##### 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 1, 2005 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
BOULEVARD INDIANAPOLIS, INDIANA
(Address of principal executive offices)
    46256-3350
(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. Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Exchange Act). Yes o No þ Number of shares outstanding of each class of the registrants common stock as of February 3,
2005: Class A Common Stock
Class B Common Stock
    -
-
    3,731,990
4,154,880
    
    shares
shares7,886,870
    
    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 CFOEX-32.1  SECTION 906 CERTIFICATION OF THE CEOEX-32.2  SECTION 906 CERTIFICATION OF THE CFO    Table of Contents  
 PART I FINANCIAL INFORMATION 
 Item 1. Financial Statements MARSH SUPERMARKETS, INC.CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands) January 1,
    
    
    March 27,
    
    
    January 3,2005
    
    
    2004
    
    
    2004(Unaudited)
    
    
    (Note A)
    
    
    (Unaudited)AssetsCurrent assets:Cash and equivalents
    
    $
    47,302
    
    
    $
    27,584
    
    
    $
    36,609Accounts receivable
    
    
    24,505
    
    
    
    23,864
    
    
    
    26,073Inventories
    
    
    133,731
    
    
    
    126,840
    
    
    
    128,064Prepaid expenses
    
    
    6,367
    
    
    
    6,495
    
    
    
    6,420Recoverable income taxes
    
    
    1,364
    
    
    
    5,400
    
    
    
    2,764Total current assets
    
    
    213,269
    
    
    
    190,183
    
    
    
    199,930Property and equipment, less allowances for depreciation
    
    
    304,272
    
    
    
    297,028
    
    
    
    299,150Other assets
    
    
    62,807
    
    
    
    55,194
    
    
    
    51,893Total Assets
    
    $
    580,348
    
    
    $
    542,405
    
    
    $
    550,973Liabilities and Shareholders EquityCurrent liabilities:Accounts payable
    
    $
    83,460
    
    
    $
    80,614
    
    
    $
    78,633Accrued liabilities
    
    
    52,487
    
    
    
    48,170
    
    
    
    51,936Current maturities of long-term liabilities
    
    
    5,361
    
    
    
    3,427
    
    
    
    3,364Total current liabilities
    
    
    141,308
    
    
    
    132,211
    
    
    
    133,933Long-term liabilities:Long-term debt
    
    
    198,941
    
    
    
    174,161
    
    
    
    181,755Capital lease obligations
    
    
    27,494
    
    
    
    28,188
    
    
    
    28,442Pension and post-retirement benefits
    
    
    46,356
    
    
    
    42,725
    
    
    
    45,748Total long-term liabilities
    
    
    272,791
    
    
    
    245,074
    
    
    
    255,945Deferred items:Income taxes
    
    
    15,830
    
    
    
    18,309
    
    
    
    15,501Gains from sale/leasebacks
    
    
    16,846
    
    
    
    15,238
    
    
    
    14,972Other
    
    
    3,359
    
    
    
    3,297
    
    
    
    1,620Total deferred items
    
    
    36,035
    
    
    
    36,844
    
    
    
    32,093Shareholders Equity:Common stock, Classes A and B
    
    
    26,615
    
    
    
    26,570
    
    
    
    26,455Retained earnings
    
    
    133,328
    
    
    
    130,813
    
    
    
    133,081Cost of common stock in treasury
    
    
    (15,690
    )
    
    
    (15,011
    )
    
    
    (15,062
    )Deferred cost restricted stock
    
    
    (153
    )
    
    
    (211
    )
    
    
    (74
    )Notes receivable  stock purchase
    
    
    (11
    )
    
    
    (11
    )
    
    
    (14
    )Accumulated other comprehensive loss
    
    
    (13,875
    )
    
    
    (13,874
    )
    
    
    (15,384
    )Total shareholders equity
    
    
    130,214
    
    
    
    128,276
    
    
    
    129,002Total Liabilities and Shareholders Equity
    
    $
    580,348
    
    
    $
    542,405
    
    
    $
    550,973
 See notes to condensed consolidated financial statements. 2




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MARSH SUPERMARKETS, INC.CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited) 12 Weeks Ended
    
    
    40 Weeks EndedJanuary 1,
    
    
    January 3,
    
    
    January 1,

    
    
    January 3,2005
    
    
    2004
    
    
    2005
    
    
    2004Sales and other revenues
    
    $
    401,752
    
    
    $
    388,417
    
    
    $
    1,325,222
    
    
    $
    1,275,382Gains from sales of property
    
    
    1,890
    
    
    
    354
    
    
    
    3,164
    
    
    
    2,168Total revenues
    
    
    403,642
    
    
    
    388,771
    
    
    
    1,328,386
    
    
    
    1,277,550Cost of merchandise sold, including
warehousing and transportation,
excluding depreciation
    
    
    284,035
    
    
    
    270,889
    
    
    
    935,358
    
    
    
    893,353Gross profit
    
    
    119,607
    
    
    
    117,882
    
    
    
    393,028
    
    
    
    384,197Selling, general and administrative
    
    
    105,099
    
    
    
    103,874
    
    
    
    351,134
    
    
    
    344,046Depreciation
    
    
    5,815
    
    
    
    5,781
    
    
    
    19,387
    
    
    
    19,203Operating income
    
    
    8,693
    
    
    
    8,227
    
    
    
    22,507
    
    
    
    20,948Interest
    
    
    4,475
    
    
    
    4,268
    
    
    
    14,462
    
    
    
    14,763Other non-operating income
    
    
    
    
    
    
    
    
    
    
    (838
    )
    
    
    (961
    )Income before income taxes
    
    
    4,218
    
    
    
    3,959
    
    
    
    8,883
    
    
    
    7,146Income taxes
    
    
    1,545
    
    
    
    1,635
    
    
    
    3,288
    
    
    
    2,881Net income
    
    $
    2,673
    
    
    $
    2,324
    
    
    $
    5,595
    
    
    $
    4,265Earnings per common share:Basic
    
    $
    .34
    
    
    $
    .29
    
    
    $
    .71
    
    
    $
    .54Diluted
    
    $
    .34
    
    
    $
    .29
    
    
    $
    .70
    
    
    $
    .53Dividends declared per share
    
    $
    .13
    
    
    $
    .13
    
    
    $
    .39
    
    
    $
    .39
 See notes to condensed consolidated financial statements. 3




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MARSH SUPERMARKETS, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited) 40 Weeks EndedJanuary 1,
    
    
    January 3,2005
    
    
    2004Operating activitiesNet income
    
    $
    5,595
    
    
    $
    4,265Adjustments to reconcile net income to net
cash provided by operating activities:Depreciation
    
    
    19,387
    
    
    
    19,203Amortization of other assets
    
    
    1,116
    
    
    
    855Changes in operating assets and liabilities
    
    
    2,885
    
    
    
    10,426Other operating activities
    
    
    (846
    )
    
    
    2,084Net cash provided by operating activities
    
    
    28,137
    
    
    
    36,833Investing
activitiesNet acquisition of property, equipment and land
    
    
    (47,254
    )
    
    
    (7,070
    )Other investing activities
    
    
    (1,426
    )
    
    
    (1,788
    )Net cash used for investing activities
    
    
    (48,680
    )
    
    
    (8,858
    )Financing activitiesPayments of short-term borrowing
    
    
    
    
    
    
    (1,700
    )Proceeds from long-term borrowings
    
    
    110,000
    
    
    
    45,000Payments of long-term debt and capital leases
    
    
    (83,980
    )
    
    
    (62,048
    )Proceeds from sale/leasebacks
    
    
    16,367
    
    
    
    2,286Purchase of shares for treasury
    
    
    (859
    )
    
    
    (177
    )Cash dividends paid
    
    
    (3,085
    )
    
    
    (3,099
    )Other financing activities
    
    
    1,818
    
    
    
    59Net cash provided by (used for) financing activities
    
    
    40,261
    
    
    
    (19,679
    )Net increase in cash and equivalents
    
    
    19,718
    
    
    
    8,296Cash and equivalents at beginning of period
    
    
    27,584
    
    
    
    28,313Cash and equivalents at end of period
    
    $
    47,302
    
    
    $
    36,609
 See notes to condensed consolidated financial statements. 4




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MARSH SUPERMARKETS, INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except per share amounts or as otherwise noted) January 1, 2005 Note A  Basis of
Presentation

The accompanying unaudited condensed consolidated financial statements of Marsh Supermarkets, Inc.
and subsidiaries were prepared in accordance with generally accepted accounting principles for
interim financial information and the instructions to Form 10-Q. Accordingly, they do not include
all the information and footnotes necessary for a fair presentation of financial position, results
of operations, and cash flows in conformity with accounting principles generally accepted in the
United States. This report should be read in conjunction with the Companys Consolidated Financial
Statements for the year ended March 27, 2004. The balance sheet at March 27, 2004, 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 2005 and 2004 relate to the fiscal years ending April 2, 2005, and March
27, 2004, respectively. The condensed consolidated financial statements for the twelve and forty week periods ended January
1, 2005, and January 3, 2004, 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. Operating results for the twelve and forty week periods ended January 1, 2005, are not necessarily
indicative of the results that may be expected for the full fiscal year ending April 2, 2005. Note B  Earnings Per
Share

The following table sets forth the computation of the numerators and denominators used in the
computation of basic and diluted earnings per common share: 12 Weeks Ended
    
    
    40 Weeks EndedJanuary 1,
    
    
    January 3,
    
    
    January 1,
    
    
    January 3,2005
    
    
    2004
    
    
    2005
    
    
    2004Net income
    
    $
    2,673
    
    
    $
    2,324
    
    
    $
    5,595
    
    
    $
    4,265Weighted average shares outstanding
    
    
    7,912
    
    
    
    7,938
    
    
    
    7,916
    
    
    
    7,946Non-vested restricted shares
    
    
    (16
    )
    
    
    (3
    )
    
    
    (16
    )
    
    
    (4
    )Denominator for basic earnings per share
    
    
    7,896
    
    
    
    7,935
    
    
    
    7,900
    
    
    
    7,942Effect of dilutive securities:Non-vested restricted shares
    
    
    16
    
    
    
    3
    
    
    
    16
    
    
    
    4Stock options
    
    
    64
    
    
    
    42
    
    
    
    86
    
    
    
    56Denominator for diluted earnings per share -
adjusted weighted average shares
    
    
    7,976
    
    
    
    7,980
    
    
    
    8,002
    
    
    
    8,002
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Note C  Stock Option
Plans

The Companys stock option plans are accounted for under the intrinsic value method of APB Opinion
25 and related interpretations. Since the exercise price of options granted under the plans is
equal to the market price of the underlying common stock on the grant date, no stock-based
compensation cost is recognized in net income. The following table illustrates the effect on net income and earnings per share if the Company had
applied the fair value recognition provisions of FAS 123: 12 Weeks Ended
    
    
    40 Weeks EndedJanuary 1,
    
    
    January 3,
    
    
    January 1,
    
    
    January 3,2005
    
    
    2004
    
    
    2005
    
    
    2004Net income, as reported
    
    $
    2,673
    
    
    $
    2,324
    
    
    $
    5,595
    
    
    $
    4,265Compensation expense recorded
    
    
    10
    
    
    
    7
    
    
    
    33
    
    
    
    25Compensation expense using the fair value method,
net of tax
    
    
    (105
    )
    
    
    (191
    )
    
    
    (497
    )
    
    
    (655
    )Pro-forma net income
    
    $
    2,578
    
    
    $
    2,140
    
    
    $
    5,131
    
    
    $
    3,635Earnings per share, as reported:Basic
    
    $
    .34
    
    
    $
    .29
    
    
    $
    .71
    
    
    $
    .54Diluted
    
    
    .34
    
    
    
    .29
    
    
    
    .70
    
    
    
    .53Earnings per share, pro-forma:Basic
    
    
    .33
    
    
    
    .27
    
    
    
    .65
    
    
    
    .46Diluted
    
    
    .32
    
    
    
    .27
    
    
    
    .64
    
    
    
    .46
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Note D  Long-Term
Debt and Guarantor Subsidiaries

Other than three minor 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
its 8 7/8% senior subordinated notes. The Guarantors are wholly-owned subsidiaries of the Company. Balance sheet as of January 1, 2005: GuarantorParent
    
    
    subsidiaries
    
    
    TotalAssetsCurrent assets:Cash and equivalents
    
    $
    
    
    
    $
    47,302
    
    
    $
    47,302Accounts receivable
    
    
    
    
    
    
    24,505
    
    
    
    24,505Inventories
    
    
    
    
    
    
    133,731
    
    
    
    133,731Prepaid expenses
    
    
    
    
    
    
    6,367
    
    
    
    6,367Recoverable income taxes
    
    
    1,364
    
    
    
    
    
    
    
    1,364Total current assets
    
    
    1,364
    
    
    
    211,905
    
    
    
    213,269Property and equipment, less allowances for depreciation
    
    
    29,902
    
    
    
    274,370
    
    
    
    304,272Other assets
    
    
    3,197
    
    
    
    59,610
    
    
    
    62,807Total Assets
    
    $
    34,463
    
    
    $
    545,885
    
    
    $
    580,348Liabilities and Shareholders EquityCurrent liabilities:Accounts payable
    
    $
    
    
    
    $
    83,460
    
    
    $
    83,460Accrued liabilities
    
    
    11,169
    
    
    
    41,318
    
    
    
    52,487Current maturities of long-term liabilities
    
    
    1,710
    
    
    
    3,651
    
    
    
    5,361Total current liabilities
    
    
    12,879
    
    
    
    128,429
    
    
    
    141,308Long-term liabilities:Long-term debt
    
    
    110,940
    
    
    
    88,001
    
    
    
    198,941Capital lease obligations
    
    
    
    
    
    
    27,494
    
    
    
    27,494Pension and post-retirement benefits
    
    
    42,023
    
    
    
    4,333
    
    
    
    46,356Total long-term liabilities
    
    
    152,963
    
    
    
    119,828
    
    
    
    272,791Deferred items:Income taxes
    
    
    15,830
    
    
    
    
    
    
    
    15,830Other
    
    
    2,196
    
    
    
    18,009
    
    
    
    20,205Total deferred items
    
    
    18,026
    
    
    
    18,009
    
    
    
    36,035Amounts due parent from subsidiaries
    
    
    (153,156
    )
    
    
    153,156
    
    
    
    Shareholders Equity:Common stock, Classes A and B
    
    
    26,615
    
    
    
    
    
    
    
    26,615Retained earnings
    
    
    6,865
    
    
    
    126,463
    
    
    
    133,328Cost of common stock in treasury
    
    
    (15,690
    )
    
    
    
    
    
    
    (15,690
    )Deferred
cost - restricted stock
    
    
    (153
    )
    
    
    
    
    
    
    (153
    )Notes
receivable - stock purchase
    
    
    (11
    )
    
    
    
    
    
    
    (11
    )Accumulated other comprehensive loss
    
    
    (13,875
    )
    
    
    
    
    
    
    (13,875
    )Total shareholders equity
    
    
    3,751
    
    
    
    126,463
    
    
    
    130,214Total Liabilities and Shareholders Equity
    
    $
    34,463
    
    
    $
    545,885
    
    
    $
    580,348
 7




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Balance sheet as of March 27, 2004: GuarantorParent
    
    
    subsidiaries
    
    
    TotalAssetsCurrent assets:Cash and equivalents
    
    $
    
    
    
    $
    27,584
    
    
    $
    27,584Accounts and notes receivable, net
    
    
    
    
    
    
    23,864
    
    
    
    23,864Inventories
    
    
    
    
    
    
    126,840
    
    
    
    126,840Prepaid expenses
    
    
    
    
    
    
    6,495
    

    
    
    6,495Recoverable income taxes
    
    
    5,400
    
    
    
    
    
    
    
    5,400Total current assets
    
    
    5,400
    
    
    
    184,783
    
    
    
    190,183Property and equipment, less allowances for depreciation
    
    
    32,717
    
    
    
    264,311
    
    
    
    297,028Other assets
    
    
    3,247
    
    
    
    51,947
    
    
    
    55,194Total Assets
    
    $
    41,364
    
    
    $
    501,041
    
    
    $
    542,405Liabilities and Shareholders EquityCurrent liabilities:Accounts payable
    
    $
    
    
    
    $
    80,614
    
    
    $
    80,614Accrued liabilities
    
    
    8,722
    
    
    
    39,448
    
    
    
    48,170Current maturities of long-term liabilities
    
    
    1,587
    
    
    
    1,840
    
    
    
    3,427Total current liabilities
    
    
    10,309
    
    
    
    121,902
    
    
    
    132,211Long-term liabilities:Long-term debt
    
    
    112,173
    
    
    
    61,988
    
    
    
    174,161Capital lease obligations
    
    
    
    
    
    
    28,188
    
    
    
    28,188Pension and post-retirement benefits
    
    
    38,541
    
    
    
    4,184
    
    
    
    42,725Total long-term liabilities
    
    
    150,714
    
    
    
    94,360
    
    
    
    245,074Deferred items:Income taxes
    
    
    18,309
    
    
    
    
    
    
    
    18,309Other
    
    
    55
    
    
    
    18,480
    
    
    
    18,535Total deferred items
    
    
    18,364
    
    
    
    18,480
    
    
    
    36,844Amounts due parent from subsidiaries
    
    
    (145,664
    )
    
    
    145,664
    
    
    
    Shareholders Equity:Common stock, Classes A and B
    
    
    26,570
    
    
    
    
    
    
    
    26,570Retained earnings
    
    
    10,178
    
    
    
    120,635
    
    
    
    130,813Cost of common stock in treasury
    
    
    (15,011
    )
    
    
    
    
    
    
    (15,011
    )Deferred
cost - restricted stock
    
    
    (211
    )
    
    
    
    
    
    
    (211
    )Notes
receivable - stock purchases
    
    
    (11
    )
    
    
    
    
    
    
    (11
    )Accumulated other comprehensive loss
    
    
    (13,874
    )
    
    
    
    
    
    
    (13,874
    )Total shareholders equity
    
    
    7,641
    
    
    
    120,635
    
    
    
    128,276Total Liabilities and Shareholders Equity
    
    $
    41,364
    
    
    $
    501,041
    
    
    $
    542,405
 8




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Statement of income for the 12 weeks ended January 1, 2005: 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
 Statement of income for the 12 weeks ended January 3, 2004: Guarantor
    
    
    ConsolidatingParent
    
    
    subsidiaries
    
    
    entries
    
    
    TotalSales and other revenues
    
    $
    1,131
    
    
    $
    388,419
    
    
    $
    (1,133
    )
    
    $
    388,417Gains from sales of property
    
    
    
    
    
    
    354
    
    
    
    
    
    
    
    354Total revenues
    
    
    1,131
    
    
    
    388,773
    
    
    
    (1,133
    )
    
    
    388,771Cost of merchandise sold,
including warehousing and transportation,
excluding depreciation
    
    
    
    
    
    
    270,889
    
    
    
    
    
    
    
    270,889Gross profit
    
    
    1,131
    
    
    
    117,884
    
    
    
    (1,133
    )
    
    
    117,882Selling, general and administrative
    
    
    633
    
    
    
    104,374
    
    
    
    (1,133
    )
    
    
    103,874Depreciation
    
    
    88
    
    
    
    5,693
    
    
    
    
    
    
    
    5,781Operating income
    
    
    410
    
    
    
    7,817
    
    
    
    
    
    
    
    8,227Interest
    
    
    407
    
    
    
    3,861
    
    
    
    
    
    
    
    4,268Income before income taxes
    
    
    3
    
    
    
    3,956
    
    
    
    
    
    
    
    3,959Income taxes
    
    
    1
    
    
    
    1,634
    
    
    
    
    
    
    
    1,635Net income
    
    $
    2
    
    
    $
    2,322
    
    
    $
    
    
    
    $
    2,324
 9




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##### Table of Contents



Statement of income for the 40 weeks ended January 1, 2005: 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
 Statement of income for the 40 weeks ended January 3, 2004: Guarantor
    
    
    ConsolidatingParent
    
    
    subsidiaries
    
    
    entries
    
    
    TotalSales and other revenues
    
    $
    3,779
    
    
    $
    1,275,379
    
    
    $
    (3,776
    )
    
    $
    1,275,382Gains from sales of property
    
    
    
    
    
    
    2,168
    
    
    
    
    
    
    
    2,168Total revenues
    
    
    3,779
    
    
    
    1,277,547
    
    
    
    (3,776
    )
    
    
    1,277,550Cost of merchandise sold,
including warehousing and transportation,
excluding depreciation
    
    
    
    
    
    
    893,353
    
    
    
    
    
    
    
    893,353Gross profit
    
    
    3,779
    
    
    
    384,194
    
    
    
    (3,776
    )
    
    
    384,197Selling, general and administrative
    
    
    2,096
    
    
    
    345,726
    
    
    
    (3,776
    )
    
    
    344,046Depreciation
    
    
    1,049
    
    
    
    18,154
    
    
    
    
    
    
    
    19,203Operating income
    
    
    634
    
    
    
    20,314
    
    
    
    
    
    
    
    20,948Interest
    
    
    1,388
    
    
    
    13,375
    
    
    
    
    
    
    
    14,763Other non-operating income
    
    
    (961
    )
    
    
    
    
    
    
    
    
    
    
    (961
    )Income before income taxes
    
    
    207
    
    
    
    6,939
    
    
    
    
    
    
    
    7,146Income taxes
    
    
    85
    
    
    
    2,796
    
    
    
    
    
    
    
    2,881Net income
    
    $
    122
    
    
    $
    4,143
    
    
    $
    
    
    
    $
    4,265
 10




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##### Table of Contents



Statement of cash flows for the forty weeks ended January 1, 2005: 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
 Statement of cash flows for the forty weeks ended January 3, 2004: GuarantorParent
    
    
    subsidiaries
    
    
    TotalNet cash provided by operating activities
    
    $
    20,952
    
    
    $
    15,881
    
    
    $
    36,833Net cash used for investing activities
    
    
    (60
    )
    
    
    (8,798
    )
    
    
    (8,858
    )Financing activities:Repayments of short-term borrowings
    
    
    
    
    
    
    (1,700
    )
    
    
    (1,700
    )Proceeds of long-term borrowings
    
    
    
    
    
    
    45,000
    
    
    
    45,000Proceeds of sale leaseback/capital lease obligations
    
    
    
    
    
    
    2,286
    
    
    
    2,286Repayments of long-term debt and capital leases
    
    
    (17,689
    )
    
    
    (44,359
    )
    
    
    (62,048
    )Cash dividends paid
    
    
    (3,099
    )
    
    
    
    
    
    
    (3,099
    )Other financing activities
    
    
    (104
    )
    
    
    (14
    )
    
    
    (118
    )Net cash provided by (used for) financing activities
    
    
    (20,892
    )
    
    
    1,213
    
    
    
    (19,679
    )Net increase in cash and equivalents
    
    
    
    
    
    
    8,296
    
    
    
    8,296Cash and equivalents at beginning of period
    
    
    
    
    
    
    28,313
    
    
    
    28,313Cash and equivalents at end of period
    
    $
    
    
    
    $
    36,609
    
    
    $
    36,609
 11




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##### Table of Contents



Note E  Employee
Benefit Plans  Pension
    
    
    Post-retirementJanuary 1,
    
    
    January 3,
    
    
    January 1,
    
    
    January 3,2005
    
    
    2004
    
    
    2005
    
    
    2004Service cost
    
    $
    254
    
    
    $
    200
    
    
    $
    121
    
    
    $
    129Interest cost
    
    
    1,026
    
    
    
    1,017
    
    
    
    63
    
    
    
    72Expected return on plan assets
    
    
    (765
    )
    
    
    (652
    )
    
    
    
    
    
    
    Recognized actuarial loss
    
    
    314
    
    
    
    396
    
    
    
    9
    
    
    
    9Amortization of prior service cost
    
    
    85
    
    
    
    85
    
    
    
    (5
    )
    
    
    2Benefit cost
    
    $
    914
    
    
    $
    1,046
    
    
    $
    188
    
    
    $
    212
 The components of net periodic benefit cost for the forty week periods ended January 1, 2005, and
January 3, 2004, were as follows: Pension
    
    
    Post-retirementJanuary 1,
    
    
    January 3,
    
    
    January 1,
    
    
    January 3,2005
    
    
    2004
    
    
    2005
    
    
    2004Service cost
    
    $
    846
    
    
    $
    667
    
    
    $
    402
    
    
    $
    429Interest cost
    
    
    3,421
    
    
    
    3,390
    
    
    
    210
    
    
    
    238Expected return on plan assets
    
    
    (2,551
    )
    
    
    (2,174
    )
    
    
    
    
    
    
    Recognized actuarial loss
    
    
    1,046
    
    
    
    1,319
    
    
    
    29
    
    
    
    30Amortization of prior service cost
    
    
    285
    
    
    
    285
    
    
    
    (16
    )
    
    
    6Benefit cost
    
    $
    3,047
    
    
    $
    3,487
    
    
    $
    625
    
    
    $
    703
 Note F  Recent
Accounting Pronouncements  In December 2004, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 123
(revised 2004), Share-Based Payment, which revised FASB Statement No. 123, Accounting for
Stock-Based Compensation. Statement 123(R) supersedes APB Opinion No. 25, Accounting for Stock
Issued to Employees, and amends FASB Statement No. 95,
Statement of Cash Flows. Statement No. 123(R)
requires all share-based payments to employees, including grants of stock options, to be recognized
in the income statement based on their fair values; pro forma disclosure is no longer an
alternative. Statement No. 123(R)
will be effective for periods beginning after June 15, 2005, and, accordingly,
the Company will adopt the statement for its second quarter of fiscal year 2006. The Company expects
to adopt Statement No. 123(R) using the modified prospective method, in which compensation cost, if
any, will be recognized beginning with the effective date. As permitted by Statement No. 123, the Company currently accounts for shared-based payments using
Opinion 25s intrinsic value method and, as such, recognizes no compensation cost for employee
stock options. The impact of the adoption of Statement No. 123(R) cannot be predicted because it
will depend on levels of stock options and any other forms of share-based payments granted in the
future. Had the Company adopted Statement No. 123(R) in prior periods, the impact of the standard
would have approximated the impact of Statement No. 123 as described in the disclosure of pro forma
net income and earnings per share in Note C. However, the Company expects the adoption will not
have an immediate material impact on the financial statements as there will be a minimal number of
unvested stock options outstanding at the adoption date. 12




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##### Table of Contents



Note G 
Contingencies

A complaint was filed against the Company on August 26, 2004, in the United States District Court
for the Southern District of Indiana, Indianapolis Division, entitled C. Alan Marsh v. Marsh
Supermarkets, Inc., Cause No. 1:04-CV-1407-SEB-VSS. The case involves claims for breach of
contract and civil conversion and seeks damages and treble damages. The Company disputes the
plaintiffs claims and intends to defend this matter vigorously. The Company is unable to estimate
the amount or range of potential loss, if any. 13




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations General

At January 1, 2005, Marsh Supermarkets, Inc. (the Company or Marsh) operated through
wholly-owned subsidiaries 117 supermarkets under the Marsh, LoBill, OMalia and Arthurs Fresh
Market banners and 162 Village Pantry convenience stores in central Indiana and western Ohio. The
Company believes that Marsh supermarkets have one of the largest market shares of supermarket
chains operating in its market area and Village Pantry has one of the largest market shares of
convenience stores in its market area. Marsh also owns and operates Crystal Food Services, which
provides upscale and mid-level catering, vending, concession, coffee roasting and distribution, and
business cafeteria management services, and McNamara, which operates eight upscale retail floral
shops and one business florist. Business
Overview

Revenues from supermarket operations represented 78.0% of total revenues for the forty weeks ended
January 1, 2005, while convenience stores and foodservices contributed 17.2% and 3.7% of revenues,
respectively. Sales are generally for cash. Data from various non-affiliated sources reported Marsh
supermarkets market share at #1 or #2 in its marketing area as of February 2004. Market Trends

The Companys efforts to increase revenues continue to be affected by competitive store openings
and remodels and the challenging local economy. At January 1, 2005, there were 12 major
competitors stores opened or remodeled within the last 12 months. Although the Company believes
that the number of competitors new store openings has peaked, it is expected that new stores will
continue to be opened in the market area. According to U.S. Department of Labor statistics, the
combined employment in the five largest cities in central Indiana declined 1.5% from December 2003
to December 2004. The Companys ability to increase gross profit rates continues to be a challenge due to
competitors pricing and promotional activity. Also, recent commodity price increases, particularly
in beef and gasoline, have created additional pressures on gross profit rates. Management
Focus

Given the continued pressures on revenues and gross profit rates, the Companys management
continues its focus on merchandising plans, expense reduction, asset management and cash flow. The Companys merchandising plan is currently focused on pricing strategies and the enhancement of
its price image, increasing sales of its private label products and the effective execution of
merchandising programs by store personnel. The Company continues to pursue the expense reduction initiatives that were initiated in fiscal
year 2003. Those initiatives included, among others, changes to employee medical benefits plans,
seeking greater efficiencies in store labor scheduling, lowering interest expense by replacing
fixed rate debt with lower variable rate debt, pursuing lower costs of goods, supplies and
services, in-house handling versus outsourcing of certain support services, and improvements in
warehousing and delivery logistics. The initiatives completed to date
have partially offset increases in
non-controllable and other selling, general and administrative expenses. 14




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##### Table of Contents



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 - DatePercent of Revenues
    
    
    Percent
    
    
    Percent of Revenues
    
    
    Percent2005
    
    
    2004
    
    
    Change
    
    
    2005
    
    
    2004
    
    
    ChangeTotal revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    3.8
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    4.0
    %Gross profit
    
    
    29.6
    %
    
    
    30.3
    %
    
    
    1.5
    %
    
    
    29.6
    %
    
    
    30.1
    %
    
    
    2.3
    %Selling, general and administrative
    
    
    26.0
    %
    
    
    26.7
    %
    
    
    1.2
    %
    
    
    26.4
    %
    
    
    26.9
    %
    
    
    2.1
    %Depreciation
    
    
    1.4
    %
    
    
    1.5
    %
    
    
    0.6
    %
    
    
    1.5
    %
    
    
    1.5
    %
    
    
    1.0
    %Operating income
    
    
    2.2
    %
    
    
    2.1
    %
    
    
    5.7
    %
    
    
    1.7
    %
    
    
    1.6
    %
    
    
    7.4
    %Interest
    
    
    1.1
    %
    
    
    1.1
    %
    
    
    4.9
    %
    
    
    1.1
    %
    
    
    1.2
    %
    
    
    (2.0
    %)Other non-operating income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.1
    %
    
    
    0.1
    %
    
    
    (12.8
    %)Income taxes
    
    
    0.4
    %
    
    
    0.4
    %
    
    
    (5.5
    %)
    
    
    0.2
    %
    
    
    0.2
    %
    
    
    14.1
    %Net income
    
    
    0.7
    %
    
    
    0.6
    %
    
    
    15.0
    %
    
    
    0.4
    %
    
    
    0.3
    %
    
    
    31.2
    %
 Total Revenues

Consolidated total revenues were $403.6 million for the third quarter of 2005, compared to $388.8
million for the third quarter of 2004, with the increase primarily due to new store openings and
higher gasoline prices. Gasoline sales were $35.8 million for the third quarter of 2005, compared
to $27.4 million for the third quarter of 2004, and consolidated total revenues excluding gasoline
sales were $367.8 million and $361.4 million for the third quarter of 2005 and 2004, respectively.
The Company excludes gasoline sales from its analysis of revenues and believes it is useful
information for investors and the Company because gasoline prices fluctuate widely and frequently.
Sales in comparable supermarkets and convenience stores increased 0.6% to $366.6 million from
$364.6 million, but sales in comparable stores excluding gasoline declined 1.9% to $332.0 million
from $338.3 million. Comparable stores include stores open at least one full year, replacement
stores and format conversions. Competitors new store openings and continued high levels of
competitive promotional activity combined with a weak economy continue to adversely affect
comparable store sales. Consolidated total revenues were $1,328.4 million for the forty weeks ended January 1, 2005,
compared to $1,277.6 million for the same period of 2004, with the increase primarily due to new
store openings and higher gasoline prices. Gasoline sales were $122.9 million for the forty weeks
of 2005, compared to $92.0 million for same period of 2004, and consolidated total revenues
excluding gasoline sales were $1,205.5 million and $1,185.6 million for the forty weeks of 2005 and
2004, respectively. Sales in comparable supermarkets and convenience stores increased 1.2% for the
forty weeks of 2005 to $1,210.1 million from $1,196.0 million from the same period of 2004, but
sales in comparable stores excluding gasoline declined 1.5% to $1,091.5 million from $1,107.9
million. Gross Profit

Gross profit is calculated net of promotional expenses, and warehousing and transportation,
excluding depreciation. Gross profit as a percentage of revenues may not be comparable to other
supermarket retailers because the Company does not include purchasing and advertising costs in
gross profit. Consolidated gross profit was 29.6% of revenues for the third quarter of 2005,
compared to 30.3% for the third quarter of 2004. The rate decline results from higher gasoline
sales at a profit rate significantly lower than the profit rates achieved in the Companys other
categories. Consolidated gross profit as a percentage of revenues was 29.6% for the forty weeks ended January
1, 2005, compared to 30.1% for the same weeks of 2004 with the rate decline attributable to higher
gasoline sales. 15




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##### Table of Contents



Selling, General and
Administrative

Selling, general and administrative (SG&A) expenses include store expenses, administrative and
corporate expenses, advertising and purchasing personnel costs. Consolidated SG&A expenses
increased $1.2 million for the third quarter of 2005 compared to the year earlier quarter due to
new stores. As a percentage of total revenues, SG&A expenses were 26.0% in the third quarter of
2005 compared to 26.7% for the third quarter of 2004, with 0.5% of the rate change attributable to
higher gasoline sales. Decreases in medical benefit costs and administrative and corporate expenses
partially offset higher store expenses. Wage expense in stores open both quarters, excluding
supermarket conversions to the LoBill format, decreased 0.7% due to a reduction in hours worked.
The continued refinement of store specific labor profiles accounted for the reduction in hours
worked. Consolidated SG&A expenses increased $7.1 million for the forty weeks in 2005 from the comparable
weeks in 2004 due to new stores. As a percentage of total revenues SG&A expenses decreased to 26.5%
for 2005, compared to 26.9% for 2004 due to higher gasoline sales. In stores open both periods,
wage expense for the forty weeks of 2005 declined 2.1% from the forty weeks of 2004 for the reason
cited above. Depreciation

Depreciation was $5.8 million for the third quarters of both 2005 and 2004. Depreciation as a
percentage of revenues was 1.4% for the third quarter of 2005 compared to 1.5% for the third
quarter of 2004. For the forty weeks ended January 1, 2005, depreciation was $19.4 million compared to $19.2 million
for the forty weeks in 2004. Depreciation as a percentage of revenues was 1.5% for the forty weeks
of both 2005 and 2004. Interest

Interest was $4.5 million for the third quarter of 2005, compared to $4.3 million for the third
quarter of 2004. The increase results from a higher interest rate on the revolving credit facility
combined with higher average borrowings under the credit facility. For the forty weeks ended January 1, 2005, interest was $14.5 million, compared to $14.8 million
for the forty weeks of 2004. The decline results from the repurchase of $16.75 million of the
Companys 8 7/8% senior subordinated notes during the first half of 2004, net of an increase in
interest due to higher borrowing under the revolving credit facility. Other Non-operating
Income

During the first half of 2005, the Company sold its minority interest in a real estate partnership
resulting in a gain of $0.8 million. During the first and second quarters of 2004, the Company purchased and retired $7.25 million and
$9.50 million, respectively, of its 8 7/8% senior subordinated notes at less than face value. The
purchases resulted in gains of $1.0 million during the forty weeks ended January 3, 2004. Deferred Pension and
Post-retirement Benefits

Deferred pension and post-retirement benefit obligations increased to $46.4 million at January 1,
2005, from $42.7 million at March 27, 2004. The increase is attributable to the recognition of
current year expense of the plans. 16




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##### Table of Contents



Capital
Expenditures

The Companys capital requirements have traditionally been financed through long-term borrowings
and lease financing, including capital and operating leases, and internally generated funds. During the forty weeks ended January 1, 2005, one new Marsh supermarket was opened, two Marsh
supermarkets were remodeled, one new LoBill Foods was opened, one Marsh supermarket and one OMalia
store were converted to the LoBill format and a new concept 21,000 square foot Arthurs Fresh
Market was opened. Also, construction began on one new Marsh supermarket and a second Arthurs
market that are scheduled to open during the last quarter of the year. Additionally, during the
fourth quarter of 2005, the Company plans to remodel three Marsh supermarkets. The cost of these
projects and other capital commitments is estimated to be $68 million. Of this amount, the Company
plans to fund $27 million through sale/leasebacks or build-to-suit arrangements, $13 million
through equipment leasing and the remainder from internally generated funds. Cash capital
expenditures totaled $51 million for the forty weeks ended January 1, 2005. The Companys plans with respect to store construction, expansion, conversion and remodeling are
subject to known and unknown risks and uncertainties and may be revised in light of changing
conditions, such as availability and cost of financing, competitive influences, its ability to
negotiate successfully site acquisitions or leases, zoning limitations and other governmental
regulations. The timing of projects is subject to normal construction and other delays. It is
possible that projects described above may not commence, others may be added, a portion of planned
expenditures with respect to projects commenced during the current fiscal year may carry over to
the subsequent fiscal year and the Company may use other or different financing arrangements. Liquidity and Capital
Resources

Net cash provided by operating activities for the forty weeks ended January 1, 2005, was $28.1
million, compared to $36.8 million for the year earlier period. Changes in other assets and
liabilities, primarily deferred taxes and inventory, provided $2.9 million of cash in 2005 compared
to $10.4 million in 2004. Working capital increased $14.0 million to $72.0 million from March 27,
2004. Changes in working capital included a $19.7 million
increase in cash and equivalents, of which
$15.0 million was used to reduce revolving credit facility
borrowings subsequent to January 1, 2005.
Accrued liabilities increased $4.3 million due primarily to amounts accrued that are paid
subsequent to January 1, 2005, including property taxes, vacation pay and store management
incentive compensation. The Company has a revolving credit facility that permits total borrowings of up to $82.5 million.
Amounts borrowed are for terms selected by the Company at the time of borrowing. Interest rates are
based on LIBOR or floating prime rate, and principal and interest are payable at maturity.
Commitment fees of 0.5% are paid on unused amounts and the facility matures in February 2006. The
Company had borrowings of $65.0 million under the facility at January 1, 2005. The credit facility
is secured by land and buildings having a net carrying cost of $67.9 million at January 1, 2005,
and the facility contains certain debt covenants, including limits on future indebtedness, cash
dividends, repurchases of common stock and disposition of assets. Under the most restrictive debt
covenant, the Company would have had additional permitted borrowing of $17.5 million as of January
1, 2005. In November 2004, Standard and Poors (S&P) Ratings Services placed its ratings on the Company on
CreditWatch with negative implications. S&P stated it will resolve the CreditWatch listing after
further discussions with management regarding the Companys financial plans. S&P also indicated
that the Companys B+ corporate credit rating might be lowered by one notch. The Company does not
anticipate any current material adverse effects from the downgrade, including no changes in
borrowing capacity or interest rates. 17




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Critical Accounting
Policies

The preparation of financial statements requires management to make assumptions and estimates that
could have a material impact on the reported results of operations. Although management applies its
judgment based on assumptions believed to be reasonable under the circumstances, actual results
could vary from those assumptions and it is possible that materially different amounts would be
reported using different assumptions. The Company is self-insured for most healthcare, workers compensation and general liability claims.
Reported claims and related loss reserves are estimated by third party administrators and utilized
by management to develop appropriate accruals. Claims incurred but not reported are recorded based
on historical experience and industry trends, which are regularly monitored, and accruals are
adjusted when warranted by changes in facts and circumstances. Pension and other retirement plans are administered by the Retirement Committee of the Employees
Pension Plan of Marsh Supermarkets, Inc. and Subsidiaries. An independent financial consulting firm
is engaged to advise the Retirement Committee regarding investment manager performance and
independent actuaries are consulted to assist in determining appropriate assumptions and are engaged
to calculate estimated future obligations under the various plans. Long-lived assets are depreciated over estimated useful lives based on the Companys historical
experience and prevailing industry practice. Estimated useful lives are periodically reviewed to
ensure they remain appropriate. Long-lived assets are tested for impairment whenever an event
occurs that indicates an impairment may exist. Income tax assets and liabilities are recognized generally based upon tax statutes, regulations and
case law, but also include estimates. The estimated amounts are reviewed periodically and adjusted
based upon factual changes and the related impact on managements judgment. The Company receives allowances and credits from many of the vendors whose products the Company
purchases for resale. Allowances related to a specific purchase quantity are recorded as a
component of item cost inventory and recognized in merchandise costs when the item is sold. Other
allowances include consideration received for new item introduction, item shelf placement and
temporary retail price reduction. Due to system constraints and the nature of certain of these
allowances, it is sometimes not practicable to apply allowances to the item cost of inventory. In
those instances, the allowances are applied as a reduction of merchandise costs using a systematic
and rational methodology, which results in the recognition of these incentives when the related
merchandise is sold. Notes and accounts receivable are reviewed for collectibility on a regular and periodic basis.
Valuation allowances are adjusted for small recurring type transactions based on past experience,
while large notes and amounts receivable are reviewed and adjusted on a specific transaction basis. In light of recent industry communications, including a February 7, 2005, letter from the Chief
Accountant of the Securities and Exchange Commission to the Chairman, Center for Public Company
Audit Firms, the Company is reviewing certain aspects of its accounting for leases and leasehold
improvements to determine whether certain changes in its accounting that may accelerate the
recognition of rent and depreciation expenses are required by GAAP. The Company is discussing these
matters with its independent auditors and has not reached a conclusion regarding whether a change
is required or the amount of any such change. Based on a preliminary analysis, the Company believes
that any adjustments that may result from its review would not affect cash flows and would not be
material to its financial condition. The Company expects to complete its review during its fourth
quarter ending April 2, 2005. 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,
many of which are beyond the Companys control. The forward-looking statements and the Companys
future results, liquidity and capital resources are subject to risks and uncertainties including,
but not limited to, the following: the entry of new competitive stores and their impact on the
Company; the Companys ability to improve comparable store sales; the level of discounting and
promotional spending by competitors; the stability and timing of distribution incentives from
suppliers; the level of margins achievable in the Companys operating divisions; softness in the
local and national economies and the general retail food industry; the success of the Companys new
and remodeled stores, including image and rebranding programs; potential interest rate increases on
variable rate debt, as well as terms, costs and the availability of capital; the Companys ability
to control employee medical costs; uncertainties regarding future real estate gains due to limited
real estate holdings available for sale; the ability of the Company to predict and respond to
changes in customer preferences and lifestyles; the ability of the Company to respond to commodity
price fluctuations; uncertainties regarding gasoline prices and margins; 18




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the Companys ability to control costs including labor, rent, credit card, and workers compensation
and general liability expense; the Companys ability to implement cost improvement initiatives;
uncertainties related to state and federal taxation and tobacco and environmental legislation; the
Companys ability to collect outstanding notes and accounts receivable; uncertainties associated
with pension and other retirement obligations; the successful economic implementation of new
technology; uncertainties related to the outcome of pending litigation; uncertainties regarding the outcome of the Companys review of certain aspects of lease and
leasehold accounting; the impact of any
acquisitions and dispositions; the timely and on budget completion of store construction,
expansion, conversion and remodeling; and other known and unknown risks and uncertainties. The
Company undertakes no obligation to update or revise any forward-looking statements to reflect
subsequent events or circumstances. 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company, as a policy, does not engage in significant speculative or derivative transactions,
nor does it hold or issue financial instruments for trading purposes. The Company is exposed to
changes in interest rates primarily as a result of its borrowing activities. Based on interest
rates at January 1, 2005, a one percent change in interest rates would not have had a material
impact on the Company. 
 Item 4. Controls and Procedures Evaluation of Disclosure
Controls and Procedures

The Chief Executive Officer and the Chief Financial Officer carried out an evaluation of the
effectiveness of the Companys disclosure controls and procedures (as defined in the Securities
Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this
report. Based on that evaluation, these officers have concluded that as of the end of the period
covered by this report, the Companys disclosure controls and procedures were effective and
designed to ensure that material information relating to the Company would be made known to them by
others within the Company on a timely basis. Internal Control over
Financial Reporting

There was no change in the Companys internal control over financial reporting during the quarter
ended January 1, 2005, that materially affected, or is reasonably likely to materially affect, the
Companys internal control over financial reporting. 19




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##### Table of Contents



Part II Other Information 
 Item 1. Legal Proceedings Not Applicable. 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds In July 1994, the Board of Directors announced a plan for the repurchase of its Class A Common
Stock and/or Class B Common Stock. The amount originally authorized has been subsequently amended,
most recently to $18.0 million. Share repurchases during the twelve weeks ended January 1, 2005,
were as follows: Class A shares
    
    
    Class B sharesAverage
    
    
    
    
    
    
    AverageBegin
    
    End
    
    
    Number
    
    
    price
    
    
    Number
    
    
    price10/10/04
    
    
    11/09/04
    
    
    
    
    
    
    
    
    
    
    
    400
    
    
    
    11.3711/10/04
    
    
    12/09/04
    
    
    
    
    
    
    
    
    
    
    
    2,500
    
    
    
    11.6012/10/04
    
    
    01/01/05
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,900
    
    
    
    11.57
 All of the share purchases during the twelve weeks ended January 1, 2005, were made under the
plan. At January 1, 2005, the maximum amount that may yet be purchased under the plan was $0.9
million. The plan does not have a specified termination date. 
 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 The following exhibits are included herein:  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. 20




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SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MARSH SUPERMARKETS, INC.February 15, 2005
    
    By:
    
    /s/ Douglas W. DoughertyDouglas W. Dougherty
Senior Vice President, Chief Financial Officer
and TreasurerFebruary 15, 2005
    
    By:
    
    /s/ Mark A. VarnerMark A. Varner
Chief Accounting Officer,
Vice President  Corporate Controller
 21