<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 January 3, 1998
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 January 3, 1998:
Class A Common Stock - 3,980,584 shares
Class B Common Stock - 4,510,957 shares
---------
8,491,541 shares
<PAGE> 2
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MARSH SUPERMARKETS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
12 Weeks Ended 40 Weeks Ended
------------------------ ---------------------------
January 3, January 4, January 3, January 4,
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sales and other revenues $356,206 $338,116 $1,165,779 $1,123,059
Cost of merchandise sold, including
warehousing and transportation 268,164 255,963 879,090 850,480
-------- -------- ---------- ----------
Gross profit 88,042 82,153 286,689 272,579
Selling, general and administrative 76,182 71,391 248,890 247,571
Depreciation and amortization 4,669 4,461 14,980 19,158
-------- -------- ---------- ----------
Operating income 7,191 6,301 22,819 5,850
Interest and debt expense amortization 4,454 2,992 13,340 9,829
-------- -------- ---------- ----------
Income (loss) before income taxes
and extraordinary item 2,737 3,309 9,479 (3,979)
Income taxes (benefit) 776 1,303 2,795 (1,612)
-------- -------- ---------- ----------
Income (loss) before extraordinary item 1,961 2,006 6,684 (2,367)
Extraordinary item, net of tax -- -- (3,278) --
-------- -------- ---------- ----------
Net income (loss) $ 1,961 $ 2,006 $ 3,406 $ (2,367)
======== ======== ========== ==========
Earnings (loss) per common share
Before effect of extraordinary item $ .24 $ .24 $ .80 $ (.28)
Extraordinary item -- -- (.39) --
-------- -------- ---------- ----------
Net income (loss) per common share $ .24 $ .24 $ .41 $ (.28)
======== ======== ========== ==========
Earnings (loss) per common share -
assuming dilution
Before effect of extraordinary item $ .22 $ .23 $ .76 $ (.28)
Extraordinary item -- -- (.33) --
-------- -------- ---------- ----------
Net income (loss) per common share
- assuming dilution $ .22 $ .23 $ .43 $ (.28)
======== ======== ========== ==========
Dividends per share $ .11 $ .11 $ .33 $ .33
======== ======== ========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE> 3
MARSH SUPERMARKETS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
January 3, March 29, January 4,
1998 1997 1997
---- ---- ----
(Unaudited) (Note A) (Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 41,547 $ 12,529 $ 10,885
Accounts receivable 35,976 25,634 27,790
Inventories less LIFO reserve: January 3, 1998 - $17,814;
March 29, 1997 - $17,592; January 4, 1997 - $18,763 96,355 88,262 92,021
Prepaid expenses 4,237 5,362 4,833
Recoverable income taxes 3,125 941 1,034
Deferred income taxes -- 650 1,467
--------- --------- ---------
Total current assets 181,240 133,378 138,030
Property and equipment, less allowances for depreciation 244,407 232,681 235,917
Other assets 38,112 29,572 22,933
--------- --------- ---------
$ 463,759 $ 395,631 $ 396,880
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to bank $ 2,650 $ 10,755 $ 16,072
Accounts payable 62,454 54,132 52,196
Accrued liabilities 47,910 42,140 40,862
Current maturities of long-term liabilities 2,792 7,097 7,264
--------- --------- ---------
Total current liabilities 115,806 114,124 116,394
Long-term liabilities:
Long-term debt 207,603 141,264 141,710
Capital lease obligations 3,825 4,165 4,531
--------- --------- ---------
Total long-term liabilities 211,428 145,429 146,241
Deferred items:
Income taxes 9,543 7,865 7,676
Other 11,906 12,765 12,315
--------- -------- ---------
Total deferred items 21,449 20,630 19,991
Shareholders' Equity:
Common stock, Classes A and B (Note B) 24,784 24,784 24,791
Retained earnings 99,088 98,474 97,278
Cost of common stock in treasury (6,311) (7,488) (7,497)
Deferred cost - restricted stock (2,157) -- --
Notes receivable - stock options (328) (322) (318)
--------- --------- ---------
Total shareholders' equity 115,076 115,448 114,254
--------- --------- ---------
$ 463,759 $ 395,631 $ 396,880
========= ========= =========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 4
MARSH SUPERMARKETS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
40 Weeks Ended
--------------------------
January 3, January 4,
1998 1997
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 3,406 $ (2,367)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 14,980 14,487
Amortization of other assets 3,819 4,068
Debt extinguishment costs 3,278 --
Changes in operating assets and liabilities (3,086) (7,068)
Other operating activities (3,022) 6,950
--------- --------
Net cash provided by operating activities 19,375 16,070
INVESTING ACTIVITIES
Net acquisition of property, equipment and land (25,561) (25,768)
Other investing activities (5,447) (1,932)
--------- --------
Net cash used for investing activities (31,008) (27,700)
FINANCING ACTIVITIES
Proceeds (repayments) of short-term borrowings (8,105) 1,072
Proceeds of long-term borrowings 172,000 42,580
Repayments of long-term debt and capital leases (110,308) (31,162)
Debt acquisition costs (5,718) --
Debt extinguishment costs (3,278) --
Purchase of shares for treasury (2,061) (27)
Stock options exercised 902 --
Cash dividends paid (2,781) (2,770)
--------- --------
Net cash provided by financing activities 40,651 9,693
--------- --------
Net increase (decrease) in cash and equivalents 29,018 (1,937)
Cash and equivalents at beginning of period 12,529 12,822
--------- --------
Cash and equivalents at end of period $ 41,547 $ 10,885
========= ========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
MARSH SUPERMARKETS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except per share amounts or as otherwise noted)
(Unaudited)
JANUARY 3, 1998
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 twelve and forty week
periods ended January 3, 1998 and January 4, 1997, 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. Certain items were reclassified for the twelve and
forty week periods ended January 4, 1997 to conform with the basis of
presentation used for the comparable periods ended January 3, 1998.
Operating results for the forty week period ended January 3, 1998 are not
necessarily indicative of the operating results 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 January 3, 1998, March 29, 1997 and January 4, 1997, there were
3,980,584, 3,850,591 and 3,850,630 shares of Class A Common Stock and 4,510,957,
4,544,572 and 4,544,111 shares of Class B Common Stock outstanding,
respectively.
In November 1997, the Company authorized an increase in its previously announced
stock repurchase plan from $4.0 million to $6.0 million. Through January 3,
1998, the Company has repurchased 323,227 shares of common stock at an aggregate
cost of $4.1 million. The Company intends to utilize the increase to purchase
from time to time additional shares of common stock at prices up to $17 per
share. The number of shares that could be purchased represents approximately
1.5% of the currently outstanding common stock.
NOTE C -- RESTRICTED STOCK
In September 1997, 150,750 shares of restricted Class A Common Stock were
granted under the 1991 Employee Stock Incentive Plan to certain key employees.
The shares will vest ratably on each of the first four anniversaries of the date
of grant and are subject to restrictions on their sale or transfer.
5
<PAGE> 6
NOTE D -- EXTRAORDINARY ITEM: DEBT EXTINGUISHMENT AND SUPPLEMENTAL GUARANTOR
INFORMATION
On August 5, 1997, the Company sold $150.0 million of 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 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, fees and related costs.
The Company used the net proceeds from the offering of the 144A Notes (i) to
repay approximately $60.9 million in principal amount of senior unsecured
indebtedness, approximately $0.9 million in accrued interest and approximately
$5.0 million in related prepayment fees; (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 use of the $42.2 million of net proceeds
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 represented
$.33 per diluted share for the sixteen week period.
The Company is a holding company with no operations other than its investment in
its subsidiaries.
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 inconsequential subsidiaries). The
Company has not presented separate financial statements and other disclosures
concerning the guarantor and non-guarantor subsidiaries because management
believes 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 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.
Depreciation and amortization includes $4.9 million of the charge 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 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 convenience store retail operations were organized
as wholly-owned limited liability companies and the Company's intellectual
property was transferred to a passive investment company. As a result of the
restructuring, the current year effective tax rate will be significantly lower
due to the reversal of a portion of deferred tax accruals.
6
<PAGE> 7
NOTE G - EARNINGS PER SHARE
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, "Earnings per Share" (FAS 128). This statement
simplifies the standards for computing earnings per share by replacing Primary
and Fully Diluted Earnings per Share with Basic and Diluted Earnings per Share.
Unlike Primary Earnings per Share, Basic Earnings per Share excludes any
dilutive effects of options, warrants and convertible securities. Like Fully
Diluted Earnings per Share, Diluted Earnings per Share reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock or resulted in the issuance of
common stock. All earnings per share amounts for all periods have been presented
on the income statement, and where appropriate, restated to conform to FAS 128.
The following table sets forth the computation of the numerators and
denominators used in the computation of basic and diluted earnings per share
(amounts in thousands, except per share amounts):
<TABLE>
<CAPTION>
12 weeks ended 40 weeks ended
------------------------ -----------------------
January 3, January 4, January 3, January 4,
1998 1997 1998 1997
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Numerator:
Net income (loss) before extraordinary item $ 1,961 $2,006 $ 6,684 $(2,367)
Extraordinary item, net of tax -- -- (3,278) --
Numerator for basic earnings
per share - income available to
common stockholders 1,961 2,006 3,406 (2,367)
Effect of dilutive securities:
7% convertible debentures, net of tax 231 195 754 -- (a)
------- ------ ------- -------
Numerator for diluted earnings
per share - income available to
common stockholders after
assumed conversions $ 2,192 $2,201 $ 4,160 $(2,367)
======= ====== ======= =======
Denominator:
Weighted average shares outstanding 8,492 8,395 8,436 8,395
Non-vested restricted shares (151) -- (63) --
Denominator for basic earnings
per share 8,341 8,395 8,373 8,395
Effect of dilutive securities:
Employee stock options 128 21 106 -- (a)
7% convertible debentures 1,290 1,290 1,290 -- (a)
------- ------ ------- -------
Dilutive potential common shares 1,418 1,311 1,396 --
Denominator for diluted earnings
per share - adjusted weighted
average shares and assumed
conversions 9,759 9,706 9,769 8,395
======= ====== ======= =======
</TABLE>
(a) For the forty weeks ended January 4, 1997, earnings per share have
been calculated assuming no incremental shares, since the inclusion of
normally dilutive securities would be anti-dilutive.
7
<PAGE> 8
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
of operations 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>
Third 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% 5.4% 100.0% 100.0% 3.8%
Gross profit 24.7% 24.3% 7.2% 24.6% 24.3% 5.2%
Selling, general and administrative 21.4% 21.1% 6.7% 21.3% 22.0% 0.5%
Depreciation and amortization 1.3% 1.3% 4.7% 1.3% 1.7% (21.8%)
Operating profit 2.0% 1.9% 14.1% 2.0% 0.5% 290.1%
Interest and debt expense amortization 1.3% 0.9% 48.9% 1.1% 0.9% 35.7%
Income taxes (benefit) 0.2% 0.4% (40.4%) 0.2% (0.1%) n/m
Income (loss) before extraordinary item 0.6% 0.6% (2.2%) 0.6% (0.2%) n/m
Extraordinary item, net of tax - - - (0.3%) - -
Net income (loss) 0.6% 0.6% (2.2%) 0.3% (0.2%) n/m
n/m = non-meaningful comparison
</TABLE>
SALES AND OTHER REVENUES
Consolidated sales and other revenues of $356.2 million increased $18.1 million,
or 5.4%, in the third quarter of 1998, compared to the same quarter of 1997.
Consolidated sales and other revenues in the third quarter of 1998 include gains
from sales of real estate of $0.4 million. Supermarket revenues increased $10.4
million, Convenience Store Distributing Company (CSDC) revenues increased $8.0
million and Crystal Food Services revenues increased $0.8 million, while Village
Pantry revenues decreased $1.6 million. Retail sales, excluding fuel sales,
increased 3.6%. Sales in comparable supermarkets and convenience stores
(including replacement stores and format conversions) increased 2.9% from the
year earlier quarter. Approximately $3.5 million of the increase in CSDC
revenues resulted from passing on higher manufacturer cigarette prices to
customers. Significantly lower retail fuel prices accounted for $1.2 million, or
75.0%, of the decline in Village Pantry revenues.
8
<PAGE> 9
For the forty weeks ended January 3, 1998, consolidated sales and other revenues
of $1,165.8 million increased $42.7 million, or 3.8%, compared to the same forty
weeks of 1997. Supermarket revenues increased $22.8 million, CSDC revenues
increased $22.0 million and Crystal Food Services revenues increased $2.7
million. Village Pantry revenues decreased $5.3 million. Retail sales, excluding
fuel sales, increased 2.1%. Sales in comparable stores (including replacement
stores and format conversions) increased 1.6% from the year earlier period.
Approximately $7.0 million of the increase in CSDC revenues resulted from
passing on higher manufacturer cigarette prices to customers. Lower retail fuel
prices combined with the removal of fuel operations from twelve locations
accounted for $2.0 million, or 37.7%, of the decline in Village Pantry revenues.
GROSS PROFIT
Gross profit is net of warehousing, transportation, and promotional expenses.
Gross profit increased $5.9 million, or 7.2%, to $88.0 million in the third
quarter of 1998, from the comparable quarter of 1997. As a percentage of
revenues, gross profit increased to 24.7% from 24.3%. Gross profit increased
each operating division, both in total and as a percentage of revenues.
For the forty weeks ended January 3, 1998, gross profit increased $14.1 million,
or 5.2%, to $286.7 million, from the year earlier period. As a percentage of
revenues, gross profit increased to 24.6% from 24.3% in the prior year. The
supermarket division accounted for approximately 70.0% of the improvement with
increases also contributed by all of the other operating divisions.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses (SG&A) increased $4.8 million, or
6.7%, to $76.2 million in the third quarter of 1998, compared to the third
quarter of 1997. As a percentage of revenues, SG&A expenses increased to 21.4%
from 21.1% from the year earlier quarter. The increased expenses were primarily
attributable to an increase of $1.9 million in wages and fringe benefits, a $1.2
million increase in advertising expenses, and a $2.0 million increase in
administrative and general expenses, partially offset by a $0.9 million
reduction in state gross receipts tax. Wages in stores open both quarters,
excluding supermarket conversions to the LoBill format, increased 2.5% due to
wage rate increases and increased labor hours resulting from same store sales
gains.
For the forty weeks ended January 3, 1998, SG&A expenses increased $1.3 million,
or 0.5%, to $248.9 million, from the comparable forty weeks of 1997. As a
percentage of revenues, SG&A expenses decreased to 21.3% from 22.0% in the
comparable period of 1997. In 1998, wages and fringe benefits increased $6.5
million, other store operating and occupancy costs increased $1.7 million and
administrative and general expenses increased $3.2 million. The increases were
partially offset by a $2.5 million reduction in state gross receipts tax and a
$1.3 million decline in casualty and workers compensation losses. 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 severance of certain employees; and a $0.5 million
charge to merchandising allowances related to a supplier contract. Wages in
identical stores increased 1.2% from the comparable forty weeks of the prior
year and will likely increase for the full fiscal year due to supermarket wage
rate increases effected in the third quarter.
9
<PAGE> 10
DEPRECIATION AND AMORTIZATION EXPENSE
Depreciation and amortization expense increased $0.2 million, or 4.7%, to $4.7
million in the third quarter of 1998, from the third quarter of 1997. As a
percentage of revenues, depreciation and amortization expense was 1.3% of
revenues in both quarters.
For the forty weeks ended January 3, 1998, depreciation and amortization expense
decreased $4.2 million, or 21.8%, to $15.0 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 forty weeks
ended January 3, 1998, compared to 1.7% for the comparable period of the prior
year.
OPERATING INCOME
Operating income (earnings from continuing operations before interest, taxes and
debt extinguishment costs) increased $0.9 million, or 14.1%, to $7.2 million for
the third quarter of 1998, from the comparable quarter of 1997. The gross profit
increase of $5.9 million was partially offset by the $4.8 million increase in
selling, general and administrative expenses and the $0.2 million increase in
depreciation and amortization.
For the forty weeks ended January 3, 1998, operating income increased $17.0
million to $22.8 million from $5.9 million for the comparable year earlier
period. The $14.1 million improvement in gross profit combined with the $1.3
million increase in selling, general and administrative expenses and the $4.2
million decrease in depreciation and amortization accounted for the operating
income improvement.
INTEREST EXPENSE
Interest expense in the third quarter of 1998 increased $1.5 million, or 48.9%,
to $4.5 million from the third quarter of 1997. For the forty weeks ended
January 3, 1998, interest expense increased $3.5 million, or 35.7%, to $13.3
million, from the comparable period of 1997. The third quarter and forty week
increases resulted from the issuance of $150.0 million in principal amount of
the Notes, consummated in August 1997. See "Liquidity and Capital Resources".
INCOME TAXES
For the quarter ended January 3, 1998, the effective income tax rate was 28.4%,
compared to 39.4% for the comparable prior year quarter. For the forty weeks
ended January 3, 1998, the effective income tax rate was 29.5%, compared to
40.5% for the comparable period of the prior year. The effective tax rate for
the current full fiscal year is expected to be approximately 29.5% and is lower
than the statutory rate due to contributions, tax credits and the reversal of
deferred tax accruals resulting from restructuring the Company's supermarket and
convenience store retail operations.
INCOME BEFORE EXTRAORDINARY ITEM
Income before extraordinary item for both the quarter ended January 3, 1998, and
the year earlier quarter was $2.0 million, or 0.6% of revenues. For the forty
weeks ended January 3, 1998, income before extraordinary item was $6.7 million,
or 0.6% of revenues, compared to a loss of $2.4 million, or (negative) 0.2%
revenues, for the comparable forty weeks of the prior year.
10
<PAGE> 11
EXTRAORDINARY ITEM: DEBT EXTINGUISHMENT
In August 1997, the Company consummated the issuance of $150.0 million in
principal amount of the 144A Notes. 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 and notes payable to banks of approximately $35.1
million. 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 diluted earnings per
share.
NET INCOME (LOSS)
Net income for both the quarter ended January 3, 1998, and the year earlier
quarter was $2.0 million, or 0.6% of revenues. For the forty weeks ended January
3, 1998, net income was $3.4 million, or 0.3% of revenues, compared to a net
loss of $2.4 million, or (negative) 0.2% 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 forty 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 Complete
Supermarket Remodel 80,000 Fishers, IN Complete
Supermarket New 82,000 Carmel, IN Under construction
LoBill New 42,000 Hamilton, OH Acquired
LoBill Conversion 23,000 Connersville, IN Complete
Convenience New 5,000 Zionsville, IN Under construction
Convenience New 5,000 Cicero, IN Under construction
</TABLE>
In addition to the projects above, the Company plans to open in 1998 one LoBill
supermarket and acquire several sites for future development. Additionally, the
Company plans to upgrade supermarket front-end systems and scale equipment, and
has begun implementation of new generation inventory procurement/distribution
software. The estimated cost of these projects in 1998, including routine
capital expenditures, is expected to be $32.0 million. Of this amount, it is
anticipated that equipment leasing will fund approximately $2.0 million. The
Company has expended $26.0 million for capital expenditures through the first
forty weeks of 1998.
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
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.
11
<PAGE> 12
Net cash provided by operating activities was $19.4 million for the first three
quarters of 1998, a $3.3 million, or 20.6%, increase from the $16.1 million
reported for the first three quarters of 1997. Working capital increased $46.2
million from March 29, 1997. The significant changes in working capital were a
$29.0 million increase in cash and equivalents, a $10.3 million increase in
accounts receivable, an $8.1 million increase in inventory, an $8.1 million
decrease in notes payable to bank, an $8.3 million increase in accounts payable
and a $5.8 million increase in accrued liabilities. The increase in cash and
equivalents and the decrease in notes payable to bank result from residual
proceeds of the Notes. The increase in accounts receivable is attributable
primarily to a deposit on assets to be leased. The increases in inventory and
accounts payable are due primarily to seasonal trends. The increase in accrued
liabilities is due largely to interest accrued on the Notes.
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 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. At January 3, 1998, no amounts were outstanding on revolving credit
facilities. 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, of which $2.7 million was utilized at January 3,
1998.
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.
YEAR 2000 ISSUE
The Company has reviewed its computer and other operating systems to identify
those which could be affected by the "Year 2000" issue and is currently
reprogramming those systems. Management believes that those changes will be made
in a timely fashion and that the Year 2000 issue will not pose significant
operational problems for the Company. Moreover, management does not expect that
reprogramming costs will have a material adverse impact on its financial
condition or results of operations. It is management's understanding that the
significant third parties with which the Company deals are now or will be Year
2000 compliant in a timely manner and, therefore, it is not anticipated that
this issue will have an adverse affect on the Company's operations or financial
position.
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<PAGE> 13
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:
<TABLE>
<S> <C>
Exhibit 3 (a) By-Laws as amended as of November 26, 1997
Exhibit 10 (a) Marsh Supermarkets, Inc. Outside Directors' Stock Plan as adopted
November 26, 1997
Exhibit 27 Financial Data Schedule (for SEC use only)
</TABLE>
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter for
which this report is filed.
13
<PAGE> 14
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 13, 1998 By: /s/ Douglas W. Dougherty
----------------------------------------
Douglas W. Dougherty
Vice President, Chief Financial Officer,
and Treasurer
February 13, 1998 By: /s/ Mark A. Varner
----------------------------------------
Mark A. Varner
Corporate Controller and
Chief Accounting Officer
14
<PAGE> 15
<TABLE>
<CAPTION>
Exhibit Index Page Number
------------- -----------
<S> <C> <C>
Exhibit 3 (a) By-Laws as amended as of November 26, 1997 16
Exhibit 10 (a) Marsh Supermarkets, Inc. Outside Directors' Stock Plan as adopted
November 26, 1997 28
Exhibit 27 Financial Data Schedule (for SEC use only) 33
</TABLE>
15
<PAGE> 1
BY-LAWS
OF
MARSH SUPERMARKETS, INC.
As Restated in Full on
August 7, 1990 and amended on February 16, 1996 and November 26, 1997
ARTICLE I
SHAREHOLDERS
SECTION 1. Annual Meeting. The Annual Meeting of the Shareholders of
this Corporation shall be held within the State of Indiana on the first Tuesday
in August of each year or such other date and at such time or place as
established by the Board of Directors for the election of directors and the
transaction of such business as may lawfully come before the meeting. Such
annual meetings shall be general meetings, that is to say, open for the
transaction of any business within the powers of the Corporation without special
notice of such business, except in cases in which special notice is required by
the Articles of Incorporation, by statute or by these By-Laws.
SECTION 2. Special Meetings. Special meetings may be called by the
majority of the Board of Directors, by the Chairman of the Board of Directors or
by the Chief Executive Officer by notifying the Secretary, in written form, of
the desire for such a meeting and stating the purposes of such a meeting.
SECTION 3. Notice.
(a) A written or printed notice, stating the place, day and hour of the
annual meeting, and in case of a special meeting, the purpose thereof, shall be
delivered or mailed, postage prepaid, to such address as appears upon the
records of the Corporation by the Secretary, or the officers or persons calling
the meeting to each shareholder of record entitled to vote at such meeting, at
least 10 days prior to such meeting.
(b) At an Annual Meeting of Shareholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be brought
properly before an Annual Meeting, business must be (i) specified in the notice
of meeting (or any supplement thereto) given by or at the direction of the Board
of Directors, (ii) otherwise properly brought before the meeting by or at the
direction of the Board of Directors, or (iii) otherwise properly brought before
the meeting by a shareholder. For business to be brought properly before an
Annual Meeting by a shareholder, the shareholder must have given timely notice
thereof in writing to the Secretary of the Corporation. To be timely, a
shareholder's notice (other than a request for inclusion of a proposal in the
Corporation's proxy statement pursuant to Rule 14a-8 of the Securities Exchange
Act of 1934) must be delivered to or mailed and received at the principal
executive offices of the Corporation, not less than sixty (60) days nor more
than ninety (90) days prior to the meeting; provided, however, that in the event
that less than seventy (70) days' notice
16
<PAGE> 2
or prior public disclosure of the date of the meeting is given or made to
shareholders, notice by the shareholder to be timely must be so received not
later than the close of business on the 10th day following the date on which
such notice of the date of the Annual Meeting was mailed or such public
disclosure was made. A shareholders' notice to the Corporation shall set forth
as to each matter the shareholder proposes to bring before the Annual Meeting
(i) a brief description of the business desired to be brought before the Annual
Meeting and the reasons for conducting such business at the Annual Meeting, (ii)
the name and record address of the shareholder proposing such business, (iii)
the class and number of shares of the Corporation that are beneficially owned by
the shareholder, and (iv) any material interest of the shareholder in such
business. Notwithstanding anything in these By-Laws to the contrary, no business
shall be conducted at an Annual Meeting except in accordance with the procedures
set forth in this Section. The Chairman of an Annual Meeting shall, if the facts
warrant, determine and declare to the meeting that business was not properly
brought before the meeting in accordance with the provisions of this Section,
and if he should so determine, he shall so declare to the meeting and any such
business not properly brought before the meeting shall not be transacted. At any
special meeting of the shareholders, only such business shall be conducted as
shall have been brought before the meeting by or at the direction of the Board
of Directors.
(c) It shall not be requisite to the validity of any meeting of
shareholders that notice thereof, whether prescribed by law, by the Restated
Articles of Incorporation or by these By-Laws, shall have been given to any
shareholder who attends in person or by proxy, or to any shareholder who, in
writing, executed and filed with the records of the meeting before the holding
thereof, a waiver of notice setting forth in reasonable detail the purpose or
purposes for which the meeting is called and the time and place thereof. No
notice of adjourned meetings of shareholders need be given.
SECTION 4. Voting.
(a) Each shareholder of record of this Corporation, as determined in
accordance with Article IV, Section 6 of these By-Laws, may vote in person or by
proxy one vote for each outstanding share of voting stock standing in his or her
name on the records of the Corporation.
(b) Any shareholder entitled to vote at any meeting of shareholders may
vote either in person or by proxy, but no proxy which is dated more than eleven
months before the meeting at which it is offered shall be accepted, unless such
proxy shall, on its face, name a longer period for which it is to remain in
force. Every proxy shall be in writing, subscribed by the shareholder or his
duly authorized attorney, and dated, but need not be sealed, witnessed or
acknowledged.
17
<PAGE> 3
(c) No share shall be voted at any meeting:
(i) on which an installment is due and unpaid; or
(ii) which shall have been transferred on the books of the
Corporation within ten days preceding the date of the
meeting; or
(iii) which belongs to the Corporation.
(d) Voting shares held by fiduciaries may be voted by the fiduciaries
in such manner as the instrument or order appointing such fiduciaries may
direct. In the absence of such direction or the inability of the fiduciaries to
act in accordance therewith, then such shares shall be voted as follows:
(i) where shares are held jointly by three or more
fiduciaries, such shares shall be voted in accordance with
the will of the majority; or
(ii) where the fiduciaries, or a majority of them cannot agree,
or where they are equally divided, upon the question of
voting such shares, they shall be voted in accordance with
the order of any court of equitable jurisdiction obtained
as in the statutes provided.
(e) Unless otherwise provided in the agreement of pledge, pledged
shares which shall have been transferred to the pledgee on the books of the
Corporation may be voted by the pledgee.
SECTION 5. Quorum. At all meetings of shareholders, a majority, in
number of shares outstanding and entitled to vote, present in person or by
proxy, shall constitute a quorum for the transaction of business; but in the
absence of a quorum the shareholders present in person or by proxy at the time
and place fixed by Section 1 of this Article I for an annual meeting, or
designated in the notice of a special meeting, or at the time and place of any
adjournment thereof, by majority vote may adjourn the meeting from time to time
without notice other than by announcement at the meeting, until a quorum shall
attend. At any such adjourned meeting at which a quorum shall be present, any
business may be transacted which might have been transacted at the original
called meeting.
SECTION 6. List of Shareholders. The Secretary, an Assistant Secretary,
or other-officer in charge of the stock transfer books of the Corporation shall
make, at least five (5) days before each shareholders' meeting, a complete list
of the shareholders entitled by the Restated Articles of Incorporation to vote
at said meeting, with the shareholders' names arranged in alphabetical order,
which list shall be on file at the principal office of the Corporation and
subject to inspection upon written demand by any shareholder entitled to vote at
the meeting. Such list shall be produced and kept open at the time and place of
the meeting and subject to inspection upon written demand by any shareholder
entitled to vote at the meeting during the holding of such meeting. The original
stock register or transfer book or a duplicate thereof, kept in this State,
shall be the only evidence as to the shareholders entitled to examine such list
or the stock ledger or transfer book or vote at any meeting of the shareholders.
18
<PAGE> 4
SECTION 7. Organization. The Chairman of the Board of Directors, and in
his absence the Chief Executive Officer, and in his absence the President, and
in his absence a Vice-President, and in their absence any shareholder chosen by
the shareholders present, shall call meetings of the shareholders to order and
shall act as Chairman of such meetings, and the Secretary of the Company shall
act as Secretary of all meetings of the shareholders, but in the absence of the
Secretary, the presiding officer may appoint any shareholder to act as Secretary
of the meeting.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. Election.
(a) The members of the Board of Directors shall be elected by the
shareholders at their annual meeting. Directors need not be shareholders. Each
director shall hold office for a period of three years, or until his successor
shall have been duly chosen and qualified or until he shall have resigned, or
shall have been removed in the manner provided in Section 4 of this Article II,
or unless he shall have been elected to a shorter term, as provided in Article
IX of the Articles of Incorporation of this Corporation.
(b) Only persons who are nominated in accordance with the procedures
set forth in this Section shall be eligible for election as directors of the
Corporation. Nominations of persons for election to the Board of Directors of
the Corporation may be made at a meeting of shareholders by or at the direction
of the Board of Directors or by any shareholder of the Corporation entitled to
vote for the election of directors at the meeting who complies with the notice
procedures set forth in this Section. Such nominations, other than those made by
or at the direction of the Board of Directors, shall be made pursuant to timely
notice in writing to the Secretary of the Corporation. To be timely, a
shareholder's notice shall be delivered to or mailed and received at the
principal executive offices of the Corporation not less than sixty (60) days nor
more than ninety (90) days prior to the meeting; provided, however, that in the
event that less than seventy (70) days' notice or prior public disclosure of the
date of the meeting is given or made to shareholders, notice by the shareholder
to be timely must be so received not later than the close of business on the
10th day following the day on which such notice of the date of the meeting was
mailed or such public disclosure was made. Such shareholder's notice shall set
forth (a) as to each person whom the shareholder proposes to nominate for
election or re-election as a director, (i) the name, age, business address and
residence address of such person, (ii) the principal occupation or employment of
such person, (iii) the class and number of shares of the Corporation which are
beneficially owned by such person and (iv) any other information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (including
without limitation such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected); and (b) as to
the shareholder giving the notice (i) the name and record address of such
shareholder and (ii) the class and number of shares of the Corporation which are
beneficially owned by such shareholder. No persons shall be eligible for
election as a director of the Corporation unless nominated in accordance with
the procedures set forth in this Section. The Chairman of the meeting shall, if
the facts warrant, determine and declare to the
19
<PAGE> 5
meeting that a nomination was not made in accordance with the procedures
prescribed by the By-Laws, and if he should so determine, he shall so declare to
the meeting and the defective nomination shall be disregarded.
SECTION 2. Duties and Powers. The business and property of the
Corporation shall be conducted and managed by its Board of Directors, which may
exercise all of the powers of the Corporation except such as are by statute, by
the Articles of Incorporation or by these By-Laws, conferred upon or reserved to
the shareholders. The corporate power of this Corporation shall be vested in the
Board of Directors, who shall have the management and control of the business of
the Corporation and shall employ such agents and servants as the Board of
Directors may deem advisable, and who may fix the rate of compensation of all
agents, employees and officers.
SECTION 3. Resignation. A director may resign at any time by filing
his written resignation with the Secretary.
SECTION 4. Removal. Any director may be removed at any time at any
regular or special meeting of the shareholders of the Corporation called for
such purpose by the affirmative vote of the holders of a majority of the shares
then entitled to vote at an election of directors.
SECTION 5. Vacancies. In case of any vacancy in the Board of Directors
through death, resignation, or created by any other cause, including an increase
in the number of members of the Board of Directors through amendment to the
Articles of Incorporation or the By-Laws, the vacancy shall be filled by the
majority vote of the remaining members of the board, the newly elected member to
serve until the next Annual Meeting of Shareholders.
SECTION 6. Special Meetings. Special meetings of the Board of Directors
shall be held whenever called by the Secretary upon the direction of the
Chairman of the Board of Directors, the Chief Executive Officer or upon the
written request of any four directors.
SECTION 7. Regular Meetings.
(a) The regular annual meeting of the directors shall be held within
five days after the adjournment of the Annual Meeting of the Shareholders, at
the office of the Corporation for the purpose of organization and the
transaction of other business or at such other time and place as may be
designated by the shareholders at such annual meeting. No notice of such first
meeting shall be necessary.
(b) In addition to the first regular meeting, regular meetings of the
Board of Directors shall be held on such dates as may be fixed, from time to
time, by the Board of Directors.
SECTION 8. Notice of Meetings. Notice of the place, day and hour of
every regular and special meeting shall be given to each director in advance of
each such meeting by delivering or telephoning the same to him personally, or by
sending the same to him by telegraph, or by leaving the same at his residence or
usual place of business, or, in the alternative, by mailing it, postage
pre-paid, and addressed to him at his last known post office address, according
to the records of the Corporation.
20
<PAGE> 6
It shall not be requisite to the validity of any meeting of the Board of
Directors that notice thereof shall have been given to any director who attends,
or to any director who, in writing executed and filed with the records of the
meeting, waives such notice. No notice of adjourned meetings of the Board of
Directors need be given.
SECTION 9. Dissent. A director who is present at a meeting of the
Board of Directors when corporate action is taken is deemed to have assented to
such action unless:
(i) he objects at the beginning of the meeting (or promptly upon
his arrival) to holding the meeting or transacting business at
the meeting;
(ii) his dissent or abstention from the action taken is entered in
the minutes of the meeting; or
(iii) he delivers written notice of his dissent or abstention to the
presiding officer of the meeting before its adjournment or to
the Corporation immediately after adjournment of the meeting.
The right of dissent or abstention is not available to a
director who votes in favor of the action taken.
SECTION 10. Quorum. A majority of the actual number of directors
elected and qualified shall constitute a quorum for the transaction of business
except for filling of vacancies, but if, at any meeting of the board, there
shall be less than a quorum present, a majority of those present may adjourn the
meeting from time to time. The transaction of any business or the approval of
any resolution shall require the affirmative vote of a majority of all directors
regardless of the number in actual attendance.
SECTION 11. Organization. The Chairman of the Board of Directors, and
in his absence the Chief Executive Officer, and in their absence any director
chosen by the directors present, shall call meetings of the Board of Directors
to order, and shall act as Chairman of such meetings. The Secretary of the
Company shall act as Secretary of the Board of Directors, and in the absence of
the Secretary, the presiding officer may appoint any director to act as
Secretary of the meeting.
21
<PAGE> 7
SECTION 12. Order of Business. The order of business at all meetings
of the Board of Directors shall be as follows:
(i) Roll Call
(ii) Reading of the Minutes of the preceding meeting and action
thereof
(iii) Reports of Officers
(iv) Reports of Committees
(v) Unfinished Business
(vi) Miscellaneous Business
(vii) New Business
SECTION 13. Executive Committee and Other Committees.
(a) The Board of Directors may by resolution establish an Executive
Committee which shall consist of the Chief Executive Officer and not fewer than
two (2) nor more than four (4) other members of the Board of Directors. Each
member of such Committee, as a prerequisite to service on the Committee, shall
have served at least one (1) year on the Board of Directors. Committee members
shall hold office so long as they are members of the Board of Directors and
until removed or replaced by the Board of Directors. The Chairman of such
committee shall be named by the Board of Directors, or, if none shall be named,
shall be named by a majority of such committee. During the intervals between the
meetings of the Board of Directors, the Executive Committee shall possess and
may exercise all of the powers of the Board of Directors in the management of
the business and affairs of the Corporation unless otherwise restricted by
statute or resolution of the Board of Directors. The Executive Committee shall
keep minutes of the business which it transacts. All action by the Executive
Committee shall be reported to the Board of Directors at its meeting next
succeeding such action. Vacancies in the Executive Committee shall be filled by
the Board of Directors.
(b) The Board of Directors may by resolution establish an Audit
Committee and such other committees as the Board of Directors may from time to
time deem to be appropriate. Each member of each such committee shall be a
member of the Board of Directors, shall be elected by a majority of the Board of
Directors and shall serve until his resignation, removal or replacement by the
Board of Directors. The chairman of such committee shall be named by the Board
of Directors, or, if none shall be named, shall be named by a majority of the
members of such committee. Each such committee shall have and exercise the
authority conferred upon it by the Board of Directors. Each such committee shall
keep minutes of its meeting. All action by any such committee shall be reported
to the Board of Directors at its meeting next succeeding such action. Vacancies
in such committees shall be filled by the Board of Directors.
(c) Meetings of Committees. Unless otherwise provided by these By-Laws,
each committee established by the Board of Directors shall fix its own rules of
procedure and shall meet as provided by such rules or by resolution of the Board
of Directors, and it shall also meet at the call of the chairman or of any two
members of the committee. A majority of the Executive Committee, including the
presence of the Chief Executive Officer, shall be necessary to constitute a
quorum for the transaction of business, unless the Chief Executive Officer,
either before or after a meeting, waives the requirement that he be present to
constitute a quorum, in which case any majority of the Executive Committee shall
22
<PAGE> 8
constitute a quorum. The transaction of any business or the approval of any
resolution by the Executive Committee shall require the affirmative vote of a
majority of all members of the Executive Committee, regardless of the number in
actual attendance.
SECTION 14. Number. The number of directors of the Corporation shall
be ten (10).
ARTICLE III
GENERAL OFFICERS
SECTION 1. Designation. The offices of the Corporation shall consist of
the Chief Executive Officer, a President, one or more Vice Presidents, a
Secretary, a Treasurer, and other subordinate officers as may be appointed by
the Board of Directors from time to time. The Board of Directors of the
Corporation may create such offices as in its judgment the business of the
Corporation requires. The Chairman of the Board of Directors and the Chief
Executive Officer shall be chosen from among the directors, but other officers
need not be directors. Officers need not be shareholders of the Corporation. Any
two or more offices may be held by the same person, except that the duties of
the Chief Executive Officer and the Secretary shall not be performed by the same
person.
SECTION 2. Election and Removal. Officers shall be elected by the Board
of Directors at its annual meeting and shall hold office for one year each or
until their respective successors have been elected and qualified. The Board of
Directors may remove any officer at any time, with or without cause. Vacancies
in offices occurring by reason of death, resignation, removal or increase in the
number of officers of the Corporation may be filled by the Board of Directors,
except as otherwise provided by the law, and the officer elected to fill any
such vacancy shall hold office until the next annual meeting of the Board of
Directors or until his or her successor is elected and qualified.
SECTION 3. Chief Executive Officer. The Chief Executive Officer shall
serve as the Chief Executive Officer of the Corporation and shall have general
and executive management control of the business and affairs of the Corporation,
subject to the control of the Board of Directors. He shall, in general, perform
all duties incident to the office of Chief Executive Officer and such other
duties as, from time to time, may be assigned to him by the Board of Directors.
SECTION 4. President. The President shall have active management of the
operations of the Corporation, subject, however, to the control of the Board of
Directors and the Chief Executive Officer. He shall, in general, perform all
duties incident to the office of President and such other duties as, from time
to time, may be assigned to him by the Board of Directors or the Chief Executive
Officer.
SECTION 5. Vice President. Each Vice President shall have such powers
and perform such duties as the Board of Directors may from time to time
prescribe or as the Chief Executive Officer may from time to time delegate. The
Board of Directors may designate one of the vice presidents as an Executive Vice
President who shall temporarily discharge the duties of the President in the
case of his absence, death or inability to act. In the case of the death of the
Chief Executive Officer, the President and the Executive Vice President or in
the case of their simultaneous absence or inability to act, a Vice
23
<PAGE> 9
President shall be designated by the Board of Directors to perform temporarily
the duties of the Chief Executive Officer.
SECTION 6. Secretary. The Secretary shall attend all meetings of the
shareholders, the Board of Directors and committees of the Board of Directors
(unless the chairman of any such committee shall designate one of its members as
secretary to such committee) and shall record, or cause to be recorded, accurate
minutes of such meetings. He shall attend to the proper issuance of all notices
of the Corporation and shall have custody of the minute books of the
Corporation. In general, he shall perform all duties which are by law or custom
incident to such office, and such other duties as may, from time to time, be
assigned to him by the Board of Directors or the Chief Executive Officer.
SECTION 7. Treasurer. The Treasurer shall have charge and custody, and
be responsible for, all funds of the Corporation, and shall deposit such funds
in such depositories as shall be selected by the Board of Directors. The
Treasurer shall keep all books of account relating to the business of the
Corporation and shall render a statement of the Corporation's financial
condition whenever requested to do so by the Board of Directors. In general, he
shall perform all the duties incident to such office, and such other duties as
may, from time to time, be assigned to him by the Board of Directors or the
Chief Executive Officer.
SECTION 8. Assistant Officers. The Board of Directors may elect one or
more assistant secretaries and one or more assistant treasurers, and such
assistant officers, if any, shall hold office for such period and shall have
such authority and perform such duties as the Board of Directors may prescribe.
SECTION 9. Execution of Documents. All documents shall, unless
otherwise (i) directed by the Board of Directors (ii) required by law or (iii)
provided by these By-Laws, be executed on behalf of the Corporation, in the
following manner:
(a) All notes, bonds, leases, commercial paper and other evidences of
indebtedness and deeds, mortgages, security agreements and other documents which
provide for the sale or encumbrance of the assets of the Corporation shall be
executed by the Chief Executive Officer, or the President and the Treasurer.
(b) All checks, drafts, bills of exchange and orders for payment of
money of the Corporation shall be executed by the Chief Executive Officer, the
President or the Treasurer.
(c) All other instruments in writing and legal documents shall be
executed by the Chief Executive Officer or the President and attested by the
Secretary.
In the event of their absence or inability to act, the Chief Executive
Officer, the President, Treasurer or the Secretary may designate an Executive
Vice President, Vice President or subordinate officer to execute documents on
his or her behalf.
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<PAGE> 10
ARTICLE IV
CAPITAL STOCK
SECTION 1. Certificates of Stock.
(a) The Corporation shall issue to each shareholder a certificate
signed by the Chief Executive Officer or the President, and the Secretary or an
Assistant Secretary of the Corporation, certifying the number of shares owned by
him. Where such certificate is also signed by a transfer agent or registrar, the
signatures of any such Chief Executive Officer, President, Vice President,
Secretary or Assistant Secretary and the impression of the corporate seal may be
facsimiles. The certificate shall state, the name of the registered holder, the
number of shares represented thereby, the par value of each share or a statement
that such shares have no par value, and whether such shares have been fully
paid. If such shares have not been fully paid, the certificate shall be legibly
stamped to indicate the percent which has been paid, and as further payments are
made thereon the certificate shall be stamped accordingly.
(b) If the Corporation issues more than one class, every certificate
issued shall state the kind and class of shares represented thereby, and the
relative rights, interest, preferences and restrictions of such class, or a
summary thereof.
SECTION 2. Form of Certificate. The stock certificates, representing
the shares of the capital stock of this Corporation, shall be in such form, not
inconsistent with the laws of the State of Indiana, as may be adopted by the
Board of Directors.
SECTION 3. Transfer. Title to a certificate and to the shares
represented thereby can be transferred only:
(i) By delivery of the certificate with a written assignment of the
certificate endorsed either in blank or to a specified person by the
person appearing by the certificate to be the owner of the shares
represented thereby; or
(ii) By delivery of the certificate with a written assignment of the
certificate or a power of attorney to sell, assign or transfer the same or the
shares represented thereby, signed by the person appearing by the certificate to
be the owner of the shares represented thereby. Such assignment or power of
attorney may be either in blank or to a specified person.
SECTION 4. Transfer Agents and Registrars. The Corporation may have one
or more transfer agents and one or more registrars of its stock, whose
respective duties the Board of Directors may, from time to time, define. No
certificate of stock shall be valid until countersigned by a transfer agent, if
the Corporation has a transfer agent, or until registered by a registrar, if the
Corporation has a registrar. The duties of transfer agent and registrar may be
combined.
SECTION 5. Stock Ledgers. An original or duplicate stock list,
containing a complete and accurate list of the names and addresses of the
shareholders of the Corporation and the number of shares held by them
respectively, shall be kept at the principal office of the Corporation. The
original
25
<PAGE> 11
or duplicate stock ledger required by Article IV, Section 5 of these
By-Laws shall be open to inspection and examination at the Corporation's
principal office during the usual business hours of such office for all proper
purposes by any shareholder of the Corporation, or his duly authorized agent or
attorney. Any shareholder wishing to make such inspection or examination shall
make a request therefor, under oath in writing at the Corporation's principal
office, setting forth therein in detail the reasons for requesting such
inspection or examination.
SECTION 6. Record Dates. The Board of Directors is hereby authorized to
fix the date, not exceeding seventy (70) days or in the absence of such
determination by the directors, ten (10) days preceding the date of any meeting
of shareholders. The Board of Directors is also hereby authorized to fix the
date of any dividend payment date or any date for the allotment of rights,
including voting rights. For the purpose of taking such record, the books of the
Corporation shall be closed at the close of business on such date, and only
shareholders of record on such date shall be entitled to notice of and to vote
at such meetings, or to receive such dividends or rights, as the case may be.
SECTION 7. Mutilated, Lost or Destroyed Certificates. The holder of any
certificate representing shares of stock of the Corporation shall immediately
notify the Corporation of any mutilation, loss or destruction thereof, and the
proper officers of the Corporation may cause one or more new certificates, for
the same number of shares in the aggregate, to be issued to such holder upon the
surrender of the mutilated certificate, or in the case of loss or destruction of
the certificate, upon satisfactory proof of such loss or destruction and in all
cases, upon the deposit of any open penalty bond or of indemnity by way of bond
or otherwise, in an amount of at least equal to the then market value of the
mutilated, lost or destroyed certificates and in such form and with such
sureties or securities as the proper officers may approve to indemnify the
Corporation against loss or liability by reason of the issuance of such new
certificates; but the officers may, in their discretion, refuse to issue such
new certificates, save upon the order of some court having jurisdiction in such
matters.
SECTION 8. Dividends. The Board of Directors may, from to time, declare
and the Corporation may pay dividends on its outstanding shares of capital
stock, out of the unreserved and unrestricted earned surplus or out of any other
source permitted by statutes. Dividends may be paid in cash, in property or in
shares of the capital stock of the Corporation, but no dividend payable in cash
or property shall be paid out of surplus due to or arising from unrealized
appreciation in value or from revaluation of assets.
SECTION 9. Transfers to Capital. The Board of Directors may, from time
to time, increase the capital of the Corporation by transfer of all or a part of
the surplus of the Corporation to stated capital.
26
<PAGE> 12
ARTICLE V
MISCELLANEOUS
SECTION 1. Fiscal Year. The fiscal year of this Corporation shall begin
on the first day following the end of the thirteenth week of each calendar year,
and shall end on the last day of the thirteenth week of each calendar year.
SECTION 2. Methods of Calling Subscriptions. The subscriptions for
stock shall be payable in full at the time of making such subscriptions unless
the Board of Directors shall authorize time be given and other terms of payment
to be set forth in the stock subscription itself. In no event shall credit be
given beyond eighteen months from the date of the subscription.
SECTION 3. Amendments. These By-Laws may be adopted, amended or
repealed at any meeting of the Board of Directors by the affirmative vote of
three-fourths of the total directors regardless of the number in actual
attendance.
SECTION 4. Seal. This Corporation shall have a corporate seal which
shall be as follows: A circular disc, on the outer margin of which shall appear
the corporate name and State of Incorporation, with the words "Corporate Seal"
through the center, so mounted that it may be used to impress these words in
raised letters upon paper, and same shall be kept by the Secretary.
SECTION 5. Waiver of Notice. Any shareholder, director or officer
may, in writing, waive the giving and the mailing of any notice required to be
given or mailed either by the statutes of Indiana, the Articles of Incorporation
or by the By-Laws of this Corporation.
27
<PAGE> 1
MARSH SUPERMARKETS, INC.
OUTSIDE DIRECTORS' STOCK PLAN
as adopted November 26, 1997
1. Purpose
The purpose of the Marsh Supermarkets, Inc. Outside Directors' Stock
Plan (the "Plan") is to advance the interests of Marsh Supermarkets, Inc. (the
"Corporation") and its shareholders by increasing the proprietary interest of
members of the Board of Directors of the Corporation (the "Board"), who are
Outside Directors (as defined herein), in the growth and performance of the
Corporation by enabling such Outside Directors to receive shares of the
Corporation's Class B Common Stock (the "Common Stock"), which Common Stock may
be either authorized but unissued or treasury shares, in lieu of all or a
portion of the compensation they receive for membership on the Board and
committees thereof.
2. Administration
The Plan shall be administered by the Salary Committee of the Board
(the "Committee"). The Committee shall, subject to the provisions of the Plan,
have the power to construe the terms hereunder and to adopt and amend such rules
and regulations for the administration of the Plan as it may deem desirable. Any
decisions of the Committee in the administration of the Plan, as described
herein, shall be final and conclusive. The Committee may authorize any one or
more of its members or the Secretary of the Committee or any officer of the
Corporation to execute and deliver documents on behalf of the Committee. No
member of the Committee shall be liable for anything done or omitted to be done
by him or her or by any other member of the Committee in connection with the
Plan, except for his or her own willful misconduct or as expressly provided by
stature.
3. Participation
Each member of the Board who is not an employee of the Corporation or
any Subsidiary (as defined herein) of the Corporation (an "Outside Director")
shall be eligible to participate in the Plan. As used herein, the term
"Subsidiary" means any partnership, corporation, association, limited liability
company, joint stock company, trust, joint venture, unincorporated organization
or other business entity of which (i) if a corporation, a majority of the total
voting power of shares of stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by the
Corporation or one or more of the other Subsidiaries or any combination thereof,
or (ii) if a partnership, association, limited liability company, joint stock
company, trust, joint venture, unincorporated organization or other business
entity, a majority of the partnership or other similar ownership interest
thereof is at the time owned or controlled, directly or indirectly, by the
Corporation or one or more Subsidiaries or any combination thereof. For purposes
hereof, the Corporation or a Subsidiary shall be deemed to have a majority
ownership interest in a partnership, association, limited liability company,
joint stock company, trust, joint venture, unincorporated organization or other
business entity if the Corporation or such Subsidiary shall be allocated a
majority of partnership, association, limited liability company,
28
<PAGE> 2
joint stock company, trust, joint venture, unincorporated organization or other
business entity gains or losses or shall be or control the managing director,
the trustee, a manager or a general partner of such partnership, association,
limited liability company, joint stock company, trust, joint venture,
unincorporated organization or other business entity.
4. Election to Receive Common Stock in Lieu of Cash Compensation
An Outside Director may elect to reduce all or part of the cash
compensation otherwise payable for services to be rendered by him or her as a
director (including the annual retainer fee and any fees payable for services on
the Board or any committee thereof) and to receive in lieu thereof shares of
Common Stock. Any such election (a) shall be in the form prescribed by the
Corporation (the "Election Form") addressed to the Secretary of the Corporation,
(b) shall specify an amount of such compensation to be received in the form of
Common Stock, expressed as a percentage of the cash compensation otherwise
payable in cash or as a type of fee (e.g., retainer fee) otherwise payable in
cash, and (c) shall become effective on the first day of the first calendar
quarter commencing on or immediately after the date of receipt of such Election
Form by the Corporation. Any such election shall continue in effect until a new
Election Form revoking or changing such election is received by the Corporation.
5. Issuance of Common Stock
If an Outside Director elects to receive all or a portion of his or her
compensation in the form of Common Stock pursuant to paragraph 4 above, the
Corporation shall cause to be issued to such director as soon as practicable
after the end of each calendar quarter with respect to which such election
applies, a number of shares of Common Stock equal to the amount of such
compensation divided by the closing price per share of Common Stock reported on
NASDAQ on the last business day of the calendar quarter during which the
compensation would have been paid in cash in the absence of such election;
provided; however, if NASDAQ is not open for trading on such business day or if
Common Stock does not trade on such business day, the closing price for the last
day of such calendar quarter on which Common Stock did so trade shall be used.
To the extent that the application of the foregoing formula would result in
fractional shares of Common Stock being issuable, cash will be paid to the
Outside Director in lieu of such fractional shares based upon the value
established pursuant to such formula.
6. Number of Common Stock of Common Stock Issuable Under the Plan
The maximum number of shares of Common Stock that may be purchased
under the Plan shall be one hundred thousand (100,000).
29
<PAGE> 3
7. Miscellaneous Provisions
(a) Neither the Plan nor any action taken hereunder shall be construed
as giving any Outside Director any right to be retained in the service of the
Corporation.
(b) An Outside Director's rights and interest under the Plan may not be
assigned or transferred, hypothecated or encumbered in whole or in part either
directly or by operation of law or otherwise (except in the event of Outside
Director's death, by will or the laws of descent and distribution or as
described in Section 7(c) herein), including, but not by way of limitation,
execution, levy, garnishment, attachment, pledge, bankruptcy or in any other
manner, and no such right or interest of any Outside Director in the Plan shall
be subject to any obligation or liability of such Outside Director.
(c) An Outside Director may designate, in the Election Form, any person
to whom payments of cash or shares of Common Stock are to be made if the Outside
Director dies before receiving payment of all amounts due hereunder. A
beneficiary designation will be effective only after the signed Election Form is
filed with the Secretary of the Corporation while the Outside Director is alive,
and will cancel all beneficiary designations signed and filed earlier. If the
Outside Director fails to designate a beneficiary, or if all designated
beneficiaries of the Outside Director die before the Outside Director or before
complete payment of all amounts due hereunder, any remaining unpaid amounts
shall be paid in one lump sum to the estate of the last to die of the Outside
Director or the Outside Director's designated beneficiaries, if any.
(d) No shares of Common Stock shall be issued hereunder unless counsel
for the Corporation shall be satisfied that such issuance will be in compliance
with applicable federal, state, local and foreign securities, securities
exchange and other applicable laws and requirements.
(e) It shall be a condition to the obligation of the Corporation to
issue shares of Common Stock hereunder, that the Outside Director pay to the
Corporation, upon its demand, such amount as may be requested by the Corporation
for the purpose of satisfying any liability to withhold federal, state, local or
foreign income or other taxes. If the amount requested is not paid, the
Corporation shall have no obligation to issue and the Outside Director shall
have no right to receive, shares of Common Stock.
(f) The expenses of the Plan shall be borne by the Corporation.
(g) The Plan shall be unfunded. The Corporation shall not be required
to establish any special or separate fund or to make any other segregation of
assets to assure the issuance of shares hereunder.
(h) By accepting any Common Stock hereunder or other benefit under the
Plan, each Outside Director and each person claiming under or through him or her
shall be conclusively deemed to have indicated his or her acceptance and
ratification of, and consent to, any action taken under the Plan by the
Corporation or the Committee.
30
<PAGE> 4
(i) The Corporation shall cause to be filed any registration statement
required by the Securities Act of 1933, as amended, and any reports, returns or
other information regarding any shares of Common stock issued pursuant hereto as
may be required by Section 13 or 15(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), or any other applicable statute, rule or
regulation.
(j) The provisions of this Plan shall be governed by and construed in
accordance with the laws of the State of Indiana.
(k) Pending issuance of shares of Common Stock hereunder, all
compensation earned by an Outside Director with respect to which an election to
receive Common Stock pursuant to paragraph 4 above shall have been received by
the Corporation shall be the property of such director and shall be paid to him
or her in cash in the event that shares of Common Stock are not used.
(l) Headings are given to the sections of this Plan solely as a
convenience to facilitate reference. Such headings, numbering and paragraphing
shall not in any case be deemed in any way material or relevant to the
construction of this Plan or any provisions thereof. The use of the singular
shall also include within its meaning the plural, where appropriate, and vice
versa.
8. Amendment
The Plan may be amended at any time and from time to time by resolution
of the Board as the Board shall deem advisable; provided, however, that no
amendment shall become effective without shareholder approval if such
shareholder approval is required by law, rule or regulation, and provided
further, to the extent required by Rule 16b-3 under Section 16 of the Exchange
Act, in effect from time to time, Plan revisions shall not be amended more than
once every six (6) months, except that the foregoing shall not preclude any
amendment to comport with changes in the Internal Revenue Code of 1986, the
Employee Retirement Income Security Act of 1974 or the rules there under in
effect from time to time. No amendment of the Plan shall materially and
adversely affect any right of any Outside Director with respect to any shares of
Common Stock theretofore issued without such Outside Director's written consent.
9. Termination
This Plan shall terminate upon the earlier of the following dates or
events to occur: (a) upon the adoption or resolution of the Board terminating
the Plan; or (b) ten (10) years from the date the Plan is initially approved and
adopted by the Board. No termination of the Plan shall materially and adversely
affect any of the rights or obligations of any person without his or her consent
with respect to any shares of Common Stock theretofore earned and issuable under
the Plan.
31
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S 10-Q FOR THE PERIOD ENDED JANUARY 3, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND THE NOTES THERETO.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-29-1998
<PERIOD-END> JAN-03-1998
<CASH> 41,547
<SECURITIES> 0
<RECEIVABLES> 35,976
<ALLOWANCES> 0
<INVENTORY> 96,355
<CURRENT-ASSETS> 181,240
<PP&E> 380,043
<DEPRECIATION> 135,636
<TOTAL-ASSETS> 463,759
<CURRENT-LIABILITIES> 115,806
<BONDS> 207,603
0
0
<COMMON> 8,491,541<F1>
<OTHER-SE> 90,292
<TOTAL-LIABILITY-AND-EQUITY> 463,759
<SALES> 1,165,779
<TOTAL-REVENUES> 1,165,779
<CGS> 879,090
<TOTAL-COSTS> 1,127,980<F2>
<OTHER-EXPENSES> 14,980
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,340
<INCOME-PRETAX> 9,479
<INCOME-TAX> 2,795
<INCOME-CONTINUING> 6,684
<DISCONTINUED> 0
<EXTRAORDINARY> (3,278)
<CHANGES> 0
<NET-INCOME> 3,406
<EPS-PRIMARY> 0.41<F3>
<EPS-DILUTED> 0.43<F3>
<FN>
<F1>NUMBER OF CLASS A AND CLASS B SHARES OUTSTANDING.
<F2>INCLUDES (I) $879,090 OF COST OF GOODS SOLD (ITEM 5-03(B)2(A) OF REGULATION
S-X) AND (II) $248,890 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>
