10-Q 1 g67187e10-q.txt 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 6, 2001 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 31, 2001: Class A Common Stock - 3,956,808 shares Class B Common Stock - 4,245,364 shares --------- 8,202,172 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 6, January 1, January 6, January 1, 2001 2000 2001 2000 -------- -------- ---------- ----------- Sales and other revenues $429,817 $419,582 $1,467,071 $ 1,348,451 Cost of merchandise sold, including warehousing and transportation 316,980 316,453 1,100,637 1,018,190 -------- -------- ---------- ----------- Gross profit 112,837 103,129 366,434 330,261 Selling, general and administrative 95,548 87,209 312,301 280,751 Depreciation 5,197 5,947 19,801 19,620 -------- -------- ---------- ----------- Operating income 12,092 9,973 34,332 29,890 Interest and debt cost amortization 5,529 5,075 19,158 16,506 Other non-operating (income) expense 811 13 1,000 (113) -------- -------- ---------- ----------- Income before income taxes 5,752 4,885 14,174 13,497 Income taxes 1,917 1,629 4,723 4,344 -------- -------- ---------- ----------- Net income $ 3,835 $ 3,256 $ 9,451 $ 9,153 ======== ======== ========== =========== Earnings per common share $ .47 $ .39 $ 1.15 $ 1.10 ======== ======== ========== =========== Earnings per common share - assuming dilution $ .42 $ .35 $ 1.05 $ 1.00 ======== ======== ========== =========== 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 6, April 1, January 1, 2001 2000 2000 --------- --------- --------- Unaudited) (Note A) (Unaudited) ASSETS Current assets: Cash and equivalents $ 34,927 $ 31,435 $ 30,912 Accounts receivable 43,012 44,315 38,567 Inventories, less LIFO reserve: January 6, 2001 - $8,593; April 1, 2000 - $8,343; January 1, 2000 - $11,979 133,288 125,383 120,272 Prepaid expenses 5,809 6,068 6,124 Recoverable income taxes -- 1,960 1,190 --------- --------- --------- Total current assets 217,036 209,161 197,065 Property and equipment, less allowances for depreciation 307,156 299,589 298,871 Other assets 53,362 58,255 54,501 --------- --------- --------- $ 577,554 $ 567,005 $ 550,437 ========= ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable to bank $ 600 $ 10,000 $ -- Accounts payable 89,502 79,097 77,296 Accrued liabilities 60,330 55,042 53,132 Current maturities of long-term liabilities 2,786 28,097 3,228 --------- --------- --------- Total current liabilities 153,218 172,236 133,656 Long-term liabilities: Long-term debt 244,565 218,724 244,407 Capital lease obligations 13,885 14,266 14,367 --------- --------- --------- Total long-term liabilities 258,450 232,990 258,774 Deferred items: Income taxes 12,883 12,744 12,103 Other 16,269 16,123 14,447 --------- --------- --------- Total deferred items 29,152 28,867 26,550 Shareholders' Equity: Common stock, Classes A and B 25,593 25,455 25,449 Retained earnings 124,065 117,360 115,183 Cost of common stock in treasury (10,964) (7,858) (6,941) Deferred cost - restricted stock (1,036) (1,574) (1,769) Notes receivable - stock options (924) (471) (465) --------- --------- --------- Total shareholders' equity 136,734 132,912 131,457 --------- --------- --------- $ 577,554 $ 567,005 $ 550,437 ========= ========= =========
See notes to condensed consolidated financial statements. 4 MARSH SUPERMARKETS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
40 Weeks Ended ----------------------- January 6, January 1, 2001 2000 -------- -------- OPERATING ACTIVITIES Net income $ 9,451 $ 9,153 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 19,801 19,620 Amortization of other assets 4,092 4,588 Changes in operating assets and liabilities 12,021 3,144 Other operating activities 618 (2,256) -------- -------- Net cash provided by operating activities 45,983 34,249 INVESTING ACTIVITIES Net acquisition of property, equipment and land (37,796) (40,093) Other investing activities (5,443) (7,851) -------- -------- Net cash used for investing activities (43,239) (47,944) FINANCING ACTIVITIES Proceeds (payments) of short-term borrowing (9,400) -- Proceeds of long-term borrowing 62,011 27,550 Payments of long-term debt and capital leases (61,862) (12,378) Proceeds from sale/leasebacks 16,282 2,120 Purchase of shares for treasury (3,818) (540) Stock options exercised 235 121 Cash dividends paid (2,750) (2,811) Other financing activities 50 25 -------- -------- Net cash provided by financing activities 748 14,087 -------- -------- Net increase in cash and equivalents 3,492 392 Cash and equivalents at beginning of period 31,435 30,520 -------- -------- Cash and equivalents at end of period $ 34,927 $ 30,912 ======== ========
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 6, 2001 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 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 Financial Statements for the twelve and forty week periods ended January 6, 2001 and January 1, 2000, 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 2000 financial statements were reclassified to conform with the 2001 presentation. Operating results for the forty week period ended January 6, 2001 are not necessarily indicative of the results that may be expected for the full fiscal year ending March 31, 2001. NOTE B - CHANGE IN ESTIMATED USEFUL LIVES OF PROPERTY AND EQUIPMENT As a result of the Company's periodic examination and review of its accounting policies and practices, the Company determined that a revision of the estimated useful lives used to depreciate building, leasehold and land improvements was appropriate in light of the Company's historical experience and its current assessment of prevailing industry practice. The effect of this change was a decrease in depreciation expense of $1.2 million and an increase in net income of $0.8 million, or $.08 per diluted share, for the quarter and $.09 per diluted share for the forty weeks ended January 6, 2001. 6 NOTE C - 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:
January 6, April 1, January 1, 2001 2000 2000 --------- --------- ----------- Current assets $ 216,454 $ 203,772 $ 191,102 Current liabilities 140,388 162,458 122,297 Noncurrent assets 319,225 314,866 309,293 Noncurrent liabilities 109,902 67,139 89,513
12 Weeks Ended 40 Weeks Ended ------------------------- ---------------------------- January 6, January 1, January 6, January 1, 2001 2000 2001 2000 --------- --------- ----------- ----------- Total revenues $ 428,994 $ 419,415 $ 1,466,041 $ 1,348,403 Gross profit 112,014 102,961 365,404 330,213 Net income 6,726 6,387 19,753 19,864
NOTE D - 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 6, January 1, January 6, January 1, 2001 2000 2001 2000 --------- --------- ----------- ----------- Net income - numerator for earnings per share $ 3,835 $ 3,256 $ 9,451 $ 9,153 Effect of convertible debentures 215 215 716 735 --------- --------- ----------- ----------- Numerator for diluted earnings per share - income after assumed conversions $ 4,050 $ 3,471 $ 10,167 $ 9,888 ========= ========= =========== =========== Weighted average shares outstanding 8,210 8,507 8,316 8,507 Non-vested restricted shares (83) (137) (108) (163) --------- --------- ----------- ----------- Denominator for earnings per share 8,127 8,370 8,208 8,344 Effect of dilutive securities: Non-vested restricted shares 83 137 108 163 Stock options 164 31 108 45 Convertible debentures 1,290 1,290 1,290 1,290 --------- --------- ----------- ----------- Denominator for diluted earnings per share - adjusted weighted average shares 9,664 9,828 9,714 9,842 ========= ========= =========== ===========
7 NOTE E - 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 Convenience Store Distributing Company (CSDC), principally to unaffiliated convenience stores. Segment information is set forth in the following table:
Retail Wholesale Consolidated ---------- --------- ------------ Twelve weeks ended January 6, 2001 External revenues $ 372,122 $ 57,695 $ 429,817 Intersegment sales 8,025 21,473 29,498 Income before income taxes 5,296 456 5,752 Twelve weeks ended January 1, 2000 External revenues 338,225 81,357 419,582 Intersegment sales 8,185 21,050 29,235 Income before income taxes 5,058 (173) 4,885 Forty weeks ended January 6, 2001 External revenues 1,192,490 274,581 1,467,071 Intersegment sales 26,701 75,081 101,782 Income before income taxes 11,628 2,546 14,174 Forty weeks ended January 1, 2000 External revenues 1,075,177 273,274 1,348,451 Intersegment sales 26,259 71,704 97,963 Income before income taxes 11,657 1,840 13,497
NOTE F - ACQUISITION On May 6, 2000, the Company acquired the capital stock of A. L. Ross & Sons, Inc. (Ross), which operated five supermarkets and three pharmacies in Muncie, Indiana. The results of operations, assets and liabilities, and cash flows of Ross are included in the condensed consolidated statements from the date of the acquisition. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This report includes certain forward-looking statements (statements other than those made solely with respect to historical fact). Actual results could differ materially and adversely from those contemplated by the forward-looking statements due to known and unknown risks and uncertainties. The forward-looking statements and the Company's future results, liquidity and capital resources are subject to the following risks and uncertainties: softness in the general retail food industry, the entry of new competitive stores and e-retailers in the Company's market, adverse developments regarding customer retention, the ability to predict the impact of the revision in the estimated useful lives of building, leasehold and land improvements, the impact of any acquisitions or dispositions, 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 ability to complete authorized share repurchases, 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 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 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 Percent of of Revenues Revenues ---------------- Percent ---------------- Percent 2001 2000 Change 2001 2000 Change ------ ------ ------ ------ ------ ------ Sales and other revenues 100.0% 100.0% 2.4% 100.0% 100.0% 8.8% Gross profit 26.3% 24.6% 9.4% 25.0% 24.5% 11.0% Selling, general and administrative 22.2% 20.8% 9.6% 21.3% 20.8% 11.2% Depreciation 1.2% 1.4% (12.6%) 1.3% 1.5% 0.9% Operating income 2.8% 2.4% 21.2% 2.3% 2.2% 14.9% Interest and debt cost amortization 1.3% 1.2% 8.9% 1.3% 1.2% 16.1% Other non-operating expense 0.2% 0.0% n/m 0.0% 0.0% n/m Income taxes 0.4% 0.4% 17.7% 0.3% 0.3% 8.7% Net income 0.9% 0.8% 17.8% 0.6% 0.7% 3.3%
n/m = not meaningful SALES AND OTHER REVENUES In the third quarter of 2001, consolidated sales and other revenues increased $10.2 million, or 2.4%, from the third quarter of 2000 to $429.8 million. Sales and other revenues of the retail segment increased $33.9 million, or 10.0%, from the third quarter of 2000 to $372.1 million. Supermarket revenues increased $23.0 million, Village Pantry revenues increased $8.3 million, and Crystal Food Service revenues increased $0.8 million. Retail sales, excluding fuel sales, increased 7.2%. Sales in comparable supermarkets and convenience stores, including replacement stores and format conversions, but excluding fuel sales, increased 0.7% from the third quarter of 2000. The increase in supermarket revenues was comprised of approximately $13.0 million from the acquisition of Ross, $2.8 million from comparable store sales gains and $7.2 million from stores opened since the beginning of the year earlier quarter. Village Pantry inside store revenues were essentially unchanged and fuel gallons sold increased 18.5% primarily due to price increases and promotional efforts. Sales and other revenues of the wholesale segment, CSDC, declined $23.7 million, or 29.1%, to $57.7 million due to the loss of two convenience store chain customers. 9 For the forty weeks ended January 6, 2001, consolidated sales and other revenues increased $118.6 million, or 8.8%, from the same forty week period of 2000 to $1,467.1 million. Sales and other revenues of the retail segment increased $117.3 million, or 10.9%, from the forty weeks of 2000 to $1,192.5 million. Supermarket revenues increased $80.1 million, Village Pantry revenues increased $28.2 million and Crystal Food Service revenues increased $4.4 million. Retail sales, excluding fuel sales, increased 6.5%. Sales in comparable stores, including replacement stores and format conversions, but excluding fuel sales, increased 2.2% from the prior year. The increase in supermarket revenues was comprised of approximately $33.7 million from the acquisition of Ross, $18.9 million from comparable store sales gains and $27.5 million from stores opened since the beginning of the prior year. Village Pantry inside revenues increased 4.8% and fuel gallons sold increased 11.7%. Sales and revenues of the wholesale segment, CSDC, increased $1.3 million to $274.6 million. GROSS PROFIT Gross profit is calculated net of warehousing, transportation, and promotional expenses. In the third quarter of 2001, consolidated gross profit increased $9.7 million, or 9.4%, from the third quarter of 2000 to $112.8 million. As a percentage of revenues, consolidated gross profit was 26.3% for the third quarter compared to 24.6% for the year earlier quarter. The improvement in consolidated gross profit as a percentage of revenues resulted primarily from the 29.1% decrease in sales of the wholesale segment, which has a profit rate significantly lower than the retail segment, and a 0.1% gain resulting from cigarette manufacturers' price increases. For the forty weeks ended January 6, 2001, consolidated gross profit increased $36.2 million, or 11.0%, from the year earlier period to $366.4 million. As a percentage of revenues, consolidated gross profit increased to 25.0% from 24.5%. The increase in consolidated gross profit as a percentage of revenues resulted from a greater distribution of revenues from the retail segment, which has a profit rate significantly higher than the wholesale segment. Gains from cigarette manufacturer price increases were essentially the same in both years. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES In the third quarter of 2001, consolidated selling, general and administrative (SG&A) expenses increased $8.3 million, or 9.6%, from the third quarter of 2000 to $95.5 million. As a percentage of consolidated sales and other revenues, SG&A expenses increased to 22.2% from 20.8% for the year earlier quarter attributable to the 29.1% decline in wholesale segment sales. SG&A expenses for the retail segment as a percentage of sales and other revenues was the same in both quarters. Wages in stores open both quarters, excluding supermarket conversions to the LoBill format, increased 2.0% due to wage rate increases and increased labor hours intended to drive store sales gains and maintain customer service levels. For the forty weeks ended January 6, 2001, SG&A expenses increased $31.6 million, or 11.2%, from the comparable forty weeks of 2000. As a percentage of consolidated sales and revenues, SG&A expenses were 21.3% in 2001 compared to 20.8% in 2000, due primarily to the decline in sales distribution of the wholesale segment. Retail segment SG&A as a percentage of sales and revenues expenses increased 0.2% for 2001. Wages in identical stores increased 3.3% from the comparable forty weeks of the prior year due to increases in both wage rates and labor hours. 10 DEPRECIATION EXPENSE Depreciation expense for the third quarter of 2001 was $5.2 million, compared to $5.9 million for the year earlier quarter. During the third quarter of 2001, the Company determined that it was appropriate to increase the estimated useful lives of building, leasehold and land improvements to reflect more closely the Company's historical experience and its current assessment of prevailing industry practice. The effect of this change in estimate was to decrease depreciation expense by $1.2 million for the quarter and to increase net income by $0.8 million, or $.08 per diluted share, for the quarter and $.09 per diluted share for the forty weeks ended January 6, 2001. The Company believes that this change in estimate will favorably impact depreciation expense for the fourth quarter by a similar amount. As a percentage of revenues, depreciation expense was 1.2% for the third quarter of 2001, compared to 1.4% for the prior year quarter. For the forty weeks ended January 6, 2001, depreciation expense was $19.8 million, compared to $19.6 million for the year earlier period. As a percentage of revenues, depreciation expense was 1.3% for the first forty weeks of 2001, compared to 1.2% for the comparable period of 2000. OPERATING INCOME Operating income (income from continuing operations before interest and taxes) increased $2.1 million to $12.1 million for the third quarter of 2001 from $10.0 million for the comparable quarter of 2000. Operating income included a $1.2 million decrease in depreciation expense, a $0.3 million decrease in gains on real estate sales, and a $0.7 million increase in cigarette price gains resulting from manufacturers' price increases (reported as gross profit). Third quarter operating income, as a percentage of revenues, was 2.8% for 2001 compared to 2.4% for 2000. For the forty weeks ended January 6, 2001, operating income was $34.3 million, compared to $29.9 million for the year earlier period. Income from operations increased $5.5 million and gains on real estate sales decreased $1.2 million. Operating income as a percentage of revenues was 2.3% for 2001 and 2.2% for 2000. OTHER NON-OPERATING EXPENSE During the third quarter of 2001, the Company determined the realizable value of a minority interest in an investment, accounted for by the equity method, was impaired and took an $0.8 million charge to write off the investment. As a percentage of revenues, other non-operating expense was 0.2% for the quarter and 0.0% for the forty weeks ended January 6, 2001. INTEREST EXPENSE Interest expense for the third quarter of 2001 was $5.5 million, compared to $5.1 million for the comparable quarter of 2000. For the forty weeks ended January 6, 2001, interest expense was $19.2 million, compared to $16.5 million in the same period in 2000. As a percentage of revenues, interest expense was 1.3% for both the twelve weeks and forty weeks ended January 6, 2001, compared to 1.2% for the comparable periods of 2000. INCOME TAXES For the quarter ended January 6, 2001, the effective income tax rate was 33.3%, the same as for the comparable prior year quarter. For the forty weeks ended January 6, 2001, the effective income tax rate was 33.3%, compared to 32.2% for the comparable forty weeks of the prior year. It is expected the effective rate will be 33.3% for the current year. NET INCOME Net income was $3.8 million for the third quarter of 2001, compared to $3.3 million in 2000. Net income, as a percentage of revenues, was 0.9% for the third quarter of 2001 compared to 0.8% for year earlier quarter. For the forty weeks ended January 6, 2001, net income was $9.5 million, compared to $9.2 million in 2000. As a percentage of revenues, net income for the forty weeks ended January 6, 2001, was 0.6% compared to 0.7% for the prior year period. 11 CAPITAL EXPENDITURES The Company's capital requirements have traditionally been financed through internally generated funds, long-term borrowing and lease financings, including capital and operating leases. During the first forty weeks of 2001, the following stores were opened or were under construction:
Square Store Type Category Feet Location Status ---------- -------- ---- -------- ------ Supermarket New 55,000 Mooresville, IN Open Supermarket New 55,000 Bloomington, IN Open Supermarket Replacement 55,000 Kokomo, IN Under construction Supermarket Remodel 46,000 Indianapolis, IN Under construction LoBill Acquired 26,000 Greensburg, IN Open LoBill New 31,000 Lebanon, IN Open LoBill Acquired 34,000 Muncie, IN Open LoBill Acquired 30,000 Muncie, IN Open LoBill Acquired 35,500 Muncie, IN Open Convenience Replacement 3,600 Connersville, IN Open Convenience - kiosk New 200 Indianapolis, IN Open Convenience Replacement 3,800 Muncie, IN Open Convenience New 3,500 Martinsville, IN Open Convenience Acquired 3,000 Peru, IN Open Convenience Replacement 3,500 Muncie, IN Open Convenience Acquired 3,000 Muncie, IN Open Convenience - kiosk New 200 Mooresville, IN Open Convenience Acquired 1,500 Muncie, IN Open Convenience Replacement 3,500 Wabash, IN Open Convenience New 3,500 McCordsville, IN Open Convenience New 3,500 Lebanon, IN Under construction Convenience New 3,500 Fishers, IN Under construction
The Company also acquired the assets of Primo Catering, a mid-scale caterer in Indianapolis, Indiana. In 2001, the Company also plans to acquire several sites for future development. The cost of these projects and other capital commitments is estimated to be $60.0 million. Of this amount, the Company plans to fund $15.0 million through equipment leasing, $27.0 million from sale/leasebacks, $10.0 million from mortgages and believes it can finance the balance with current cash balances, internally generated funds, and amounts available under the revolving credit facility. As of January 6, 2001, the Company had expended $38.9 million for capital expenditures, excluding equipment leasing, during the current fiscal year. 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, availability and cost of capital, 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. 12 LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operating activities in the forty weeks ended January 6, 2001 was $46.0 million, compared to $34.2 million for the year earlier period. The improvement in net cash provided by operating activities was due primarily to increases in trade accounts payable and accrued liabilities. Working capital increased $26.9 million to $63.8 million from April 1, 2000. Changes in working capital included a $3.5 million increase in cash and equivalents, a $7.9 million increase in inventory, a $9.4 million decrease in notes payable, a $10.4 million increase in trade accounts payable, a $5.3 million increase in accrued liabilities, and a $25.3 million decrease in current maturities of long-term liabilities. The increase in cash and decrease in notes payable were due primarily to the receipt of proceeds from the mortgage of two supermarkets. Inventory increased to support higher seasonal sales levels, but the increase was more than offset by the increase in accounts payable. Accrued liabilities increased due primarily to the timing of interest payments on the Senior Subordinated Notes. The decrease in current maturities of long-term liabilities resulted from the payment of amounts borrowed under revolving credit facilities. During 2001, $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 $30.0 million was utilized at January 6, 2001. The new credit 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 $0.6 million was utilized at January 6, 2001. During the third quarter, the Company repurchased 41,000 shares of its Class A Common Stock and 33,000 shares of its Class B Common Stock. As of the date hereof, the Company has spent $11.9 million of the $12.0 million previously authorized. The Board of Directors has authorized the repurchase of up to an additional $3.0 million of common stock. The ability of the Company to complete the repurchase, in whole or in part, is subject to known and unknown risks and uncertainties. The Company believes amounts available under its revolving credit facility and the bank commitment, cash flows from operating activities, and lease financings will be adequate to meet the Company's working capital needs, debt service obligations and planned capital expenditures for the foreseeable future. 13 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: None (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter for which this report is filed. 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 19, 2001 By: /s/ Douglas W. Dougherty --------------------------------------- Douglas W. Dougherty Senior Vice President, Chief Financial Officer, and Treasurer February 19, 2001 By: /s/ Mark A. Varner --------------------------------------- Mark A. Varner Chief Accounting Officer Vice President - Corporate Controller