<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 1, 2000
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 February 8, 2000:
Class A Common Stock - 4,004,408 shares
Class B Common Stock - 4,503,708 shares
---------
8,508,116 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 1, January 2, January 1, January 2,
2000 1999 2000 1999
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Sales and other revenues $419,569 $383,042 $1,348,564 $1,232,147
Cost of merchandise sold, including
warehousing and transportation 316,453 288,596 1,018,190 927,364
-------- -------- ---------- ----------
Gross profit 103,116 94,446 330,374 304,783
Selling, general and administrative 87,209 80,157 280,751 260,308
Depreciation and amortization 5,947 5,180 19,620 16,789
-------- -------- ---------- ----------
Operating income 9,960 9,109 30,003 27,686
Interest and debt cost amortization 5,075 4,510 16,506 14,914
-------- -------- ---------- ----------
Income before income taxes 4,885 4,599 13,497 12,772
Income taxes 1,629 1,401 4,344 4,090
-------- -------- ---------- ----------
Net income $ 3,256 $ 3,198 $ 9,153 $ 8,682
======== ======== ========== ==========
Earnings per common share $ .39 $ .38 $ 1.10 $ 1.05
======== ======== ========== ==========
Earnings per common share -
assuming dilution $ .35 $ .35 $ 1.00 $ .96
======== ======== ========== ==========
Dividends per share $ .11 $ .11 $ .33 $ .33
======== ======== ========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE> 3
MARSH SUPERMARKETS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
January 1, March 27, January 2,
2000 1999 1999
--------- --------- ---------
(Unaudited) (Note A) (Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 30,912 $ 30,520 $ 33,423
Accounts receivable 38,567 36,096 36,715
Inventories, less LIFO reserve: January 1, 2000 - $11,979;
March 27, 1999 - $12,141; January 2, 1999 - $15,859 120,272 107,336 100,766
Prepaid expenses 6,124 9,768 5,846
Recoverable income taxes 1,190 308 849
--------- --------- ---------
Total current assets 197,065 184,028 177,599
Property and equipment, less allowances for depreciation 298,871 278,639 277,537
Other assets 54,501 47,016 45,498
--------- --------- ---------
$ 550,437 $ 509,683 $ 500,634
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to bank $ -- $ -- $ 8,440
Accounts payable 77,296 69,466 68,887
Accrued liabilities 53,132 45,507 49,470
Current maturities of long-term liabilities 3,228 2,990 2,985
--------- --------- ---------
Total current liabilities 133,656 117,963 129,782
Long-term liabilities:
Long-term debt 244,407 228,900 215,238
Capital lease obligations 14,367 12,820 8,834
--------- --------- ---------
Total long-term liabilities 258,774 241,720 224,072
Deferred items:
Income taxes 12,103 11,768 11,603
Other 14,447 13,752 12,901
--------- --------- ---------
Total deferred items 26,550 25,520 24,504
Shareholders' Equity:
Common stock, Classes A and B 25,449 25,239 25,239
Retained earnings 115,183 108,841 106,827
Cost of common stock in treasury (6,941) (6,710) (6,710)
Deferred cost - restricted stock (1,769) (2,418) (2,613)
Notes receivable - stock options (465) (472) (467)
--------- --------- ---------
Total shareholders' equity 131,457 124,480 122,276
--------- --------- ---------
$ 550,437 $ 509,683 $ 500,634
========= ========= =========
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE> 4
MARSH SUPERMARKETS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
40 Weeks Ended
-----------------------
January 1, January 2,
2000 1999
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 9,153 $ 8,682
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 19,620 16,789
Amortization of other assets 4,588 3,214
Changes in operating assets and liabilities 3,144 4,262
Other operating activities (2,256) (145)
-------- --------
Net cash provided by operating activities 34,249 32,802
INVESTING ACTIVITIES
Net acquisition of property, equipment and land (40,093) (42,621)
Other investing activities (7,851) (4,676)
-------- --------
Net cash used for investing activities (47,944) (47,297)
FINANCING ACTIVITIES
Proceeds (payments) of short-term borrowing -- 8,440
Proceeds of long-term borrowing 27,550 20,000
Payments of long-term debt and capital leases (12,378) (10,807)
Proceeds from sale/leaseback 2,120 --
Purchase of shares for treasury (540) (1,171)
Stock options exercised 121 689
Cash dividends paid (2,811) (2,779)
Other financing activities 25 --
-------- --------
Net cash provided by financing activities 14,087 14,372
-------- --------
Net increase (decrease) in cash and equivalents 392 (123)
Cash and equivalents at beginning of period 30,520 33,546
-------- --------
Cash and equivalents at end of period $ 30,912 $ 33,423
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE> 5
MARSH SUPERMARKETS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except per share amounts or as otherwise noted)
JANUARY 1, 2000
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of Marsh
Supermarkets, Inc. and subsidiaries (the "Financial Statements") 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 27, 1999. The balance sheet at March 27, 1999, 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 "2000" and "1999" relate to the fiscal
years ending April 1, 2000 and March 27, 1999, respectively.
The Financial Statements for the twelve and forty week periods ended January 1,
2000 and January 2, 1999, 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 consolidated basis, the financial position,
results of operations and cash flows for the periods presented. Certain amounts
in the 1999 financial statements were reclassified to conform with the 2000
presentation.
Operating results for the forty week period ended January 1, 2000 are not
necessarily indicative of the results that may be expected for the full fiscal
year ending April 1, 2000.
NOTE B - LONG-TERM DEBT AND GUARANTOR SUBSIDIARIES
Other than three inconsequential subsidiaries, all of the Company's subsidiaries
(the "Guarantors") have fully and unconditionally guaranteed on a joint and
several basis the Company's obligations under the $150.0 million of 8 7/8%
Senior Subordinated Notes. The Guarantors are 100% wholly-owned subsidiaries of
the Company. The Guarantors 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
each Guarantor because management believes that such information is not material
to investors. Summarized combined financial information for the Guarantors is
set forth below:
<TABLE>
<CAPTION>
January 1, March 27, January 2,
2000 1999 1999
-------- -------- --------
<S> <C> <C> <C>
Current assets $191,102 $178,504 $172,478
Current liabilities 122,297 111,778 119,923
Noncurrent assets 309,293 280,966 274,457
Noncurrent liabilities 89,513 71,249 51,222
</TABLE>
<TABLE>
<CAPTION>
12 Weeks Ended 40 Weeks Ended
----------------------- -------------------------
January 1, January 2, January 1, January 2,
2000 1999 2000 1999
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Total revenues $419,415 $383,035 $1,348,403 $1,232,132
Gross profit 102,961 94,439 330,213 304,768
Net income 6,387 6,509 19,864 19,763
</TABLE>
<PAGE> 6
NOTE C - EARNINGS PER SHARE
The following table sets forth the computation of the numerators and
denominators used in the computation of earnings per share and diluted earnings
per share:
<TABLE>
<CAPTION>
12 weeks ended 40 weeks ended
---------------------- -----------------------
January 1, January 2, January 1, January 2,
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income - numerator for earnings per share $ 3,256 $ 3,198 $ 9,153 $ 8,682
Effect of convertible debentures 215 224 735 729
------- ------- ------- -------
Numerator for diluted earnings per share -
income after assumed conversions $ 3,471 $ 3,422 $ 9,888 $ 9,411
======= ======= ======= =======
Weighted average shares outstanding 8,507 8,452 8,507 8,427
Non-vested restricted shares (137) (125) (163) (140)
------- ------- ------- -------
Denominator for earnings per share 8,370 8,327 8,344 8,287
Effect of dilutive securities:
Non-vested restricted shares 137 125 163 140
Stock options 31 87 45 104
Convertible debentures 1,290 1,290 1,290 1,290
------- ------- ------- -------
Denominator for diluted earnings per share -
adjusted weighted average shares 9,828 9,829 9,842 9,821
======= ======= ======= =======
</TABLE>
NOTE D - BUSINESS SEGMENTS
The Company operates within two business segments: the retail sale of food and
related products through supermarkets, convenience stores and food services, and
the wholesale distribution of food and related products by CSDC, principally to
unaffiliated convenience stores. Segment information is set forth in the
following table:
<TABLE>
<CAPTION>
Retail Wholesale Consolidated
---------- --------- ------------
<S> <C> <C> <C>
Twelve weeks ended January 1, 2000
- ----------------------------------
External revenues $ 338,212 $ 81,357 $ 419,569
Intersegment sales 8,185 21,050 29,235
Income before income taxes 5,058 (173) 4,885
Twelve weeks ended January 2, 1999
- ----------------------------------
External revenues 311,209 71,833 383,042
Intersegment sales 6,975 19,883 26,858
Income before income taxes 2,836 1,763 4,599
Forty weeks ended January 1, 2000
- ---------------------------------
External revenues 1,075,290 273,274 1,348,564
Intersegment sales 26,259 71,704 97,963
Income before income taxes 11,657 1,840 13,497
Forty weeks ended January 2, 1999
- ---------------------------------
External revenues 992,159 239,988 1,232,147
Intersegment sales 23,912 63,807 87,719
Income before income taxes 8,414 4,358 12,772
</TABLE>
<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 (statements
other than with respect to historical fact). Actual results could differ
materially from those reflected by the forward-looking statements due to known
and unknown risks and uncertainties which could adversely affect future results,
liquidity and capital resources. The risks and uncertainties 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, uncertainties relating
to tobacco and environmental regulations, and the level of margins achievable in
the Company's operating divisions and their ability to minimize operating
expenses. The Company undertakes no obligation to update or revise any
forward-looking statements to reflect subsequent events or circumstances.
Results of operations for interim periods do not necessarily reflect the results
of operations that may be expected for the fiscal year.
The following table sets forth certain income statement components, expressed as
a percentage of sales and other revenues, and the percentage change in such
components:
<TABLE>
<CAPTION>
Third Quarter Year - to - Date
--------------------------------- ------------------------------
Percent of Revenues Percent of Revenues
------------------- Percent ------------------- Percent
2000 1999 Change 2000 1999 Change
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Sales and other revenues 100.0% 100.0% 9.5% 100.0% 100.0% 9.4%
Gross profit 24.6% 24.7% 9.2% 24.5% 24.7% 8.4%
Selling, general and administrative 20.8% 20.9% 8.8% 20.8% 21.1% 7.9%
Depreciation and amortization 1.4% 1.4% 14.8% 1.5% 1.4% 16.9%
Operating income 2.4% 2.4% 9.3% 2.2% 2.2% 8.4%
Interest and debt cost amortization 1.2% 1.2% 12.5% 1.2% 1.2% 10.7%
Income taxes 0.4% 0.4% 16.3% 0.3% 0.3% 6.2%
Net income 0.8% 0.8% 1.8% 0.7% 0.7% 5.4%
</TABLE>
SALES AND OTHER REVENUES
In the third quarter of 2000, consolidated sales and other revenues increased
$36.5 million, or 9.5%, to $419.6 million compared to the same quarter of 1999.
Supermarket revenues increased $15.9 million, Village Pantry revenues increased
$8.9 million, Convenience Store Distributing Company (CSDC) revenues increased
$9.5 million and Crystal Food Services revenues increased $1.5 million. Retail
sales, excluding fuel sales, increased 6.1%. Sales in comparable supermarkets
and convenience stores, including replacement stores and format conversions, but
excluding fuel, increased 2.6% from the year earlier quarter. Approximately $5.0
million of the increase in supermarket revenues was attributable to same store
sales gains, with the remainder attributable to two supermarket and four LoBill
store openings since the beginning of the year earlier quarter. Village Pantry
inside store revenues increased 7.8%, and fuel sales increased 56.7% due to a
22.8% increase in fuel gallons sold combined with average retail pump prices
that were 25.7 cents per gallon higher than in 1999. The increase in CSDC
revenues was primarily attributable to higher cigarette manufacturer prices
passed on to customers.
<PAGE> 8
For the forty weeks ended January 1, 2000, consolidated sales and other revenues
increased $116.4 million, or 9.4%, to $1,348.6 million compared to the same
forty weeks of 1999. Supermarket revenues increased $51.5 million, Village
Pantry revenues increased $25.5 million, CSDC revenues increased $33.3 million
and Crystal Food Services revenues increased $5.4 million. Retail sales,
excluding fuel sales, increased 6.6%. Sales in comparable stores, including
replacement stores and format conversions, but excluding fuel, increased 4.2%
from the prior year. The increase in supermarket revenues was split evenly
between same store sales gains and the aforementioned store additions. Village
Pantry inside revenues increased 8.6%, and fuel sales increased 43.0% due to a
22.2% increase in fuel gallons sold combined with average retail pump prices
that were 16.6 cents higher than in 1999. The increase in CSDC revenues is
essentially attributable to higher cigarette manufacturer prices passed on to
customers.
GROSS PROFIT
Gross profit is calculated net of warehousing, transportation, and promotional
expenses. In the third quarter of 2000, consolidated gross profit increased $8.7
million, or 9.2%, from the comparable quarter of 1999 to $103.0 million. In
November 1998, cigarette manufacturers increased wholesale prices approximately
25% and cigarette retailers immediately increased the retail shelf price
accordingly. The increase allowed the Company to realize a one-time gain, net of
the estimated LIFO impact, of $2.8 million in the year earlier quarter.
Excluding the cigarette price increase gain, consolidated gross profit increased
$11.5 million, or 12.5%, from the year earlier quarter. As a percentage of
revenues, consolidated gross profit was 24.6% in the third quarter of 2000 and
24.7% in the third quarter of 1999. Excluding the cigarette price increase gain,
consolidated gross profit was 23.9% of revenues in the third quarter of 1999.
Excluding the cigarette price increase gain, gross profit, expressed as a
percentage of revenues, increased in supermarkets, but decreased in Village
Pantry, CSDC and Crystal Food Services.
For the forty weeks ended January 1, 2000, consolidated gross profit increased
$25.6 million, or 8.4%, from the year earlier period to $330.2 million.
Excluding the cigarette price increase gain in the third quarter of 1999,
consolidated gross profit increased $28.4 million, or 9.4%, from the forty weeks
ended January 2, 1999. As a percentage of revenues, consolidated gross profit
declined to 24.5% from 24.7% in the prior year's comparable period. Excluding
the cigarette price increase gain in the third quarter of 1999, consolidated
gross profit, expressed as a percentage of revenues, was 24.5% for both years.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
In the third quarter of 2000, selling, general and administrative (SG&A)
expenses increased $7.1 million, or 8.8%, compared to the third quarter of 1999
to $87.2 million. As a percentage of revenues, SG&A expenses decreased to 20.8%
from 20.9% for the year earlier quarter. The higher current quarter expenses
were attributable to increases in wages and fringe benefits of $4.1 million,
store occupancy and other store operating costs of $1.2 million, pre-opening
costs for two new supermarkets of $0.5 million, advertising of $0.7 million, and
$0.6 million in administrative and general expenses. Wages in stores open both
quarters, excluding supermarket conversions to the LoBill format, increased 1.3%
due to wage rate increases and increased labor hours resulting from same store
sales gains.
For the forty weeks ended January 1, 2000, SG&A expenses increased $20.4
million, or 7.9%, from the comparable forty weeks of 1999 to $280.8 million. As
a percentage of revenues, SG&A expenses were 20.8% in both years. The increase
was due to increases in wages and benefits of $10.4 million, store occupancy and
other store operating costs of $4.8 million, advertising of $2.7 million, and
$2.8 million in administrative and general costs. Wages in identical stores
increased 1.0% from the comparable forty weeks of the prior year.
<PAGE> 9
DEPRECIATION AND AMORTIZATION EXPENSE
Depreciation and amortization expense for the third quarter of 2000 was $5.9
million, compared to $5.2 million for the year earlier quarter. As a percentage
of revenues, depreciation and amortization expense was 1.4% in the third quarter
of both years.
For the forty weeks ended January 1, 2000, depreciation and amortization expense
was $19.6 million, compared to $16.8 million for the year earlier period. As a
percentage of revenues, depreciation and amortization expense was 1.5% for the
first forty weeks of 2000, compared to 1.4% for the comparable period of 1999.
OPERATING INCOME
Operating income (income from continuing operations before interest and taxes)
increased to $10.0 million for the third quarter of 2000 from $9.1 million for
the comparable quarter of 1999. The increase was the result of an $11.5 million
gross profit increase, including $0.9 million from the sale of real estate and a
$0.4 million favorable LIFO adjustment, net of a $7.1 million increase in SG&A
expenses, a $0.7 million increase in depreciation and amortization, and the $2.8
million non-recurring cigarette price increase gain in the third quarter of
1999. Third quarter operating income as a percentage of revenues was 2.4% in
both years.
For the forty weeks ended January 1, 2000, operating income was $30.0 million,
compared to $27.7 million in the same period in 1999. The increase is comprised
of the improvement in gross profit in excess of incremental SG&A expenses and
incremental depreciation and amortization, $0.9 million from sales of real
estate and a $0.4 million favorable LIFO adjustment. Operating income as a
percentage of revenues was 2.2% in both years.
INTEREST EXPENSE
Interest expense for the third quarter of 2000 was $5.1 million, compared to
$4.5 million for the comparable quarter of 1999 and was 1.2% as a percentage of
revenues in both quarters. For the forty weeks ended January 1, 2000, interest
expense was $16.5 million, compared to $14.9 million in the same period in 1999.
As a percentage of revenues, interest expense for the forty weeks was 1.2% in
both years.
INCOME TAXES
For the quarter ended January 1, 2000, the effective income tax rate was 33.3%,
compared to 30.5% for the comparable prior year quarter. For the forty weeks
ended January 1, 2000, the effective income tax rate was 32.2%, compared to
32.0% for the comparable weeks of the prior year. It is expected the effective
rate will be 32.2% for the current year.
NET INCOME
Net income was $3.3 million for the third quarter of 2000, compared to $3.2
million in 1999. Net income, as a percentage of revenues, was 0.8% in both
quarters.
For the forty weeks ended January 1, 2000, net income was $9.2 million, compared
to $8.7 million in 1999. As a percentage of revenues, net income for the forty
weeks was 0.7% in both years.
<PAGE> 10
CAPITAL EXPENDITURES
The Company's capital requirements have traditionally been financed through
internally generated funds, long-term borrowing and lease financing, including
capital and operating leases.
During the first forty weeks of 2000, the following stores were opened,
acquired, remodeled, converted or under construction:
<TABLE>
<CAPTION>
Square
Store Type Category Feet Location Status
---------- -------- ---- -------- ------
<S> <C> <C> <C> <C>
Supermarket Replacement 64,000 Indianapolis, IN Open
Supermarket New 65,000 Carmel, IN Open
Supermarket Replacement 65,000 Brownsburg, IN Under construction
LoBill Conversion 30,000 Indianapolis, IN Open
LoBill Acquired 12,000 Pendleton, IN Open
LoBill Acquired 17,000 Peru, IN Open
LoBill Acquired 32,000 Richmond, IN Open
LoBill Acquired 14,000 Richmond, IN Open
Convenience Acquired 2,600 Indianapolis, IN Open
Convenience Acquired 2,600 Indianapolis, IN Open
Convenience New 2,000 Warsaw, IN Open
Convenience Acquired 2,600 Muncie, IN Open
Convenience New 3,600 Greenfield, IN Under construction
Convenience New 3,600 Brownsburg, IN Under construction
Convenience New 5,000 W. Lafayette, IN Under construction
Convenience New 3,600 Connersville, IN Under construction
Convenience New 3,800 Muncie, IN Under construction
</TABLE>
Subsequent to the end of the quarter, the Company opened the supermarket in
Brownsburg, Indiana and the convenience stores in Greenfield and Brownsburg,
Indiana. In addition to the above projects, the Company plans to construct and
open a fuel kiosk at one supermarket and acquire several sites for future
development. The cost of these projects and other capital commitments is
estimated to be $65.0 million. Of this amount, the Company plans to fund $15.0
million through equipment leasing, $25.0 million through mortgages, and the
remainder with current cash balances and internally generated funds. As of
January 1, 2000, the Company had expended $45.2 million for capital expenditures
in 2000.
The Company's plans with respect to store construction, expansion, conversion
and remodeling may be revised in light of changing conditions, such as
competitive influences, its ability to negotiate successfully site acquisitions
or leases, zoning limitations and other governmental regulations. The timing of
projects is subject to normal construction and other delays. It is possible 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, and the
Company may use other or different financing arrangements.
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities in the forty weeks ended January 1,
2000 was $34.2 million, compared to $32.8 million for the year earlier period.
The improvement in net cash provided by operating activities was due primarily
to higher non-cash charges for depreciation of property, equipment and other
assets. Working capital decreased $2.7 million to $63.4 million from March 27,
1999 for the reasons stated below. Accounts receivable increased $2.5 million
due to seasonal sales volume. Inventory increased $12.9 million due to seasonal
demands, but was partially funded by a $7.8 million increase in accounts
payable. Prepaid expenses decreased $3.6 million, as $4.1 million funded for the
Company group insurance plan at March 27, 1999 was disbursed during the period.
Accrued liabilities increased $7.6 million due primarily to vacation and other
employee benefits, the timing of interest payments on the Senior Subordinated
Notes and an increase in the current portion of deferred federal income taxes.
At January 1, 2000, the Company's bank revolving credit agreements provided
$50.0 million of available financing, of which $25.0 million was utilized.
Commitments from various banks for short-term borrowings provided an additional
$20.0 million available at rates at or below the prime rates of the committed
banks, of which none was utilized at January 1, 2000.
The Company believes amounts available 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, debt
service obligations and capital expenditures for the foreseeable future.
YEAR 2000 ISSUE
The Company has completed the remediation, testing and implementation phases for
all business applications hardware and software (information technology, or IT),
and non-IT areas including microprocessors and embedded chips. Subsequent to
December 31, 1999, minor non-compliance issues have been identified and
remediated, none of which have affected the Company's ability to operate in the
normal course of business. Since some software programs are executed
infrequently, additional non-compliance may be detected in the future. No
significant non-compliance related problems have been experienced with
merchandise suppliers and service providers. The Company believes that any risk
associated with further findings of non-compliance will be minimal and will not
have a material effect on the Company's operating results or financial position.
The total cost of compliance was $13.8 million, of which $12.8 million was
capitalized and $1.0 million was expensed. The Company does not separately track
the internal costs incurred for the Year 2000 project; those costs are
principally the payroll and related costs for its information systems group. The
costs of the project were funded through operating cash flows. No IT projects
were delayed as a result of the Year 2000 compliance effort that would have a
material effect on the Company's operating results or financial position.
<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
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable.
Item 5. Other Information
Not Applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are included herein:
Exhibit 27 - Financial Data Schedule (For SEC use only)
(b) Reports on Form 8-K:
None.
<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.
February 14, 2000 By: /s/ Douglas W. Dougherty
------------------------------------------
Douglas W. Dougherty
Senior Vice President, Chief Financial
Officer, and Treasurer
February 14, 2000 By: /s/ Mark A. Varner
------------------------------------------
Mark A. Varner
Chief Accounting Officer
Vice President - Corporate Controller
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S 10-Q FOR THE PERIOD ENDED JANUARY 1, 2000 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> APR-01-2000
<PERIOD-START> MAR-28-1999
<PERIOD-END> JAN-01-2000
<CASH> 30,912
<SECURITIES> 0
<RECEIVABLES> 38,567
<ALLOWANCES> 0
<INVENTORY> 120,272
<CURRENT-ASSETS> 197,065
<PP&E> 471,884
<DEPRECIATION> 173,013
<TOTAL-ASSETS> 550,437
<CURRENT-LIABILITIES> 133,656
<BONDS> 244,407
0
0
<COMMON> 8,506,653<F1>
<OTHER-SE> 106,008
<TOTAL-LIABILITY-AND-EQUITY> 550,437
<SALES> 1,348,564
<TOTAL-REVENUES> 1,348,564
<CGS> 1,018,190
<TOTAL-COSTS> 1,298,941<F2>
<OTHER-EXPENSES> 19,620
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,506
<INCOME-PRETAX> 13,497
<INCOME-TAX> 4,344
<INCOME-CONTINUING> 9,153
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,153
<EPS-BASIC> 1.10<F3>
<EPS-DILUTED> 1.00<F3>
<FN>
<F1>Number of Class A and Class B shares outstanding
<F2>Includes (i) $1,018,190 of Cost of Goods Sold (Item 5-03(b)2(a) of Regulation
S-X) and (ii) $280,751 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>
