##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 21, 2003

Commission File Number 0-1532

MARSH SUPERMARKETS, INC.

(Exact name of registrant as specified in its charter)


INDIANA
    
    35-0918179(State or other jurisdiction of
    
    (IRS Employerincorporation or organization)
    
    Identification No.)


9800 CROSSPOINT BOULEVARD

INDIANAPOLIS, INDIANA
    
    46256-3350(Address of principal executive offices)
    
    (Zip Code)


(317) 594-2100
(Registrants telephone number, including area code)

Registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding twelve months
and (2) has been subject to such filing requirements for at least the past 90
days.

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes  o     No  x

Number of shares outstanding of each class of the registrants common
stock as of July 18, 2003:

Class A Common Stock
    
    3,817,138 sharesClass B Common Stock
    
    4,132,896 shares7,950,034 shares






---

TABLE OF CONTENTS



|                                                     |  |  |  |  |  |  |  | 
|---------------------------------------------------- |  |  |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION                      
|CONDENSED CONSOLIDATED STATEMENTS OF INCOME         
|CONDENSED CONSOLIDATED BALANCE SHEETS               
|CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS     
|NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|PART II  OTHER INFORMATION                         
|SIGNATURES                                          
|EX-31.1 CEO CERTIFICATION                           
|EX-31.2 CFO CERTIFICATION                           
|EX-32.1 CEO SARBANES 906 CERTIFICATION              
|EX-32.2 CFO SARBANES 906 CERTIFICATION              



---



##### Table of Contents






PART I  FINANCIAL INFORMATION

Item 1.  Financial Statements




MARSH SUPERMARKETS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per share amounts)
(Unaudited)

12 Weeks EndedJune 21,
    
    June 22,2003
    
    2002Sales and other revenues
    
    $
    378,010
    
    
    $
    383,495Gains from sales of property
    
    
    
    
    
    
    1,671Total revenues
    
    
    378,010
    
    
    
    385,166Cost of merchandise sold, including
warehousing and transportation
    
    
    264,757
    
    
    
    266,231Gross profit
    
    
    113,253
    
    
    
    118,935Selling, general and administrative
    
    
    102,119
    
    
    
    102,914Depreciation
    
    
    5,762
    
    
    
    5,590Operating income
    
    
    5,372
    
    
    
    10,431Interest
    
    
    4,570
    
    
    
    5,423Other non-operating expense (income)
    
    
    (634
    )
    
    
    Income from continuing operations
before income taxes
    
    
    1,436
    
    
    
    5,008Income taxes
    
    
    623
    
    
    
    1,847Income from continuing operations
    
    
    813
    
    
    
    3,161Loss on disposal of discontinued operation, net of tax
    
    
    
    
    
    
    (181
    )Net income
    
    $
    813
    
    
    $
    2,980Basic earnings per common share:Continuing operations
    
    $
    .10
    
    
    $
    .40Loss on disposal of discontinued operation
    
    
    
    
    
    
    (.02
    )Net income
    
    $
    .10
    
    
    $
    .38Diluted earnings per common share:Continuing operations
    
    $
    .10
    
    
    $
    .35Loss on disposal of discontinued operation
    
    
    
    
    
    
    (.02
    )Net income
    
    $
    .10
    
    
    $
    .33Dividends per share
    
    $
    .13
    
    
    $
    .11


See notes to condensed consolidated financial statements.

2



---



##### Table of Contents






MARSH SUPERMARKETS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

June 21,
    
    March 29,
    
    June 22,2003
    
    2003
    
    2002(Unaudited)
    
    (Note A)
    
    (Unaudited)AssetsCurrent assets:Cash and equivalents
    
    $
    25,947
    
    
    $
    28,313
    
    
    $
    30,686Accounts receivable
    
    
    28,704
    
    
    
    27,203
    
    
    
    38,334Inventories
    
    
    130,797
    
    
    
    135,855
    
    
    
    132,417Prepaid expenses
    
    
    4,019
    
    
    
    5,731
    
    
    
    7,013Total current assets
    
    
    189,467
    
    
    
    197,102
    
    
    
    208,450Property and equipment, less allowances for depreciation
    
    
    311,417
    
    
    
    311,469
    
    
    
    313,554Other assets
    
    
    44,998
    
    
    
    46,309
    
    
    
    48,758$
    545,882
    
    
    $
    554,880
    
    
    $
    570,762Liabilities and Shareholders EquityCurrent liabilities:Notes payable to bank
    
    $
    
    
    
    $
    1,700
    
    
    $
    Accounts payable
    
    
    70,842
    
    
    
    71,883
    
    
    
    71,752Accrued liabilities
    
    
    49,287
    
    
    
    49,665
    
    
    
    49,553Current maturities of long-term liabilities
    
    
    3,177
    
    
    
    3,452
    
    
    
    3,243Total current liabilities
    
    
    123,306
    
    
    
    126,700
    
    
    
    124,548Long-term liabilities:Long-term debt
    
    
    191,312
    
    
    
    198,148
    
    
    
    221,168Capital lease obligations
    
    
    28,787
    
    
    
    29,009
    
    
    
    29,704Total long-term liabilities
    
    
    220,099
    
    
    
    227,157
    
    
    
    250,872Deferred items:Income taxes
    
    
    11,526
    
    
    
    11,525
    
    
    
    16,543Pension and post-retirement benefits
    
    
    41,684
    
    
    
    40,824
    
    
    
    22,002Other
    
    
    18,010
    
    
    
    17,226
    
    
    
    13,822Total deferred items
    
    
    71,220
    
    
    
    69,575
    
    
    
    52,367Shareholders Equity:Common stock, Classes A and B
    
    
    26,443
    
    
    
    26,439
    
    
    
    26,407Retained earnings
    
    
    135,331
    
    
    
    135,550
    
    
    
    137,640Cost of common stock in treasury
    
    
    (14,917
    )
    
    
    (14,928
    )
    
    
    (14,419
    )Deferred cost  restricted stock
    
    
    (39
    )
    
    
    (54
    )
    
    
    (280
    )Notes receivable  stock options
    
    
    (177
    )
    
    
    (175
    )
    
    
    (1,049
    )Accumulated other comprehensive loss
    
    
    (15,384
    )
    
    
    (15,384
    )
    
    
    (5,324
    )Total shareholders equity
    
    
    131,257
    
    
    
    131,448
    
    
    
    142,975$
    545,882
    
    
    $
    554,880
    
    
    $
    570,762


See notes to condensed consolidated financial statements.

3



---



##### Table of Contents






MARSH SUPERMARKETS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)

12 Weeks EndedJune 21,
    
    June 22,2003
    
    2002Operating activitiesNet income
    
    $
    813
    
    
    $
    2,980Adjustments to reconcile net income to net
cash provided by operating activities:Depreciation
    
    
    5,762
    
    
    
    5,590Amortization of other assets
    
    
    297
    
    
    
    534Changes in operating assets and liabilities
    
    
    6,100
    
    
    
    (110
    )Other operating activities
    
    
    1,629
    
    
    
    (1,128
    )Net cash provided by operating activities
    
    
    14,601
    
    
    
    7,866Investing activitiesNet acquisition of property, equipment and land
    
    
    (6,154
    )
    
    
    (13,045
    )Other investing activities
    
    
    (727
    )
    
    
    462Net cash used for investing activities
    
    
    (6,881
    )
    
    
    (12,583
    )Financing activitiesRepayments of short-term borrowings
    
    
    (1,700
    )
    
    
    (1,300
    )Proceeds of long-term borrowings
    
    
    5,000
    
    
    
    Proceeds of sale/leasebacks
    
    
    
    
    
    
    16,477Payments of long-term debt and capital leases
    
    
    (12,333
    )
    
    
    (16,506
    )Cash dividends paid
    
    
    (1,034
    )
    
    
    (878
    )Other financing activities
    
    
    (19
    )
    
    
    94Net cash used for financing activities
    
    
    (10,086
    )
    
    
    (2,113
    )Net decrease in cash and equivalents
    
    
    (2,366
    )
    
    
    (6,830
    )Cash and equivalents at beginning of period
    
    
    28,313
    
    
    
    37,516Cash and equivalents at end of period
    
    $
    25,947
    
    
    $
    30,686


See notes to condensed consolidated financial statements.

4



---



##### Table of Contents






MARSH SUPERMARKETS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands except per share amounts, or as otherwise noted)

June 21, 2003

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 29, 2003. The balance sheet at March 29, 2003, 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 2004 and 2003 relate to the fiscal
years ending March 27, 2004 and March 29, 2003, respectively.

The condensed consolidated financial statements for the twelve-week periods
ended June 21, 2003 and
June 22, 2002, 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 week period ended June 21, 2003, are not
necessarily indicative of the results that may be expected for the full fiscal
year ending March 27, 2004.

Note B  Discontinued Operation

In October 2001, the Company sold certain assets of its
wholesale division. The loss on disposal of discontinued operation reported in
the condensed consolidated statements of income relates primarily to
adjustments to accounts receivable of that division. The remaining assets and liabilities from the
discontinued operation included in the condensed consolidated balance sheet at
June 21, 2003, are not material.

5



---



##### Table of Contents



Note C  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 share:

12 Weeks EndedJune 21,
    
    June 22,2003
    
    2002Income from continuing operations
    
    $
    813
    
    
    $
    3,161Loss on disposal of discontinued operation
    
    
    
    
    
    
    (181
    )Numerator for basic earnings per share
    
    
    813
    
    
    
    2,980Effect of convertible debentures
    
    
    
    
    
    
    202Numerator for diluted earnings per share 
income after assumed conversions
    
    $
    813
    
    
    $
    3,182Weighted average shares outstanding
    
    
    7,949
    
    
    
    7,977Non-vested restricted shares
    
    
    (6
    )
    
    
    (27
    )Denominator for basic earnings per share
    
    
    7,943
    
    
    
    7,950Effect of dilutive securities:Non-vested restricted shares
    
    
    6
    
    
    
    27Stock options
    
    
    61
    
    
    
    267Convertible debentures
    
    
    
    
    
    
    1,284Denominator
for diluted earnings per share 
adjusted weighted average shares
    
    
    8,010
    
    
    
    9,528


Note D  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 EndedJune 21,
    
    June 22,2003
    
    2002Net income, as reported
    
    $
    813
    
    
    $
    2,980Plus
compensation expense reflected in net income
    
    
    7
    
    
    
    28Less compensation expense using
the fair value method, net of tax
    
    
    215
    
    
    
    274Pro-forma net income
    
    $
    605
    
    
    $
    2,734Earnings per share, as reported:Basic
    
    $
    .10
    
    
    $
    .38Diluted
    
    
    .10
    
    
    
    .33Pro-forma earnings per share:Basic
    
    
    .08
    
    
    
    .34Diluted
    
    
    .08
    
    
    
    .31


6



---



##### Table of Contents



Note E  Long-Term Debt and Guarantor Subsidiaries

Other than three inconsequential subsidiaries, all of the Companys
subsidiaries (the guarantors) have guaranteed on a joint and several basis
the Companys obligations under the 8 7/8% senior subordinated notes. The
guarantors are 100% wholly owned subsidiaries of the Company. The Company has
not presented separate financial statements and other disclosures concerning
each guarantor because management has determined that such information is not
material to investors.

Summarized combined financial information for the guarantors is set forth
below:

June 21,
    
    March 29,
    
    June 22,2003
    
    2003
    
    2002Current assets
    
    $
    189,461
    
    
    $
    197,102
    
    
    $
    208,450Current liabilities
    
    
    112,147
    
    
    
    119,351
    
    
    
    118,685Noncurrent assets
    
    
    313,639
    
    
    
    312,831
    
    
    
    321,779Noncurrent liabilities
    
    
    159,065
    
    
    
    154,378
    
    
    
    119,134


12 Weeks EndedJune 21,
    
    June 22,2003
    
    2002Total revenues
    
    $
    378,008
    

    
    $
    385,154Gross profit
    
    
    113,251
    
    
    
    118,923Net income
    
    
    2,654
    
    
    
    6,089


Note F  Recent Accounting Pronouncements

In April 2002, the FASB issued Statement No. 145 (FAS 145), Rescission of FASB
Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical
Corrections. Certain provisions of FAS 145 were effective for the Company in
fiscal year 2003. The remaining provisions became effective for the Companys
current fiscal year and had no effect on the Companys results of operations or
financial position for the current quarter.

In January 2003, the FASB issued FIN 46, Consolidation of Variable Interest
Entities which was effective for new entities created after January 31, 2003
and for interim periods beginning after June 15, 2003 for variable interest
entities created or acquired before February 1, 2003. The interpretation had no
effect on the Companys results of operations or financial position for the
current quarter and is not expected to have an effect on the Companys fiscal
year financial statements.

7



---



##### Table of Contents



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

Cautionary Note Regarding Forward-Looking Statements

This report includes certain forward-looking statements (statements other than
those made solely with respect to historical fact). Actual results could differ
materially and adversely from those contemplated by the forward-looking
statements due to known and unknown risks and uncertainties, 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; softness in the local and
national economies and the general retail food industry; the level of
discounting and promotional spending by competitors; the Companys ability to
implement its improvement initiatives; the ability of the Company to predict
and respond to changes in customer preferences and lifestyles; food price
deflation; uncertainties regarding future real estate gains due to limited real
estate holdings available for sale; stability and timing of distribution
incentives from suppliers; the Companys ability to control costs including
labor, medical, rent, credit card, and workers compensation and general
liability expense; the impact of any acquisitions and dispositions; the level
of margins achievable in the Companys operating divisions; uncertainties
regarding gasoline prices and margins; the success of the Companys new and
remodeled stores, including image and rebranding programs; the successful
economic implementation of new technology; uncertainties associated with
pension and other retirement obligations; uncertainties related to state and
federal taxation and tobacco and environmental legislation; the successful
integration of acquisitions; potential interest rate increases on variable rate
debt, as well as terms, costs and availability of capital; the timely and on budget completion of store construction, expansion,
conversion and remodeling; the ability to complete share repurchases, 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.

General

At June 21, 2003, Marsh Supermarkets, Inc. (the Company or Marsh) operated
through wholly-owned subsidiaries 111 supermarkets and 167 Village Pantry
convenience stores in central Indiana and western Ohio. The Company believes
that Marsh supermarkets has 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 a food services division, which provides upscale catering, vending,
coffee roasting, concession and business cafeteria management services, and a
floral division, which operates six upscale retail floral shops under the name
of McNamara and one business florist under the name Enflora.

Results of Operations

Results of operations for interim periods do not necessarily reflect the
results that may be expected for the fiscal year.

The following table sets forth certain income statement components, expressed
as a percentage of total revenues, and the percentage change in such
components:

First QuarterPercentage of RevenuesPercentage2004
    
    2003
    
    ChangeTotal revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    (1.9
    )%Gross profit
    
    
    30.0
    %
    
    
    30.9
    %
    
    
    (4.8
    )%Selling, general and administrative
    
    
    27.0
    %
    
    
    26.7
    %
    
    
    (0.8
    )%Depreciation
    
    
    1.5
    %
    
    
    1.5
    %
    
    
    3.1
    %Operating income
    
    
    1.4
    %
    
    
    2.7
    %
    
    
    (48.5
    )%Interest
    
    
    1.2
    %
    
    
    1.4
    %
    
    
    (15.7
    )%Other non-operating income
    
    
    0.2
    %
    
    
    
    
    
    
    Income taxes
    
    
    0.2
    %
    
    
    0.5
    %
    
    
    (66.3
    )%Income from continuing operations
    
    
    0.2
    %
    
    
    0.8
    %
    
    
    (74.3
    )%


8



---



##### Table of Contents



Total Revenues

In the first quarter of 2004, consolidated total revenues were $378.0 million,
compared to $385.2 million in the first quarter of 2003. Supermarket revenues
declined $7.8 million, Crystal Food Service revenues increased $2.3 million,
Village Pantry revenues increased $0.5 million and gains from sales of property
decreased $1.7 million. Retail sales, excluding fuel sales, decreased 2.4%.
Sales in comparable supermarkets and convenience stores, including replacement
stores and format conversions, but excluding fuel, decreased 2.7% from the
first quarter of 2003. The decline in comparable store sales continues to
result from new supermarket square footage and increased competitive
promotional levels, a weak economy and food price deflation. Although results
may vary from period to period, future gains from sales of property are not
expected to equal or exceed historic levels due to the limited real estate
holdings available for sale in the normal course of business, which could
materially adversely affect the Companys results of operations.

Gross Profit

Gross profit is calculated net of warehousing, transportation, and promotional
expenses. In the first quarter of 2004, consolidated gross profit decreased
$5.7 million, or 4.8%, from the first quarter of 2003 to $113.3 million.
Consolidated gross profit as a percentage of total revenues was 30.0% in the
first quarter of 2004 compared to 30.9% for the first quarter of 2003.
Fuel sales and gross profit accounted for 0.6% of the percentage decrease and the decline in gains from
sales of property accounted for 0.3% of the percentage decrease.

Selling, General and Administrative Expenses

In the first quarter of 2004, consolidated selling, general and administrative
(SG&A) expenses were $102.1 million compared to $102.9 million for the first
quarter of 2003. As a percentage of revenues, SG&A expenses were 27.0% in the
first quarter of 2004 compared to 26.7% in the first quarter of 2003. The
increased percentage was partially due to the decline in sales reducing
leverage against fixed costs. Wage expense in stores open both quarters,
excluding replacement stores and supermarket conversions to the LoBill format,
decreased 4.6% primarily reflecting the same store sales decline and continued
efforts on labor efficiency and scheduling. In the first quarter of 2004, wage
and other variable costs savings were largely offset by increased building and
equipment repairs, employee fringe benefits and credit card processing fees.

Depreciation

Depreciation expense for the first quarter of 2004 was $5.8 million, compared
to $5.6 million for the first quarter of 2003. Depreciation expense as a
percentage of revenues was 1.5% for the first quarter of both 2004 and 2003.

Operating Income

Operating income (income from continuing operations before interest and taxes)
was $5.4 million for the first quarter of 2004 compared to $10.4 million for
the first quarter of 2003 due primarily to the decline in gross profit.
Operating income as a percentage of revenues was 1.4% for the first quarter of
2004 compared to 2.7% for the first quarter of 2003.

Interest Expense

Interest expense for the first quarter of 2004 was $4.6 million, compared to
$5.4 million for the first quarter of 2003 and as a percentage of total
revenues was 1.2% for the first quarter of 2004 compared to 1.4% for the first
quarter of 2003. The decline in interest expense resulted from the retirement of
the Companys 7% convertible debentures and a portion of the Companys 8 7/8%
senior subordinated notes subsequent to the first quarter of 2003.

Income Taxes

The effective income tax rate was 43.4% for the first quarter of 2004 compared
to 36.9% for the year earlier quarter. The first quarter effective rate is
based on the overall expected rate for 2004. The increase in the effective rate for 2004 was due primarily to the decline in pretax income.

9



---



##### Table of Contents



Income from Continuing Operations

Income from continuing operations for the first quarter of 2004 was $0.8
million, compared to $3.2 million for the first quarter of 2003. Income from
continuing operations as a percentage of total revenues was 0.2% for the first
quarter of 2004 compared to 0.8% for the first quarter of 2003.

Discontinued Operation

During fiscal year 2002, the Company sold certain assets of its wholesale
division. and reported a gain from the disposal. In the first quarter of 2003,
the reported gain was decreased by $0.2 million, after tax benefit, primarily
for an increase in provision for doubtful accounts.

Deferred Pension and Post-retirement Benefits

Deferred pension and post-retirement benefit obligations increased to $41.7
million at June 21, 2003, from $22.0 million at June 22, 2002. The defined
benefit pension plan liability increased $13.8 million due to a
decline in the interest rate used for actuarial valuation of the
benefit obligation and a decline in the market value of assets held by the plan; the plan was frozen in 1997. The liability for an
unfunded supplemental executive retirement plan increased $5.3 million over the
same period due primarily to a decrease in the interest rate used for
actuarial valuation of the benefit obligation.

Other Deferred Items

Other deferred items increased to $18.0 million at June 21, 2003, from $13.8
million at June 22, 2002, due to the deferral of gains on stores sold and
leased back subsequent to June 22, 2002.

Capital Expenditures

The Companys capital requirements have traditionally been financed through
internally generated funds, long-term borrowings and lease financing, including
capital and operating leases.

During the first quarter of 2004, one Marsh supermarket remodel was completed,
one Marsh supermarket was converted to the LoBill format and construction began
on a new Marsh supermarket. Additionally in 2004, the Company plans to
construct a second Marsh supermarket and one new LoBill Foods, remodel four or
five supermarkets, continue the convenience store re-imaging program begun in
the previous year and upgrade certain information systems. The cost of these
projects and other capital commitments is estimated to be $40 million. Of this
amount, the Company plans to fund $20 million through sale/leasebacks, $10
million through equipment leasing and believes it can finance the balance with
internally generated funds. As of June 21, 2003, the Company had expended $6.2
million for capital improvements.

The Companys plans with respect to store financing, 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
competitive influences, cost and availability of capital, its ability to
successfully negotiate 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 in the first quarter of 2004 was
$14.6 million, compared to $7.9 million in the first quarter of 2003. In the
first quarter of 2004, net cash provided by operating activities increased
primarily due to a decrease in inventory and a smaller decrease in accounts
payable and accrued expenses than in the first quarter of 2003. Working capital
at June 21, 2003 decreased $4.2 million to $66.2 million from March 29, 2003.
Changes in working capital included a $2.4 million decrease in cash and
equivalents, a $1.5 million increase in accounts receivable, a $5.1 million
decrease in inventory, a $1.7 million decrease in prepaid expenses, a $1.7
million decrease in notes payable to bank and a $1.4 million decrease in accounts
payable and accrued expenses.

10



---



##### Table of Contents



The Company has a revolving credit facility that permits total borrowings of up
to $95.0 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 $44.0 million under the facility at June 21, 2003. The credit
facility is secured by land and buildings having a net carrying cost of $49.6
million at June 21, 2003 and the facility contains certain debt covenants,
including limits on future indebtedness, such as limitations on the
ratio of long-term debt to EBITDA and on fixed charge coverage, 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 $22.2 million as of
June 21, 2003.

The Company also has a bank commitment that provides $3.0 million in short-term
borrowing, at rates based upon the then prevailing federal funds rate, none of
which was utilized at June 21, 2003.

During the quarter ended June 21, 2003 the Company purchased and retired $9.5
million of its 8 7/8% senior subordinated notes at 91.625% of face value. The
purchase resulted in a gain of $0.6 million. The balance of senior subordinated
notes outstanding at June 21, 2003 was $110.0 million.

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 claims, workers compensation
claims, and general liability and automotive liability losses. Reported claims
and related loss reserves are estimated by third party administrators. Claims
incurred but not reported are recorded based on historical experience and
industry trends, which are continually monitored, and accruals are adjusted
when warranted by changes in facts and circumstances.

Pension and other retirement benefits are evaluated with the oversight of the
Companys retirement committee. Outside actuaries are consulted to determine
appropriate assumptions and are engaged to calculate estimated future
obligations. In 1997, the Company froze benefit accruals under its qualified
defined benefit pension plan.

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.

11



---



##### Table of Contents



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 June 21,
2003, a 100 basis point change in interest rates would not have had a material
impact on the Company.

Item 4.  Disclosure Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Chief Executive Officer and 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 (the
Evaluation Date). Based on that evaluation, these officers have concluded
that as of the Evaluation Date, the Companys disclosure controls and
procedures were adequate and designed to ensure that material information
relating to the Company would be made known to them by others within the
Company.

12



---



##### Table of Contents






PART II  OTHER INFORMATION

Item 1.  Legal Proceedings

Not Applicable.

Item 2.  Changes in Securities and Use of Proceeds

Not Applicable.

Item 3.  Defaults upon Senior Securities

Not Applicable.

Item 4.  Submission of Matters to a Vote of Security Holders

Not Applicable.

Item 5.  Other Information

Not Applicable.

Item 6.  Exhibits and Reports on Form 8-K



| | (a) |  | The following exhibits are included herein:
| | --- |  | -------------------------------------------



| |  |  | 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.
| |  |  | --------------------------------------------------------



| | (b) |  | Reports on Form 8-K
| | --- |  | -------------------



| |  |  | Current Reports on Form 8-K furnished to the SEC on June 9, 2003  Item 12
Results of Operations and Financial Condition from the
Companys Annual Report to Shareholders for the fiscal year
ended March 29, 2003.
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Notwithstanding the foregoing, information furnished under Item 12 of our
Current Report on Form 8-K, including the related exhibits, is not incorporated
by reference into this quarterly report on Form 10-Q.
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

13



---



##### Table of Contents






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, INCAugust 4, 2003
    
    By:
    
    /s/ Douglas W. DoughertyDouglas W. Dougherty
Senior Vice President, Chief Financial Officer
and TreasurerAugust 4, 2003
    
    By:
    
    /s/ Mark A. VarnerMark A. Varner
Chief Accounting Officer
Vice President  Corporate Controller


14