##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 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 7, 2006
 Commission File Number 0-1532
 MARSH SUPERMARKETS, INC.
  INDIANA
(State or other jurisdiction of
incorporation or organization)
    
    35-0918179
(IRS Employer
Identification No.)
 9800 CROSSPOINT BOULEVARDINDIANAPOLIS, INDIANA
(Address of principal executive offices)
    
    46256-3350
(Zip Code)
 (317) 594-2100
 þ o
 o o þ
 o þ
  Class A Common Stock -
    
    
    3,734,927
    
    
    sharesClass B Common Stock -
    
    
    4,174,515
    
    
    shares7,909,442
    
    
    shares




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TABLE OF CONTENTS  PART I FINANCIAL INFORMATIONItem 1.Financial StatementsItem 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3.Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPart II Other InformationItem 1. Legal ProceedingsItem 2. Unregistered Sales of Equity Securities and Use of ProceedsItem 3. Defaults upon Senior SecuritiesItem 4. Submission of Matters to a Vote of Security HoldersItem 5. Other InformationItem 6. ExhibitsSIGNATURESEX-31.1  SECTION 302 CERTIFICATION OF THE CEOEX-31.2  SECTION 302 CERTIFICATION OF THE EVPEX-32.1  SECTION 906 CERTIFICATION OF THE CEOEX-32.2  SECTION 906 CERTIFICATION OF THE EVP    Table of Contents  
 PART I FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 MARSH SUPERMARKETS, INC.  CONDENSED CONSOLIDATED BALANCE SHEETS
 January 7,
    
    
    April 2,
    
    
    January 1,2006
    
    
    2005
    
    
    2005(Unaudited)
    
    
    (Note A)
    
    
    (Unaudited)AssetsCurrent assets:Cash and equivalents
    
    $
    28,813
    
    
    $
    27,364
    
    
    $
    47,302Accounts receivable, net
    
    
    26,465
    
    
    
    22,153
    
    
    
    24,505Inventories
    
    
    135,222
    
    
    
    132,758
    
    
    
    133,731Prepaid expenses
    
    
    5,792
    
    
    
    6,619
    
    
    
    6,367Prepaid income taxes
    
    
    1,985
    
    
    
    841
    
    
    
    1,364Total current assets
    
    
    198,277
    
    
    
    189,735
    
    
    
    213,269Property and equipment, less allowances for depreciation
    
    
    306,852
    
    
    
    307,816
    
    
    
    304,272Other assets
    
    
    44,861
    
    
    
    49,317
    
    
    
    62,807Total Assets
    
    $
    549,990
    
    
    $
    546,868
    
    
    $
    580,348Liabilities and Shareholders EquityCurrent liabilities:Accounts payable
    
    $
    73,150
    
    
    $
    75,786
    
    
    $
    83,460Accrued liabilities
    
    
    66,220
    
    
    
    54,941
    
    
    
    52,487Current maturities of long-term liabilities
    
    
    4,149
    
    
    
    48,444
    
    
    
    5,361Total current liabilities
    
    
    143,519
    
    
    
    179,171
    
    
    
    141,308Long-term liabilities:Long-term debt
    
    
    191,490
    
    
    
    133,268
    
    
    
    198,941Capital lease and financing obligations
    
    
    42,889
    
    
    
    27,212
    
    
    
    27,494Pension and post-retirement benefits
    
    
    32,962
    
    
    
    52,229
    
    
    
    46,356Total long-term liabilities
    
    
    267,341
    
    
    
    212,709
    
    
    
    272,791Deferred items:Income taxes
    
    
    8,133
    
    
    
    8,823
    
    
    
    15,830Gains from sale/leasebacks
    
    
    15,480
    
    
    
    16,487
    
    
    
    16,846Other
    
    
    3,976
    
    
    
    5,363
    
    
    
    3,359Total deferred items
    
    
    27,589
    
    
    
    30,673
    
    
    
    36,035Shareholders Equity:Common stock, Classes A and B
    
    
    26,661
    
    
    
    26,630
    
    
    
    26,615Retained earnings
    
    
    116,448
    
    
    
    130,890
    
    
    
    133,328Cost of common stock in treasury
    
    
    (15,916
    )
    
    
    (15,755
    )
    
    
    (15,690
    )Deferred cost restricted stock
    
    
    (31
    )
    
    
    (137
    )
    
    
    (153
    )Notes receivable stock purchase
    
    
    (11
    )
    
    
    (11
    )
    
    
    (11
    )Accumulated other comprehensive loss
    
    
    (15,610
    )
    
    
    (17,302
    )
    
    
    (13,875
    )Total shareholders equity
    
    
    111,541
    
    
    
    124,315
    
    
    
    130,214Total Liabilities and Shareholders Equity
    
    $
    549,990
    
    
    $
    546,868
    
    
    $
    580,348
  2




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##### Table of Contents



MARSH SUPERMARKETS, INC.  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 12 Weeks Ended
    
    
    40 Weeks EndedJanuary 7,
    
    
    January 1,
    
    
    January 7,
    
    
    January 1,2006
    
    
    2005
    
    
    2006
    
    
    2005Sales and other revenues
    
    $
    407,292
    
    
    $
    401,752
    
    
    $
    1,366,175
    
    
    $
    1,325,222Gains from sales of property
    
    
    217
    
    
    
    1,890
    
    
    
    749
    
    
    
    3,164Total revenues
    
    
    407,509
    
    
    
    403,642
    
    
    
    1,366,924
    
    
    
    1,328,386Cost of merchandise sold, including
warehousing and transportation,
excluding depreciation
    
    
    287,313
    
    
    
    284,035
    
    
    
    964,867
    
    
    
    935,358Gross profit
    
    
    120,196
    
    
    
    119,607
    
    
    
    402,057
    
    
    
    393,028Selling, general and administrative
    
    
    109,666
    
    
    
    105,099
    
    
    
    370,990
    
    
    
    351,134Depreciation
    
    
    6,278
    
    
    
    5,815
    
    
    
    20,401
    
    
    
    19,387Impairment of long-lived assets
    
    
    12,775
    
    
    
    
    
    
    
    12,775
    
    
    
    Operating income (loss)
    
    
    (8,523
    )
    
    
    8,693
    
    
    
    (2,109
    )
    
    
    22,507Interest
    
    
    5,222
    
    
    
    4,475
    
    
    
    15,923
    
    
    
    14,462Other non-operating expense (income)
    
    
    33
    
    
    
    
    
    
    
    (350
    )
    
    
    (838
    )Income (loss) before income taxes
    
    
    (13,778)
    
    
    
    4,218
    
    
    
    (17,682
    )
    
    
    8,883Income taxes (benefit)
    
    
    (4,146
    )
    
    
    1,545
    
    
    
    (5,308
    )
    
    
    3,288Net income (loss)
    
    $
    (9,632
    )
    
    $
    2,673
    
    
    $
    (12,374
    )
    
    $
    5,595Earnings (loss) per common share:Basic
    
    $
    (1.22
    )
    
    $
    .34
    
    
    $
    (1.57
    )
    
    $
    .71Diluted
    
    $
    (1.22
    )
    
    $
    .34
    
    
    $
    (1.57
    )
    
    $
    .70Dividends declared per share
    
    $
    
    
    
    $
    .13
    
    
    $
    .26
    
    
    $
    .39
  3




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##### Table of Contents



MARSH SUPERMARKETS, INC.  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 40 Weeks EndedJanuary 7,
    
    
    January 1,2006
    
    
    2005Operating activitiesNet income (loss)
    
    $
    (12,374
    )
    
    $
    5,595Adjustments to reconcile net income (loss) to net
cash provided by operating activities:Depreciation
    
    
    20,401
    
    
    
    19,387Impairment of long-lived assets
    
    
    12,775
    
    
    
    Deferred income taxes
    
    
    (5,380
    )
    
    
    (2,491
    )Deferred compensation plan
    
    
    (6,867
    )
    
    
    712Changes in operating assets and liabilities
    
    
    (3,146
    )
    
    
    4,934Net cash provided by operating activities
    
    
    5,409
    
    
    
    28,137Investing activitiesNet acquisition of property, equipment and land
    
    
    (28,079
    )
    
    
    (47,254
    )Other investing activities
    
    
    
    
    
    
    (1,426
    )Net cash used for investing activities
    
    
    (28,079
    )
    
    
    (48,680
    )Financing activitiesProceeds from long-term borrowings
    
    
    238,037
    
    
    
    110,000Proceeds from sale/leasebacks
    
    
    16,691
    
    
    
    16,367Repayments of long-term debt and capital leases
    
    
    (225,124
    )
    
    
    (83,980
    )Debt acquisition costs
    
    
    (2,262
    )
    
    
    Cash dividends paid
    
    
    (3,093
    )
    
    
    (3,085
    )Purchase of shares for treasury
    
    
    (539
    )
    
    
    (859
    )Other financing activities
    
    
    409
    
    
    
    1,818Net cash provided by financing activities
    
    
    24,119
    
    
    
    40,261Net increase in cash and equivalents
    
    
    1,449
    
    
    
    19,718Cash and equivalents at beginning of period
    
    
    27,364
    
    
    
    27,584Cash and equivalents at end of period
    
    $
    28,813
    
    
    $
    47,302
  4




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MARSH SUPERMARKETS, INC.  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Note A  Basis of Presentation
     Note B  Impairment of Long-Lived Assets
  5




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Note C  Earnings (Loss) Per Share
  12 Weeks Ended
    
    
    40 Weeks EndedJanuary 7,
    
    
    January 1,
    
    
    January 7,
    
    
    January 1,2006
    
    
    2005
    
    
    2006
    
    
    2005Net income (loss)
    
    $
    (9,632
    )
    
    $
    2,673
    
    
    $
    (12,374
    )
    
    $
    5,595Weighted average shares outstanding
    
    
    7,907
    
    
    
    7,912
    
    
    
    7,910
    
    
    
    7,916Non-vested restricted shares
    
    
    (6
    )
    
    
    (16
    )
    
    
    (11
    )
    
    
    (16
    )Denominator for basic earnings (loss) per share
    
    
    7,901
    
    
    
    7,896
    
    
    
    7,899
    
    
    
    7,900Effect of dilutive securities:Non-vested restricted shares
    
    
    
    (a)
    
    
    16
    
    
    
    
    (a)
    
    
    16Stock options
    
    
    
    (a)
    
    
    64
    
    
    
    
    (a)
    
    
    86Denominator for diluted earnings (loss) per share
- adjusted weighted average shares
    
    
    7,901
    
    
    
    7,976
    
    
    
    7,899
    
    
    
    8,002
 
 (a)
    
    Average shares outstanding exclude the anti-dilutive effects of non-vested restricted
shares and stock options totaling 37,000 shares and 79,000 shares for the twelve and forty weeks
ended January 7, 2006, respectively. Note D  Stock Option Plans
  12 Weeks Ended
    
    
    40 Weeks EndedJanuary 7,
    
    
    January 1,
    
    
    January 7,
    
    
    January 1,2006
    
    
    2005
    
    
    2006
    
    
    2005Net income (loss), as reported
    
    $
    (9,632
    )
    
    $
    2,673
    
    
    $
    (12,374
    )
    
    $
    5,595Compensation expense recorded
    
    
    4
    
    
    
    10
    
    
    
    (19
    )
    
    
    33Compensation expense using the fair value method,
net of tax
    
    
    (4
    )
    
    
    (105
    )
    
    
    7
    
    
    
    (497
    )Pro-forma net income (loss)
    
    $
    (9,632
    )
    
    $
    2,578
    
    
    $
    (12,386
    )
    
    $
    5,131Earnings (loss) per common share, as reported:Basic
    
    $
    (1.22
    )
    
    $
    .34
    
    
    $
    (1.57
    )
    
    $
    .71Diluted
    
    
    (1.22
    )
    
    
    .34
    
    
    
    (1.57
    )
    
    
    .70Earnings (loss) per common share, pro-forma:Basic
    
    $
    (1.22
    )
    
    
    .33
    
    
    $
    (1.57
    )
    
    
    .65Diluted
    
    
    (1.22
    )
    
    
    .32
    
    
    
    (1.57
    )
    
    
    .64
 6




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##### Table of Contents



Note E  Notes Receivable
  Note F  Long-Term Debt and Financing Obligations
     7




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##### Table of Contents



Note G  Long-Term Debt and Guarantor Subsidiaries
   GuarantorParent
    
    
    subsidiaries
    
    
    TotalAssetsCurrent assets:Cash and equivalents
    
    $
    
    
    
    $
    28,813
    
    
    $
    28,813Accounts receivable, net
    
    
    
    
    
    
    26,465
    
    
    
    26,465Inventories
    
    
    
    
    
    
    135,222
    
    
    
    135,222Prepaid expenses
    
    
    
    
    
    
    5,792
    
    
    
    5,792Prepaid income taxes
    
    
    1,985
    
    
    
    
    
    
    
    1,985Total current assets
    
    
    1,985
    
    
    
    196,292
    
    
    
    198,277Property and equipment, less allowances for depreciation
    
    
    37,037
    
    
    
    269,815
    
    
    
    306,852Other assets
    
    
    2,473
    
    
    
    42,388
    
    
    
    44,861Total Assets
    
    $
    41,495
    
    
    $
    508,495
    
    
    $
    549,990Liabilities and Shareholders EquityCurrent liabilities:Accounts payable
    
    $
    
    
    
    $
    73,150
    
    
    $
    73,150Accrued liabilities
    
    
    21,952
    
    
    
    44,268
    
    
    
    66,220Current maturities of long-term liabilities
    
    
    1,890
    
    
    
    2,259
    
    
    
    4,149Total current liabilities
    
    
    23,842
    
    
    
    119,677
    
    
    
    143,519Long-term liabilities:Long-term debt
    
    
    109,133
    
    
    
    82,357
    
    
    
    191,490Capital lease and financing obligations
    
    
    
    
    
    
    42,889
    
    
    
    42,889Pension and post-retirement benefits
    
    
    28,304
    
    
    
    4,658
    
    
    
    32,962Total long-term liabilities
    
    
    137,437
    
    
    
    129,904
    
    
    
    267,341Deferred items:Income taxes
    
    
    8,133
    
    
    
    
    
    
    
    8,133Gains from sale/leasebacks
    
    
    2,046
    
    
    
    13,434
    
    
    
    15,480Other
    
    
    
    
    
    
    3,976
    
    
    
    3,976Total deferred items
    
    
    10,179
    
    
    
    17,410
    
    
    
    27,589Amounts due parent from subsidiaries
    
    
    (128,563
    )
    
    
    128,563
    
    
    
    Shareholders Equity:Common stock, Classes A and B
    
    
    26,661
    
    
    
    
    
    
    
    26,661Retained earnings
    
    
    3,507
    
    
    
    112,941
    
    
    
    116,448Cost of common stock in treasury
    
    
    (15,916
    )
    
    
    
    
    
    
    (15,916
    )Deferred cost restricted stock
    
    
    (31
    )
    
    
    
    
    
    
    (31
    )Notes receivable stock purchases
    
    
    (11
    )
    
    
    
    
    
    
    (11
    )Accumulated other comprehensive loss
    
    
    (15,610
    )
    
    
    
    
    
    
    (15,610
    )Total shareholders equity
    
    
    (1,400
    )
    
    
    112,941
    
    
    
    111,541Total Liabilities and Shareholders Equity
    
    $
    41,495
    
    
    $
    508,495
    
    
    $
    549,990
 8




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##### Table of Contents



GuarantorParent
    
    
    subsidiaries
    
    
    TotalAssetsCurrent assets:Cash and equivalents
    
    $
    
    
    
    $
    27,364
    
    
    $
    27,364Accounts receivable, net
    
    
    
    
    
    
    22,153
    
    
    
    22,153Inventories
    
    
    
    
    
    
    132,758
    
    
    
    132,758Prepaid expenses
    
    
    
    
    
    
    6,619
    
    
    
    6,619Prepaid income taxes
    
    
    841
    
    
    
    
    
    
    
    841Total current assets
    
    
    841
    
    
    
    188,894
    
    
    
    189,735Property and equipment, less allowances for depreciation
    
    
    37,919
    
    
    
    269,897
    
    
    
    307,816Other assets
    
    
    2,841
    
    
    
    46,476
    
    
    
    49,317Total Assets
    
    $
    41,601
    
    
    $
    505,267
    
    
    $
    546,868Liabilities and Shareholders EquityCurrent liabilities:Accounts payable
    
    $
    
    
    
    $
    75,786
    
    
    $
    75,786Accrued liabilities
    
    
    12,581
    
    
    
    42,360
    
    
    
    54,941Current maturities of long-term liabilities
    
    
    1,754
    
    
    
    46,690
    
    
    
    48,444Total current liabilities
    
    
    14,335
    
    
    
    164,836
    
    
    
    179,171Long-term liabilities:Long-term debt
    
    
    110,504
    
    
    
    22,764
    
    
    
    133,268Capital lease and financing obligations
    
    
    
    
    
    
    27,212
    
    
    
    27,212Pension and post-retirement benefits
    
    
    47,994
    
    
    
    4,235
    
    
    
    52,229Total long-term liabilities
    
    
    158,498
    
    
    
    54,211
    
    
    
    212,709Deferred items:Income taxes
    
    
    8,823
    
    
    
    
    
    
    
    8,823Gains from sale/leasebacks
    
    
    2,162
    
    
    
    14,325
    
    
    
    16,487Other
    
    
    
    
    
    
    5,363
    
    
    
    5,363Total deferred items
    
    
    10,985
    
    
    
    19,688
    
    
    
    30,673Amounts due parent from subsidiaries
    
    
    (141,381
    )
    
    
    141,381
    
    
    
    Shareholders Equity:Common stock, Classes A and B
    
    
    26,630
    
    
    
    
    
    
    
    26,630Retained earnings
    
    
    5,739
    
    
    
    125,151
    
    
    
    130,890Cost of common stock in treasury
    
    
    (15,755
    )
    
    
    
    
    
    
    (15,755
    )Deferred cost restricted stock
    
    
    (137
    )
    
    
    
    
    
    
    (137
    )Notes receivable stock purchases
    
    
    (11
    )
    
    
    
    
    
    
    (11
    )Accumulated other comprehensive loss
    
    
    (17,302
    )
    
    
    
    
    
    
    (17,302
    )Total shareholders equity
    
    
    (836
    )
    
    
    125,151
    
    
    
    124,315Total Liabilities and Shareholders Equity
    
    $
    41,601
    
    
    $
    505,267
    
    
    $
    546,868
 9




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##### Table of Contents



Guarantor
    
    
    ConsolidatingParent
    
    
    subsidiaries
    
    
    entries
    
    
    TotalSales and other revenues
    
    $
    1,408
    
    
    $
    407,292
    
    
    $
    (1,408
    )
    
    $
    407,292Gains from sales of property
    
    
    
    
    
    
    217
    
    
    
    
    
    
    
    217Total revenues
    
    
    1,408
    
    
    
    407,509
    
    
    
    (1,408
    )
    
    
    407,509Cost of merchandise sold,
including warehousing and transportation,
excluding depreciation
    
    
    
    
    
    
    287,313
    
    
    
    
    
    
    
    287,313Gross profit
    
    
    1,408
    
    
    
    120,196
    
    
    
    (1,408
    )
    
    
    120,196Selling, general and administrative
    
    
    1,150
    
    
    
    109,924
    
    
    
    (1,408
    )
    
    
    109,666Depreciation
    
    
    380
    
    
    
    5,898
    
    
    
    
    
    
    
    6,278Impairment of long-lived assets
    
    
    
    
    
    
    12,775
    
    
    
    
    
    
    
    12,775Operating income (loss)
    
    
    (122
    )
    
    
    (8,401
    )
    
    
    
    
    
    
    (8,523
    )Interest
    
    
    493
    
    
    
    4,729
    
    
    
    
    
    
    
    5,222Other non-operating expense
    
    
    
    
    
    
    33
    
    
    
    
    
    
    
    33Income (loss) before income taxes
    
    
    (615
    )
    
    
    (13,163
    )
    
    
    
    
    
    
    (13,778
    )Income taxes (benefit)
    
    
    (197
    )
    
    
    (3,949
    )
    
    
    
    
    
    
    (4,146
    )Net income (loss)
    
    $
    (418
    )
    
    $
    (9,214
    )
    
    $
    
    
    
    $
    (9,632
    )
  Guarantor
    
    
    ConsolidatingParent
    
    
    subsidiaries
    
    
    entries
    
    
    TotalSales and other revenues
    
    $
    1,114
    
    
    $
    401,771
    
    
    $
    (1,133
    )
    
    $
    401,752Gains from sales of property
    
    
    573
    
    
    
    1,317
    
    
    
    
    
    
    
    1,890Total revenues
    
    
    1,687
    
    
    
    403,088
    
    
    
    (1,133
    )
    
    
    403,642Cost of merchandise sold,
including warehousing and transportation,
excluding depreciation
    
    
    
    
    
    
    284,035
    
    
    
    
    
    
    
    284,035Gross profit
    
    
    1,687
    
    
    
    119,053
    
    
    
    (1,133
    )
    
    
    119,607Selling, general and administrative
    
    
    707
    
    
    
    105,525
    
    
    
    (1,133
    )
    
    
    105,099Depreciation
    
    
    306
    
    
    
    5,509
    
    
    
    
    
    
    
    5,815Operating income
    
    
    674
    
    
    
    8,019
    
    
    
    
    
    
    
    8,693Interest
    
    
    441
    
    
    
    4,034
    
    
    
    
    
    
    
    4,475Income before income taxes
    
    
    233
    
    
    
    3,985
    
    
    
    
    
    
    
    4,218Income taxes
    
    
    83
    
    
    
    1,462
    
    
    
    
    
    
    
    1,545Net income
    
    $
    150
    
    
    $
    2,523
    
    
    $
    
    
    
    $
    2,673
 10




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##### Table of Contents



Guarantor
    
    
    ConsolidatingParent
    
    
    subsidiaries
    
    
    entries
    
    
    TotalSales and other revenues
    
    $
    4,451
    
    
    $
    1,366,177
    
    
    $
    (4,453
    )
    
    $
    1,366,175Gains from sales of property
    
    
    
    
    
    
    749
    
    
    
    
    
    
    
    749Total revenues
    
    
    4,451
    
    
    
    1,366,926
    
    
    
    (4,453
    )
    
    
    1,366,924Cost of merchandise sold, including warehousing and transportation, excluding depreciation
    
    
    
    
    
    
    964,867
    
    
    
    
    
    
    
    964,867Gross profit
    
    
    4,451
    
    
    
    402,059
    
    
    
    (4,453
    )
    
    
    402,057Selling, general and administrative
    
    
    3,046
    
    
    
    372,397
    
    
    
    (4,453
    )
    
    
    370,990Depreciation
    
    
    1,263
    
    
    
    19,138
    
    
    
    
    
    
    
    20,401Impairment of long-lived assets
    
    
    
    
    
    
    12,775
    
    
    
    
    
    
    
    12,775Operating income (loss)
    
    
    142
    
    
    
    (2,251
    )
    
    
    
    
    
    
    (2,109
    )Interest
    
    
    1,579
    
    
    
    14,344
    
    
    
    
    
    
    
    15,923Other non-operating (income) expense
    
    
    (1,181
    )
    
    
    831
    
    
    
    
    
    
    
    (350
    )Income (loss) before income taxes
    
    
    (256
    )
    
    
    (17,426
    )
    
    
    
    
    
    
    (17,682
    )Income taxes (benefit)
    
    
    (90
    )
    
    
    (5,218
    )
    
    
    
    
    
    
    (5,308
    )Net income (loss)
    
    $
    (166
    )
    
    $
    (12,208
    )
    
    $
    
    
    
    $
    (12,374
    )
  Guarantor
    
    
    ConsolidatingParent
    
    
    subsidiaries
    
    
    entries
    
    
    TotalSales and other revenues
    
    $
    3,776
    
    
    $
    1,325,222
    
    
    $
    (3,776
    )
    
    $
    1,325,222Gains from sales of property
    
    
    573
    
    
    
    2,591
    
    
    
    
    
    
    
    3,164Total revenues
    
    
    4,349
    
    
    
    1,327,813
    
    
    
    (3,776
    )
    
    
    1,328,386Cost of merchandise sold, including warehousing and transportation, excluding depreciation
    
    
    
    
    
    
    935,358
    
    
    
    
    
    
    
    935,358Gross profit
    
    
    4,349
    
    
    
    392,455
    
    
    
    (3,776
    )
    
    
    393,028Selling, general and administrative
    
    
    2,140
    
    
    
    352,770
    
    
    
    (3,776
    )
    
    
    351,134Depreciation
    
    
    1,058
    
    
    
    18,329
    
    
    
    
    
    
    
    19,387Operating income
    
    
    1,151
    
    
    
    21,356
    
    
    
    
    
    
    
    22,507Interest
    
    
    1,423
    
    
    
    13,039
    
    
    
    
    
    
    
    14,462Other non-operating income
    
    
    
    
    
    
    (838
    )
    
    
    
    
    
    
    (838
    )Income (loss) before income taxes
    
    
    (272
    )
    
    
    9,155
    
    
    
    
    
    
    
    8,883Income taxes (benefit)
    
    
    (97
    )
    
    
    3,385
    
    
    
    
    
    
    
    3,288Net income (loss)
    
    $
    (175
    )
    
    $
    5,770
    
    
    $
    
    
    
    $
    5,595
 11




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##### Table of Contents



GuarantorParent
    
    
    subsidiaries
    
    
    TotalNet cash provided by operating activities
    
    $
    4,837
    
    
    $
    572
    
    
    $
    5,409Net cash used for investing activities
    
    
    (381
    )
    
    
    (27,698
    )
    
    
    (28,079
    )Financing activities:Proceeds of long-term borrowings
    
    
    
    
    
    
    238,037
    
    
    
    238,037Proceeds of sale leaseback/capital lease obligations
    
    
    
    
    
    
    16,691
    
    
    
    16,691Repayments of long-term debt and capital leases
    
    
    (1,235
    )
    
    
    (223,889
    )
    
    
    (225,124
    )Debt acquisition costs
    
    
    
    
    
    
    (2,262
    )
    
    
    (2,262
    )Cash dividends paid
    
    
    (3,093
    )
    
    
    
    
    
    
    (3,093
    )Other financing activities
    
    
    (128
    )
    
    
    (2
    )
    
    
    (130
    )Net cash provided by (used for) financing activities
    
    
    (4,456
    )
    
    
    28,575
    
    
    
    24,119Net increase in cash and equivalents
    
    
    
    
    
    
    1,449
    
    
    
    1,449Cash and equivalents at beginning of period
    
    
    
    
    
    
    27,364
    
    
    
    27,364Cash and equivalents at end of period
    
    $
    
    
    
    $
    28,813
    
    
    $
    28,813
  GuarantorParent
    
    
    subsidiaries
    
    
    TotalNet cash provided by operating activities
    
    $
    2,499
    
    
    $
    25,638
    
    
    $
    28,137Net cash used for investing activities
    
    
    (2,665
    )
    
    
    (46,015
    )
    
    
    (48,680
    )Financing activities:Proceeds of long-term borrowings
    
    
    
    
    
    
    110,000
    
    
    
    110,000Proceeds of sale leaseback/capital lease obligations
    
    
    4,995
    
    
    
    11,372
    
    
    
    16,367Repayments of long-term debt and capital leases
    
    
    (1,110
    )
    
    
    (82,870
    )
    
    
    (83,980
    )Cash dividends paid
    
    
    (3,085
    )
    
    
    
    
    
    
    (3,085
    )Other financing activities
    
    
    (634
    )
    
    
    1,593
    
    
    
    959Net cash provided by financing activities
    
    
    166
    
    
    
    40,095
    
    
    
    40,261Net increase in cash and equivalents
    
    
    
    
    
    
    19,718
    
    
    
    19,718Cash and equivalents at beginning of period
    
    
    
    
    
    
    27,584
    
    
    
    27,584Cash and equivalents at end of period
    
    $
    
    
    
    $
    47,302
    
    
    $
    47,302
 12




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##### Table of Contents



Note H  Employee Benefit Plans
  Pension
    
    
    Post-retirementJanuary 7,
    
    
    January 1,
    
    
    January 7,
    
    
    January 1,2006
    
    
    2005
    
    
    2006
    
    
    2005Service cost
    
    $
    262
    
    
    $
    254
    
    
    $
    123
    
    
    $
    121Interest cost
    
    
    1,042
    
    
    
    1,026
    
    
    
    59
    
    
    
    63Expected return on plan assets
    
    
    (710
    )
    
    
    (765
    )
    
    
    
    
    
    
    Recognized actuarial loss
    
    
    353
    
    
    
    314
    
    
    
    13
    
    
    
    9Amortization of prior service cost
    
    
    78
    
    
    
    85
    
    
    
    (11
    )
    
    
    (5
    )Benefit cost
    
    $
    1,025
    
    
    $
    914
    
    
    $
    184
    
    
    $
    188
  Pension
    
    
    Post-retirementJanuary 7,
    
    
    January 1,
    
    
    January 7,
    
    
    January 1,2006
    
    
    2005
    
    
    2006
    
    
    2005Service cost
    
    $
    928
    
    
    $
    846
    
    
    $
    410
    
    
    $
    402Interest cost
    
    
    3,532
    
    
    
    3,421
    
    
    
    198
    
    
    
    210Expected return on plan assets
    
    
    (2,366
    )
    
    
    (2,551
    )
    
    
    
    
    
    
    Recognized actuarial loss
    
    
    1,190
    
    
    
    1,046
    
    
    
    43
    
    
    
    29Amortization of prior service cost
    
    
    277
    
    
    
    285
    
    
    
    (36
    )
    
    
    (16
    )Benefit cost
    
    $
    3,561
    
    
    $
    3,047
    
    
    $
    615
    
    
    $
    625
   Note I  Stock Repurchase Program
   13




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##### Table of Contents



Note J  Contingencies
    Note K  Recent Accounting Pronouncements
     14




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##### Table of Contents



Note L  Subsequent Events
   
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 General
 ® ® ® ® SM ® SM ® ®
  Business Overview
  Market Trends
   Management Focus
  15




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##### Table of Contents



16




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##### Table of Contents



Results of Operations
   Third Quarter
    
    
    Year - to - DatePercent of Revenues
    
    
    Percent
    
    
    Percent of Revenues
    
    
    Percent2006
    
    
    2005
    
    
    Change
    
    
    2006
    
    
    2005
    
    
    ChangeTotal revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    1.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    2.9
    %Gross profit
    
    
    29.5
    %
    
    
    29.6
    %
    
    
    0.5
    %
    
    
    29.4
    %
    
    
    29.6
    %
    
    
    2.3
    %Selling, general and administrative
    
    
    26.9
    %
    
    
    26.0
    %
    
    
    4.3
    %
    
    
    27.1
    %
    
    
    26.4
    %
    
    
    5.7
    %Depreciation
    
    
    1.5
    %
    
    
    1.4
    %
    
    
    8.0
    %
    
    
    1.5
    %
    
    
    1.5
    %
    
    
    5.2
    %Impairment of long-lived assets
    
    
    3.1
    %
    
    
    
    
    
    
    
    
    
    
    0.9
    %
    
    
    
    
    
    
    Operating income (loss)
    
    
    (2.1
    %)
    
    
    2.2
    %
    
    
    n/m
    
    
    
    (0.2
    %)
    
    
    1.7
    %
    
    
    n/mInterest
    
    
    1.3
    %
    
    
    1.1
    %
    
    
    16.7
    %
    
    
    1.2
    %
    
    
    1.1
    %
    
    
    10.1
    %Other non-operating expense (income)
    
    
    0.0
    %
    
    
    
    
    
    
    
    
    
    
    0.0
    %
    
    
    (0.1
    %)
    
    
    n/mIncome taxes (benefit)
    
    
    (1.0
    %)
    
    
    0.4
    %
    
    
    n/m
    
    
    
    (0.4
    %)
    
    
    0.2
    %
    
    
    n/mNet income (loss)
    
    
    (2.4
    %)
    
    
    0.6
    %
    
    
    n/m
    
    
    
    (0.9
    %)
    
    
    0.3
    %
    
    
    n/m
 
 n/m = not meaningful Total Revenues
    12 weeks ended
    
    
    40 weeks endedJanuary 7,
    
    
    January 1,
    
    
    January 7,
    
    
    January 1,2006
    
    
    2005
    
    
    2006
    
    
    2005Total revenues
    
    $
    407.5
    
    
    $
    403.6
    
    
    $
    1,366.9
    
    
    $
    1,328.4Less non-comparable supermarket and c-store sales
    
    
    29.7
    
    
    
    28.2
    
    
    
    102.8
    
    
    
    90.2Comparable supermarket and convenience store sales
    
    
    377.8
    
    
    
    375.4
    
    
    
    1,264.1
    
    
    
    1,238.2Less comparable stores gasoline sales
    
    
    42.2
    
    
    
    35.2
    
    
    
    151.7
    
    
    
    120.2Comparable supermarket and convenience store
sales excluding gasoline
    
    $
    335.6
    
    
    $
    340.2
    
    
    $
    1,112.4
    
    
    $
    1,118.0
 17




---



##### Table of Contents



Gross Profit
   Selling, General and Administrative
   Depreciation
   Impairment of Long-Lived Assets
  Interest
   18




---



##### Table of Contents



Other Non-operating Income
   Income Taxes
  Deferred Pension and Post-retirement Benefits
  Capital Expenditures
  Liquidity and Capital Resources
   19




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##### Table of Contents



Payments due by periodLess than
    
    
    1-3
    
    
    4-5
    
    
    After 5Total
    
    
    1 year
    
    
    years
    
    
    years
    
    
    yearsLong-term debt, including
current maturities
    
    $
    194.5
    
    
    $
    2.9
    
    
    $
    134.4
    
    
    $
    57.2
    
    
    $
    Capital and financing obligations
    
    
    89.3
    
    
    
    6.3
    
    
    
    12.5
    
    
    
    12.1
    
    
    
    58.4Operating leases
    
    
    294.9
    
    
    
    40.0
    
    
    
    65.5
    
    
    
    43.9
    
    
    
    145.5Purchase obligations
    
    
    28.0
    
    
    
    7.2
    
    
    
    14.4
    
    
    
    6.4
    
    
    
    Executive retirement plans
    
    
    18.9
    
    
    
    12.6
    
    
    
    6.3
    
    
    
    
    
    
    
    Total
    
    $
    625.6
    
    
    $
    69.0
    
    
    $
    233.1
    
    
    $
    119.6
    
    
    $
    203.9
  20




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##### Table of Contents



21




---



##### Table of Contents



Critical Accounting Policies
        22




---



##### Table of Contents



Cautionary Note Regarding Forward-Looking Statements
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Internal Control over Financial Reporting
  23




---



##### Table of Contents



Part II            Other Information
 
 Item 1. Legal Proceedings
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
   
 Item 3. Defaults upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
  Exhibit 3
    
    (a)
    
    Restated Articles of Incorporation, as amended as of May 15, 1991  Incorporated by
reference to Form 10-K for the year ended March 30, 1991.(b)
    
    By-Laws as amended as of November 26, 1997  Incorporated by
reference to Form 10-Q for the quarter ended January 3, 1998.Exhibit 4
    
    (a)
    
    Articles V, VI and VII of the Companys Restated Articles of Incorporation, as
amended as of May 15, 1991  Incorporated by reference to Form 10-K for the year ended March
30, 1991.(b)
    
    Articles I and IV of the Companys By-Laws, as amended as of
November 26, 1997  Incorporated by reference to Form 10-Q for the quarter ended
January 3, 1998.
 24




---



##### Table of Contents



(c)
    
    Agreement of the Company to furnish a copy of any agreement
relating to certain long-term debt and leases to the Securities and Exchange
Commission upon its request  Incorporated by reference to Form 10-K for the
year ended March 27, 1987.(d)
    
    Amended and Restated Rights Agreement, dated as of December 24,
1998, between Marsh Supermarkets, Inc. and National City Bank  Incorporated by
reference to Form 8-K, dated December 21, 1998.(e)
    
    Indenture, dated August 5, 1997, between Marsh Supermarkets, Inc.
and certain of its subsidiaries and State Street Bank and Trust Company, as
trustee, for $150,000,000 8-7/8% Senior Subordinated Notes, due 2007 
Incorporated by reference to Registration Statement on Form S-4 (File No.
333-34855).(f)
    
    First Supplemental Indenture between Marsh Supermarkets, Inc. and
certain of its subsidiaries and State Street Bank and Trust Company, as trustee,
dated December 31, 1997  Incorporated by reference to Form 10-K for the year
ended March 28, 1998.(g)
    
    Second Supplemental Indenture between Marsh Supermarkets, Inc.
and certain of its subsidiaries and State Street Bank and Trust Company, as
trustee, dated January 28, 2000  Incorporated by reference to Form 10-K for the
year ended April 1, 2000.(h)
    
    Third Supplemental Indenture between Marsh Supermarkets, Inc. and
certain of its subsidiaries and State Street Bank and Trust Company, as trustee,
dated June 22, 2000  Incorporated by reference to Form 10-K for the year ended
April 1, 2000.(i)
    
    Fourth Supplemental Indenture between Marsh Supermarkets, Inc.
and certain of its subsidiaries and State Street Bank and Trust Company, as
trustee, dated October 15, 2001  Incorporated by reference to Registration
Statement on Form S-8 (File No. 333-82908).(j)
    
    Credit Agreement between Marsh Supermarkets, Inc. and its
subsidiaries and Bank of America, N.A., as Issuing Agent, Administrative Agent
and Collateral Agent, dated as of November 9, 2005  Incorporated by reference
to Form 8-K filed November 16, 2005.(k)
    
    First Amendment to Credit Agreement, dated as of January 6, 2006,
among Marsh Supermarkets, LLC, Marsh Supermarkets, Inc., the other borrowers
party thereto, the facility guarantors party thereto, the lenders party thereto,
and Bank of America, N.A., as Issuing Bank, and as Administrative Agent and
Collateral Agent for the Lenders  Incorporated by reference to Form 8-K filed
on January 12, 2006.(l)
    
    Security Agreement, dated as of November 9, 2005, by and among
Marsh Supermarkets, Inc., the other grantors party thereto and Bank of America,
N.A., as Collateral Agent  Incorporated by reference to Form 8-K filed on
November 16, 2005.(m)
    
    Intellectual Property Security Agreement, dated as of November 9,
2005, by and among Marsh Supermarkets, Inc., Trademark Holdings, Inc. and Bank
of America, N.A., as Collateral Agent  Incorporated by reference to Form 8-K
filed on November 16, 2005.(n)
    
    Pledge Agreement, dated as of November 9, 2005, by and among
Marsh Supermarkets, Inc., the other pledgors party thereto and Bank of America,
N.A., as Collateral Agent  Incorporated by reference to Form 8-K filed on
November 16, 2005.(o)
    
    Guaranty, dated as of November 9, 2005, by Marsh Supermarkets,
Inc. and the other borrowers party thereto, in favor of Bank of America, N.A.,
as Administrative Agent,
 25




---



##### Table of Contents



Collateral Agent and Issuing Bank, the lenders and the other secured parties 
Incorporated by reference to Form 8-K filed on November 16, 2005.(p)
    
    Form of Mortgage, Collateral Assignment of Leases and Rents and
Fixture Filing  Incorporated by reference to Form 8-K filed on November 16,
2005.(q)
    
    Credit Agreement, dated as of January 6, 2006, among Marsh
Supermarkets, LLC, Marsh Supermarkets, Inc., the other borrowers party thereto,
the facility guarantors party thereto, the lenders party thereto, and Back Bay
Capital Funding LLC, as Administrative Agent and Collateral Agent 
Incorporated by reference to Form 8-K filed on January 12, 2006.(r)
    
    Security Agreement, dated as of January 6, 2006, by and among
Marsh Supermarkets, Inc., the other grantors party thereto and Back Bay Capital
Funding LLC, as Collateral Agent  Incorporated by reference to Form 8-K filed
on January 12, 2006.(s)
    
    Intellectual Property Security Agreement, dated as of January 6,
2006, by and among Marsh Supermarkets, Inc., Trademark Holdings, Inc. and Back
Bay Capital Funding LLC, as Collateral Agent  Incorporated by reference to
Form 8-K filed on January 12, 2006.(t)
    
    Pledge Agreement, dated as of January 6, 2006, by and among Marsh
Supermarkets, Inc., the other pledgors party thereto and Back Bay Capital
Funding LLC, as Collateral Agent  Incorporated by reference to Form 8-K filed
on January 12, 2006.(u)
    
    Guaranty, dated as of January 6, 2006, by Marsh Supermarkets,
Inc. and the other borrowers party thereto, in favor of Back Bay Capital Funding
LLC, as Administrative Agent and Collateral Agent, the lenders and the other
secured parties  Incorporated by reference to Form 8-K filed on January 12,
2006.(v)
    
    Form of Mortgage, Collateral Assignment of Leases and Rents,
Security Agreement, and Fixture Filing  Incorporated by reference to Form 8-K
filed on January 12, 2006.Exhibit 10
    
    (a)
    
    Third Amendment to the Supplemental Retirement Plan of Marsh Supermarkets, Inc. and
Subsidiaries, as Amended and Restated as of January 1, 1997  Incorporated by reference to
Form 8-K filed on December 30, 2005.(b)
    
    Second Amendment to the Marsh Supermarkets, Inc. 1999 Senior
Executive Supplemental Retirement Plan  Incorporated by reference to Form 8-K
filed on December 30, 2005.(c)
    
    Amendment to Employment Agreement, by and between the Company and
Don E. Marsh, dated as of December 29, 2005  Incorporated by reference to Form
8-K filed on December 30, 2005.(d)
    
    Amendment to Employment Agreement, by and between the Company and
P. Lawrence Butt, dated as of December 29, 2005  Incorporated by reference to
Form 8-K filed on December 30, 2005.(e)
    
    Amendment to Employment Agreement, by and between the Company and
William L. Marsh, dated as of December 29, 2005  Incorporated by reference to
Form 8-K filed on December 30, 2005.
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##### Table of Contents



31.1
    
    Rule 13(a)-14(a)/15(d)-14(a) Certification of Don E. Marsh.31.2
    
    Rule 13(a)-14(a)/15(d)-14(a) Certification of Douglas W. Dougherty.32.1
    
    Section 1350 Certification of Don E. Marsh.32.2
    
    Section 1350 Certification of Douglas W. Dougherty.
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##### Table of Contents



SIGNATURES
  MARSH SUPERMARKETS, INC.February 21, 2006
    By:
    /s/ Douglas W. DoughertyDouglas W. DoughertyExecutive Vice President 
Finance and AdministrationFebruary 21, 2006
    By:
    /s/ Mark A. VarnerMark A. VarnerChief Accounting Officer,
Vice President  Corporate Controller 28