-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Frdx3h1eEDZrdtooDhY+azr2zE258Q2lQQkpwgCxHnF7SZIB+2f5VeRwMxddy6hp fmYwk40Qwq1N6JTgwrA1WA== 0000950144-00-002302.txt : 20000216 0000950144-00-002302.hdr.sgml : 20000216 ACCESSION NUMBER: 0000950144-00-002302 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000101 FILED AS OF DATE: 20000214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARSH SUPERMARKETS INC CENTRAL INDEX KEY: 0000062737 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 350918179 STATE OF INCORPORATION: IN FISCAL YEAR END: 0329 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-01532 FILM NUMBER: 544391 BUSINESS ADDRESS: STREET 1: 9800 CROSSPOINT BLVD CITY: INDIANAPOLIS STATE: IN ZIP: 46256 BUSINESS PHONE: 3175942100 10-Q 1 MARSH SUPERMARKETS,INC 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 ========= 2 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS MARSH SUPERMARKETS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) (Unaudited)
12 Weeks Ended 40 Weeks Ended ---------------------- ------------------------- January 1, January 2, January 1, January 2, 2000 1999 2000 1999 -------- -------- ---------- ---------- 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 ======== ======== ========== ==========
See notes to condensed consolidated financial statements. 3 MARSH SUPERMARKETS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)
January 1, March 27, January 2, 2000 1999 1999 --------- --------- --------- (Unaudited) (Note A) (Unaudited) 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 ========= ========= =========
See notes to condensed consolidated financial statements. 4 MARSH SUPERMARKETS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
40 Weeks Ended ----------------------- January 1, January 2, 2000 1999 -------- -------- 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 ======== ========
See notes to condensed consolidated financial statements. 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:
January 1, March 27, January 2, 2000 1999 1999 -------- -------- -------- 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
12 Weeks Ended 40 Weeks Ended ----------------------- ------------------------- January 1, January 2, January 1, January 2, 2000 1999 2000 1999 -------- -------- ---------- ---------- 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
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:
12 weeks ended 40 weeks ended ---------------------- ----------------------- January 1, January 2, January 1, January 2, 2000 1999 2000 1999 ------- ------- ------- ------- 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 ======= ======= ======= =======
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:
Retail Wholesale Consolidated ---------- --------- ------------ 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
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:
Third Quarter Year - to - Date --------------------------------- ------------------------------ Percent of Revenues Percent of Revenues ------------------- Percent ------------------- Percent 2000 1999 Change 2000 1999 Change ------ ------ ------ ------ ------ ------ 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%
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. 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. 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. 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:
Square Store Type Category Feet Location Status ---------- -------- ---- -------- ------ 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
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. 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. 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. 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 EX-27 2 FINANCIAL DATA SCHEDULE
5 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. 1,000 9-MOS APR-01-2000 MAR-28-1999 JAN-01-2000 30,912 0 38,567 0 120,272 197,065 471,884 173,013 550,437 133,656 244,407 0 0 8,506,653 106,008 550,437 1,348,564 1,348,564 1,018,190 1,298,941 19,620 0 16,506 13,497 4,344 9,153 0 0 0 9,153 1.10 1.00 Number of Class A and Class B shares outstanding 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). Multiplier is 1 for per share data.
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