of a
CHANGE IN CONTROL and shall neither be enforceable nor a condition to
payment to Executive of the BENEFITS UPON CHANGE IN CONTROL.
9. SUCCESSORS; BINDING AGREEMENT.
(a) The COMPANY will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the COMPANY
expressly to assume and agree to perform this Agreement in the same
manner and to the same extent that the COMPANY would be required to
perform it if no such succession had taken place. Failure of the
Company to obtain such agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle
Executive to compensation from the COMPANY in the same amount and on
the same terms as Executive would be entitled hereunder if such
succession had not occurred, except that for the purposes of
implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the DATE OF TERMINATION.
(b) This Agreement shall inure to the benefit of and be enforceable by
Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
If Executive should die while any amounts are still payable hereunder,
all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to Executive's devisee,
legatee or other designee or, if there is no designee, to Executive's
estate.
10. NOTICES. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered personally, mailed by United
States certified mail, return receipt requested, postage prepaid, or sent by
prepaid express mail, addressed as follows:
If to the COMPANY:
Marsh Supermarkets, Inc.
9800 Crosspoint Boulevard
Indianapolis, Indiana 46256-3350
Attn: Corporate Secretary
If to Executive:
To the address set forth on the first page of this Agreement.
Either party may change the address to which notices are to be sent by
written notice to the other party. Notice of change in notice address shall be
effective only upon receipt by the other party. Following a CHANGE IN CONTROL
any termination of Executive's employment by the COMPANY for any
28
<PAGE> 12
reason or any termination by Executive for REASON shall be communicated to
Executive or to the COMPANY, respectively, by written NOTICE OF TERMINATION.
11. TERMINATION OF AGREEMENT. This Agreement may be terminated by
either the Company or Executive upon notice to the other party given in
accordance with Section 10 above. Any such termination shall not be effective
until the EXPIRATION DATE. Upon the EXPIRATION DATE, this Agreement shall become
null and void; provided, however, that if Executive's employment relationship
with the COMPANY should be severed prior to the EXPIRATION DATE, or if a CHANGE
IN CONTROL occurs prior to the EXPIRATION DATE (regardless of whether a
severance of the employment relationship occurs), this Agreement shall continue
in full force and effect until payment of or provision for all severance
benefits provided for in this Agreement.
12. MISCELLANEOUS. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by Executive and such officer of the COMPANY specifically
designated by the BOARD OF DIRECTORS. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions at the same or at
any subsequent time. No agreement or representations, oral or otherwise, express
or implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be govern
by the laws of the State of Indiana.
13. SEVERABILITY. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
IN WITNESS WHEREOF, the COMPANY by its duly authorized officers and
Executive have caused to be executed or executed, respectively, this Agreement
as of the Effective Date.
MARSH SUPERMARKETS, INC. MARSH SUPERMARKETS, INC.
By: By:
-------------------------------- -------------------------------
Don E. Marsh, Chairman of the Stephen M. Huse, Chairman
Board, President and Chief Salary Committee of the
Executive Officer Board of Directors
Attest:
--------------------------------
P. Lawrence Butt, Secretary
"COMPANY"
---------------------------
"Executive"
WITNESS:
----------------------------
29
<PAGE> 1
EXHIBIT 11 STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
<TABLE>
<CAPTION>
16 Weeks Ended 28 Weeks Ended
-------------- --------------
October 11, October 12, October 11, October 12,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
PRIMARY
Weighted average shares outstanding 8,419,237 8,393,833 8,409,275 8,394,318
Net effect of dilutive stock options -
based on the treasury stock method 132,475 16,746 91,581 29,263
----------- ----------- ----------- -----------
Total common shares and equivalents 8,551,712 8,410,579 8,500,856 8,423,581
=========== =========== =========== ===========
Income (loss) before
extraordinary item $ 1,824,330 $ 2,739,087 $ 4,723,709 $(4,372,710)
Extraordinary item, net of tax (3,277,889) -- (3,277,889) --
----------- ----------- ----------- -----------
Net income (loss) $(1,453,559) $ 2,739,087 $ 1,445,820 $(4,372,710)
=========== =========== ----------- ===========
Per share amount
Income (loss) before extraordinary item $.21 $.33 $.56 $(.52)
Extraordinary item (.38) -- (.39) --
----------- ----------- ----------- -----------
Net income (loss) $(.17) $.33 $.17 $(.52)
=========== =========== =========== ===========
FULLY DILUTED
Weighted average shares outstanding 8,419,237 8,393,833 8,409,275 8,394,318
Net effect of dilutive stock options -
based on the treasury stock method
using average market price 190,537 17,672 190,537 29,745
Assumed conversion of 7% convertible
subordinated debentures issued
March 5, 1993 1,290,323 1,290,323 1,290,323 -- (a)
----------- ----------- ----------- -----------
Total 9,900,097 9,701,828 9,890,135 8,424,063
=========== =========== =========== ===========
Income (loss) before
extraordinary item $ 1,824,330 $ 2,739,087 $ 4,723,709 $(4,372,710)
Add 7% convertible subordinated
debenture interest, net of tax effect 268,800 256,472 470,399 -- (a)
----------- ----------- ----------- -----------
2,093,130 2,995,559 5,194,108 (4,372,710)
Extraordinary item, net of tax (3,277,889) -- (3,277,889) --
----------- ----------- ----------- -----------
Net income (loss) $(1,184,759) $ 2,995,559 $ 1,916,219 $(4,372,710)
=========== =========== =========== ===========
Per share amount
Income (loss) before extraordinary item $.21 $.31 $.52 $(.52)
Extraordinary item (.33) -- (.33) --
----------- ----------- ----------- -----------
Net income (loss) $(.12) $.31 $.19 $(.52)
=========== =========== =========== ===========
</TABLE>
(a) Antidilutive common stock equivalents excluded
30
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S 10-Q FOR THE PERIOD ENDED OCTOBER 11, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND THE NOTES THERETO.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-28-1998
<PERIOD-END> OCT-11-1997
<CASH> 47,467
<SECURITIES> 0
<RECEIVABLES> 27,286
<ALLOWANCES> 0
<INVENTORY> 97,440
<CURRENT-ASSETS> 177,565
<PP&E> 366,128
<DEPRECIATION> 131,694
<TOTAL-ASSETS> 450,242
<CURRENT-LIABILITIES> 103,762
<BONDS> 212,062
0
0
<COMMON> 8,509,319<F1>
<OTHER-SE> 89,503
<TOTAL-LIABILITY-AND-EQUITY> 450,242
<SALES> 809,574
<TOTAL-REVENUES> 809,574
<CGS> 610,926
<TOTAL-COSTS> 783,635<F2>
<OTHER-EXPENSES> 10,311
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,885
<INCOME-PRETAX> 6,743
<INCOME-TAX> 2,019
<INCOME-CONTINUING> 4,724
<DISCONTINUED> 0
<EXTRAORDINARY> (3,278)
<CHANGES> 0
<NET-INCOME> 1,446
<EPS-PRIMARY> $0.17<F3>
<EPS-DILUTED> $0.19<F3>
<FN>
<F1>Number of Class A and Class B shares outstanding, Multiplier is 1.
<F2>Includes (i) $610,926 of Cost of Goods Sold (Item 5-03(b)2(a) of Regulation
S-X) and (ii) $172,709 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>
