<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 24, 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 July 10, 2000:
Class A Common Stock - 4,040,308 shares
Class B Common Stock - 4,376,456 shares
---------
8,416,764 shares
=========
<PAGE> 2
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MARSH SUPERMARKETS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
12 Weeks Ended
----------------------
June 24, June 19,
2000 1999
---- ----
<S> <C> <C>
Sales and other revenues $436,609 $394,266
Cost of merchandise sold, including
warehousing and transportation 329,769 296,183
-------- --------
Gross profit 106,840 98,083
Selling, general and administrative 89,774 82,623
Depreciation 6,096 5,640
-------- --------
Operating income 10,970 9,820
Interest and debt expense amortization 5,771 4,871
-------- --------
Income before income taxes 5,199 4,949
Income taxes 1,722 1,668
-------- --------
Net income $ 3,477 $ 3,281
======== ========
Earnings per common share $ .42 $ .39
======== ========
Earnings per common share - assuming dilution $ .38 $ .36
======== ========
Dividends per share $ .11 $ .11
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE> 3
MARSH SUPERMARKETS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
June 24, April 1, June 19,
2000 2000 1999
---- ---- ----
(Unaudited) (Note A) (Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 38,813 $ 31,435 $ 24,263
Accounts receivable 45,694 44,315 39,978
Inventories, less LIFO reserve; June 24, 2000 - $8,418;
April 1, 2000 - $8,343; June 19, 1999 - $12,216 125,376 125,383 109,079
Prepaid expenses 5,203 6,068 4,751
Recoverable income taxes 598 1,960 --
--------- --------- ---------
Total current assets 215,684 209,161 178,071
Property and equipment, less allowances for depreciation 303,179 299,589 279,557
Other assets 61,755 58,255 50,044
--------- --------- ---------
$ 580,618 $ 567,005 $ 507,672
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to bank $ 3,880 $ 10,000 $ 300
Accounts payable 80,120 79,097 73,834
Accrued liabilities 49,108 55,042 46,204
Current maturities of long-term liabilities 3,344 28,097 3,133
--------- --------- ---------
Total current liabilities 136,452 172,236 123,471
Long-term liabilities:
Long-term debt 265,446 218,724 218,486
Capital lease obligations 14,156 14,266 13,344
--------- --------- ---------
Total long-term liabilities 279,602 232,990 231,830
Deferred items:
Income taxes 12,794 12,744 11,936
Other 16,591 16,123 13,522
--------- --------- ---------
Total deferred items 29,385 28,867 25,458
Shareholders' Equity:
Common stock, Classes A and B 25,459 25,455 25,393
Retained earnings 119,927 117,360 111,183
Cost of common stock in treasury (8,352) (7,858) (6,962)
Deferred cost - restricted stock (1,379) (1,574) (2,223)
Notes receivable - stock options (476) (471) (478)
--------- --------- ---------
Total shareholders' equity 135,179 132,912 126,913
--------- --------- ---------
$ 580,618 $ 567,005 $ 507,672
========= ========= =========
</TABLE>
See notes to condensed consolidated financial statements.
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MARSH SUPERMARKETS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
12 Weeks Ended
-----------------------
June 24, June 19,
2000 1999
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 3,477 $ 3,281
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 6,096 5,640
Amortization of other assets 1,421 1,363
Changes in operating assets and liabilities (3,993) 4,934
Other 359 (957)
-------- --------
Net cash provided by operating activities 7,360 14,261
INVESTING ACTIVITIES
Net acquisition of property, equipment and land (8,538) (6,753)
Other investing activities (5,767) (2,956)
-------- --------
Net cash used for investing activities (14,305) (9,709)
FINANCING ACTIVITIES
Proceeds from (repayments of) short-term borrowings (6,120) 300
Proceeds from long-term borrowing 22,458 25,000
Repayments of long-term debt and capital leases (599) (35,747)
Proceeds from sale/leaseback -- 1,000
Purchases of shares for treasury (504) (422)
Cash dividends paid (923) (940)
Other financing activities 11 --
-------- --------
Net cash provided by (used for) financing activities 14,323 (10,809)
Net increase (decrease) in cash and equivalents 7,378 (6,257)
Cash and equivalents at beginning of period 31,435 30,520
-------- --------
Cash and equivalents at end of period $ 38,813 $ 24,263
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
4
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MARSH SUPERMARKETS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands except per share amounts, or as otherwise noted)
JUNE 24, 2000
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of Marsh
Supermarkets, Inc. and subsidiaries were prepared in accordance with generally
accepted accounting principles for interim financial information and the
instructions to Form 10-Q. Accordingly, they do not include all the information
and footnotes necessary for a fair presentation of financial position, results
of operations, and cash flows in conformity with generally accepted accounting
principles. This report should be read in conjunction with the Company's
Consolidated Financial Statements for the year ended April 1, 2000. The balance
sheet at April 1, 2000, 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 "2001" and "2000" relate to the fiscal
years ending March 31, 2001 and April 1, 2000, respectively.
The condensed consolidated financial statements for the twelve week periods
ended June 24, 2000 and June 19, 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 items in the 2000 condensed consolidated financial
statements were reclassified to conform with the 2001 presentation.
Operating results for the twelve week period ended June 24, 2000 are not
necessarily indicative of the results that may be expected for the full fiscal
year ending March 31, 2001.
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 Company has not presented separate financial statements and
other disclosures concerning each Guarantor because management has determined
that such information is not material to investors.
Summarized combined financial information for the Guarantors is set forth below:
<TABLE>
<CAPTION>
June 24, April 1, June 19,
2000 2000 1999
---- ---- ----
<S> <C> <C> <C>
Current assets $ 216,024 $ 203,772 $ 178,071
Current liabilities 123,328 162,458 114,820
Noncurrent assets 322,468 314,866 285,434
Noncurrent liabilities 114,672 67,139 61,647
</TABLE>
<TABLE>
<CAPTION>
12 Weeks Ended
------------------------
June 24, June 19,
2000 1999
---- ----
<S> <C> <C>
Total revenues $ 436,604 $ 394,262
Gross profit 106,835 98,079
Net income 6,707 6,520
</TABLE>
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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
-----------------------
June 24, June 19,
2000 1999
---- ----
<S> <C> <C>
Numerator for earnings per share $ 3,477 $ 3,281
Effect of convertible debentures 216 214
------- -------
Numerator for diluted earnings per share -
income after assumed conversions $ 3,693 $ 3,495
======= =======
Weighted average shares outstanding 8,393 8,511
Non-vested restricted shares (124) (178)
------- -------
Denominator for earnings per share 8,269 8,333
Effect of dilutive securities:
Non-vested restricted shares 124 178
Employee stock options 72 26
Convertible debentures 1,290 1,290
------- -------
Denominator for diluted earnings per share -
adjusted weighted average shares 9,755 9,827
======= =======
</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 June 24, 2000
External revenues $ 342,153 $ 94,456 $ 436,609
Intersegment revenues 8,335 21,990 30,325
Income before income taxes 4,252 947 5,199
Twelve weeks ended June 19, 1999
External revenues $ 314,495 $ 79,771 $ 394,266
Intersegment sales 7,743 21,345 29,088
Income before income taxes 4,342 607 4,949
</TABLE>
NOTE E - ACQUISITION
On May 6, 2000, the Company acquired the capital stock of A.L. Ross & Sons,
which operates five supermarkets and three pharmacies in Muncie, Indiana. The
results of operations, assets and liabilities, and cash flows of A.L. Ross &
Sons for the period ended June 24, 2000, are not material.
6
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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 and
e-retailers 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, and the successful integration of acquisitions, uncertainties
relating to tobacco and environmental regulations, and the level of margins
achievable in the Company's operating divisions and their ability to increase
sales and 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
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>
First Quarter
--------------------------------------
Percentage of Revenues
---------------------- Percentage
2001 2000 Change
---- ---- ------
<S> <C> <C> <C>
Sales and other revenues 100.0% 100.0% 10.7%
Gross profit 24.5% 24.9% 8.9%
Selling, general and administrative 20.6% 21.0% 8.7%
Depreciation 1.4% 1.4% 8.1%
Operating income 2.5% 2.5% 11.7%
Interest and debt expense amortization 1.3% 1.2% 18.5%
Income taxes 0.4% 0.4% 3.2%
Net income 0.8% 0.8% 6.0%
</TABLE>
SALES AND OTHER REVENUES
In the first quarter of 2001, consolidated sales and other revenues increased
$42.3 million, or 10.7%, from the first quarter of 2000 to $436.6 million.
Supermarket revenues increased $16.1 million, Village Pantry revenues increased
$9.5 million, Convenience Store Distributing Company (CSDC) revenues increased
$14.7 million and Crystal Food Services revenues increased $1.1 million. Retail
sales, excluding fuel sales, increased 6.4%. Sales in comparable supermarkets
and convenience stores, including replacement stores and format conversions, but
excluding fuel, increased 3.2% from the first quarter of 2000. Approximately
half of the increase in supermarket revenues was attributable to comparable
store sales gains with the remainder attributable to two supermarkets and three
LoBill stores opened since the beginning of the year earlier quarter. Village
Pantry inside store revenues increased 6.7% and fuel gallons sold increased
9.8%. Approximately $5.5 million of the increase in Village Pantry revenues
resulted from retail fuel prices significantly higher than the year earlier
quarter. The increase in CSDC revenues was primarily attributable to higher
cigarette manufacturer prices passed on to customers.
7
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GROSS PROFIT
Gross profit is calculated net of warehousing, transportation, and promotional
expenses. In the first quarter of 2001, consolidated gross profit increased $8.8
million, or 8.9%, from the first quarter of 2000 to $106.8 million as compared
to $98.0 million for the year earlier quarter. As a percentage of revenues,
gross profit was 24.5% in the first quarter of 2001 compared to 24.9% for the
prior year. As a percentage of revenues, gross profit increased in supermarkets
and Crystal Food Services. Consolidated gross profit, as a percentage of
revenues, declined due to significantly higher retail fuel prices in Village
Pantry and higher wholesale cigarette prices in CSDC; both commodities are sold
at profit margins well below the gross profit percentages achieved on grocery
and foodservice sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
In the first quarter of 2001, selling, general and administrative (SG&A)
expenses increased $7.2 million, or 8.7%, from the comparable quarter of 2000 to
$89.8 million. As a percentage of revenues, SG&A expenses were 20.6% in 2001
compared to 21.0% in 2000. The higher expenses were primarily attributable to a
$4.9 million increase in wage and fringe benefits costs, a $0.7 million decrease
in advertising, a $2.0 million increase in store occupancy costs and a $1.0
million increase in other store operating and administrative costs. Wage expense
in stores open in both quarters, excluding supermarket conversions to the LoBill
format, increased 2.9% due to wage rate increases and increased labor hours
resulting from same store sales gains.
DEPRECIATION EXPENSE
Depreciation expense for the first quarter of 2001 was $6.1 million, compared to
$5.6 million for the first quarter of 2000. As a percentage of revenues,
depreciation expense was 1.4% for both quarters.
OPERATING INCOME
Operating income (income from continuing operations before interest and taxes)
increased $1.2 million to $11.0 million for the first quarter of 2001 from $9.8
million for the first quarter of 2000. Operations contributed $1.9 million to
the increase, but $0.7 million of income generated from the disposal of assets
in the year earlier quarter did not recur in the current quarter. Operating
income, as a percentage of revenues, was 2.5% for both quarters.
INTEREST EXPENSE
Interest expense for the first quarter of 2001 was $5.8 million, compared to
$4.9 million in the first quarter of 2000 and, as a percentage of revenues, was
1.3% in 2001 and 1.2% in 2000.
INCOME TAXES
For the quarter ended June 24, 2000 the effective income tax rate was 33.1%
compared to 33.7% for the year earlier quarter. The first quarter effective rate
is based on the overall expected rate for 2001.
NET INCOME
Net income for the first quarter of fiscal 2001 was $3.5 million, compared to
$3.3 million for the first quarter of 2000. As a percentage of revenues, net
income was 0.8% for both quarters.
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CAPITAL EXPENDITURES
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 quarter of 2001, the following stores were opened, acquired,
remodeled, converted or were under construction:
<TABLE>
<CAPTION>
Square
Store Type Category Feet Location Status
---------- -------- ---- -------- ------
<S> <C> <C> <C> <C>
Supermarket New 55,000 Mooresville, IN Under construction
Supermarket New 55,000 Bloomington, IN Under construction
Supermarket Replacement 55,000 Kokomo, IN Under construction
LoBill Acquired 26,000 Greensburg, IN Open
LoBill New 31,000 Lebanon, IN Open
Convenience Replacement 3,600 Connersville, IN Open
Convenience Replacement 3,800 Muncie, IN Open
Convenience - kiosk New 200 Indianapolis, IN Open
Convenience New 3,500 Martinsville, IN Under construction
Convenience New 3,500 McCordsville, IN Under construction
Convenience Replacement 3,500 Wabash, IN Under construction
Convenience Replacement 3,500 Muncie, IN Under construction
Convenience - kiosk New 200 Mooresville, IN Under construction
</TABLE>
During the quarter, the Company also acquired five supermarkets and three
pharmacies in Muncie, Indiana, and the assets of Primo Catering, a mid-scale
caterer in Indianapolis, Indiana. In 2001, the Company also plans to remodel one
supermarket, open four to six new convenience stores and acquire several sites
for future development. The cost of these projects and other capital commitments
is estimated to be $70.0 million. Of this amount, the Company plans to fund
$20.0 million through equipment leasing, $40.0 million through sale/leasebacks
and believes it can finance the balance with current cash balances and
internally generated funds. As of June 24, 2000, the Company had expended $8.5
million for capital expenditures.
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
projects described above may not commence, others may be added, 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.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities in the first quarter of 2001 was $7.4
million, compared to $14.3 million in the first quarter of 2000. The decline in
net cash provided by operating activities was due primarily to payments of both
notes payable to bank and accrued liabilities. Working capital increased $42.3
million from April 1, 2000. Changes in working capital included a $7.4 million
increase in cash and equivalents, a $6.1 million decrease in notes payable to
bank, a $5.9 million decrease in accrued liabilities and a $24.8 million
decrease in current maturities of long-term liabilities. The increase in cash
and equivalents and decrease in notes payable to bank were due primarily to the
receipt of proceeds from the mortgage of two supermarkets. The decrease in
accrued liabilities was due primarily to the payment of accrued compensation and
related payroll taxes, and the payment of property taxes. The decrease in
current maturities of long-term liabilities was due to the payment of amounts
borrowed under revolving credit facilities.
9
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During the quarter, $50.0 million in bank revolving credit facilities matured
and were replaced with a new three year $90.0 million unsecured revolving credit
facility, of which $35.0 million was utilized at June 24, 2000. The new facility
contains various financial covenants including a funded debt to EBITDA ratio and
a fixed charge coverage ratio. The Company also has a bank commitment that
provides an additional $5.0 million in short-term borrowing at a rate equal to
or below the prime rate of the committed bank, of which $3.9 million was
utilized at June 24, 2000.
The Company believes amounts available under its revolving credit agreement and
notes payable to bank, 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.
10
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PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable.
Item 2. Changes in Securities
Not Applicable.
Item 3. Defaults upon Senior Securities or Rights of Holders Thereof
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable.
Item 5. Other Information
Not Applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are included herein:
Exhibit 27 - Financial Data Schedule for the quarter for which
this report is filed.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which
this report is filed.
11
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MARSH SUPERMARKETS, INC.
August 2, 2000 By: /s/ Douglas W. Dougherty
--------------------------------------
Douglas W. Dougherty
Senior Vice President, Chief Financial
Officer and Treasurer
August 2, 2000 By: /s/ Mark A. Varner
--------------------------------------
Mark A. Varner
Chief Accounting Officer
Vice President - Corporate Controller
<PAGE> 13
Exhibit Index
Exhibit 27 - Financial Data Schedule for the quarter for which this report is
filed (for SEC use only).
