##### 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 October 13, 2001

Commission File Number 0-1532

MARSH SUPERMARKETS, INC.
(Exact name of registrant as specified in its charter)

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

Number of shares outstanding of each class of the registrants common
stock as of October 29, 2001:

|                       |  |  |           |        |  |  |  | 
|---------------------- |  |  | --------- | ------ |  |  |  | 
|Class A Common Stock - |  |  | 3,873,508 | shares
|                      
|                      
|                      
|                      
|Class B Common Stock - |  |  | 4,138,242 | shares
|                       |  |  |           |        |  |  |  | 
|                       |  |  | 8,011,750 | shares
|                       |  |  |           |        |  |  |  | 





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TABLE OF CONTENTS



|                             |                                                                                               |                                                      |  |  |  |  |  | 
|---------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------------------- |  |  |  |  |  | 
|PART I FINANCIAL INFORMATION
|                             | Item 1. Financial Statements                                                                 
|                             |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF INCOME         
|                             |                                                                                               | CONDENSED CONSOLIDATED BALANCE SHEETS               
|                             |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                             |                                                                                               | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|                             | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|Part II Other Information   
|                             | Item 1. Legal Proceedings                                                                    
|                             | Item 2. Changes in Securities                                                                
|                             | Item 3. Defaults upon Senior Securities or Rights of Holders Thereof                         
|                             | Item 4. Submission of Matters to a Vote of Security Holders                                  
|                             | Item 5. Other Information                                                                    
|                             | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                  



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##### 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)

|                                                                   |                                           |   |                |        |                |   |             |     |             |   |         |       |   |   |         |       | 
|------------------------------------------------------------------ | ----------------------------------------- | - | -------------- | ------ | -------------- | - | ----------- | --- | ----------- | - | ------- | ----- | - | - | ------- | ----- | 
|                                                                   |                                           |   | 16 Weeks Ended |        | 28 Weeks Ended
|                                                                   |                                           |   |                |        |               
|                                                                   |                                           |   | October 13,    |        | October 14,    |   | October 13, |     | October 14,
|                                                                   |                                           |   | 2001           |        | 2000           |   | 2001        |     | 2000       
|                                                                   |                                           |   |                |        |                |   |             |     |            
|                                                                   |                                           |  
|Sales and other revenues                                           |                                           | $ | 508,230        |        |                | $ | 478,027     |     |             | $ | 883,481 |       |   | $ | 820,180 |      
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Cost of merchandise sold, including
warehousing and transportation |                                           |   | 358,099        |        |                |   | 335,259     |     |             |   | 620,766 |       |   |   | 573,503 |      
|                                                                   |                                           |   |                |        |                |   |             |     |             |   |         |       |   |   |         |      
|Gross profit                                                       |                                           |   | 150,131        |        |                |   | 142,768     |     |             |   | 262,715 |       |   |   | 246,677 |      
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Selling, general and administrative                                |                                           |   | 133,488        |        |                |   | 125,047     |     |             |   | 230,743 |       |   |   | 213,391 |      
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Depreciation                                                       |                                           |   | 6,941          |        |                |   | 8,281       |     |             |   | 11,697  |       |   |   | 14,202  |      
|                                                                   |                                           |   |                |        |                |   |             |     |             |   |         |       |   |   |         |      
|Operating income                                                   |                                           |   | 9,702          |        |                |   | 9,440       |     |             |   | 20,275  |       |   |   | 19,084  |      
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Interest                                                           |                                           |   | 6,712          |        |                |   | 7,360       |     |             |   | 11,785  |       |   |   | 12,752  |      
|                                                                   |                                           |   |                |        |                |   |             |     |             |   |         |       |   |   |         |      
|Income from continuing operations
before income taxes              |                                           |   | 2,990          |        |                |   | 2,080       |     |             |   | 8,490   |       |   |   | 6,332   |      
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Income taxes                                                       |                                           |   | 941            |        |                |   | 683         |     |             |   | 2,793   |       |   |   | 2,074   |      
|                                                                   |                                           |   |                |        |                |   |             |     |             |   |         |       |   |   |         |      
|Income from continuing operations                                  |                                           |   | 2,049          |        |                |   | 1,397       |     |             |   | 5,697   |       |   |   | 4,258   |      
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Discontinued operation:                                            |                                           |   |                |        |                |   |             |     |             |   |         |       |   |   |         |      
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Income (loss) from operations, net of tax |   |                | (1,122 | )              |   |             | 742 |             |   |         | (859  | ) |   |         | 1,358 | 
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Gain on disposal, net of tax              |   |                | 3,275  |                |   |             |    |             |   |         | 3,275 |   |   |         |      | 
|                                                                   |                                           |   |                |        |                |   |             |     |             |   |         |       |   |   |         |      
|Net income                                                         |                                           | $ | 4,202          |        |                | $ | 2,139       |     |             | $ | 8,113   |       |   | $ | 5,616   |      
|                                                                   |                                           |   |                |        |                |   |             |     |             |   |         |       |   |   |         |      
|Basic earnings per common share:                                   |                                           |   |                |        |                |   |             |     |             |   |         |       |   |   |         |      
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Continuing operations                                              |                                           | $ | .26            |        |                | $ | .17         |     |             | $ | .72     |       |   | $ | .52     |      
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Discontinued operation                                             |                                           |   | (.14           | )      |                |   | .09         |     |             |   | (.11    | )     |   |   | .16     |      
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Gain on disposal of discontinued operation                         |                                           |   | .41            |        |                |   |            |     |             |   | .41     |       |   |   |        |      
|                                                                   |                                           |   |                |        |                |   |             |     |             |   |         |       |   |   |         |      
|Net income                                                         |                                           | $ | .53            |        |                | $ | .26         |     |             | $ | 1.02    |       |   | $ | .68     |      
|                                                                   |                                           |   |                |        |                |   |             |     |             |   |         |       |   |   |         |      
|Diluted earnings per common share:                                 |                                           |   |                |        |                |   |             |     |             |   |         |       |   |   |         |      
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Continuing operations                                              |                                           | $ | .25            |        |                | $ | .16         |     |             | $ | .65     |       |   | $ | .49     |      
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Discontinued operation                                             |                                           |   | (.12           | )      |                |   | .09         |     |             |   | (.09    | )     |   |   | .14     |      
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Gain on disposal of discontinued operation                         |                                           |   | .35            |        |                |   |            |     |             |   | .35     |       |   |   |        |      
|                                                                   |                                           |   |                |        |                |   |             |     |             |   |         |       |   |   |         |      
|Net income                                                         |                                           | $ | .48            |        |                | $ | .25         |     |             | $ | .91     |       |   | $ | .63     |      
|                                                                   |                                           |   |                |        |                |   |             |     |             |   |         |       |   |   |         |      
|Dividends per share                                                |                                           | $ | .11            |        |                | $ | .11         |     |             | $ | .22     |       |   | $ | .22     |      
|                                                                   |                                           |   |                |        |                |   |             |     |             |   |         |       |   |   |         |      

See notes to condensed consolidated financial statements.

2



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##### Table of Contents






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

|                                                         |                                                                                                               |   |                      |                             |   |             |         |           |   |             |         |         |   |         |         | 
|-------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------- | - | -------------------- | --------------------------- | - | ----------- | ------- | --------- | - | ----------- | ------- | ------- | - | ------- | ------- | 
|                                                         |                                                                                                               |   |                      |                             |   | October 13, |         | March 31, |   | October 14,
|                                                         |                                                                                                               |   |                      |                             |   | 2001        |         | 2001      |   | 2000       
|                                                         |                                                                                                               |   |                      |                             |   |             |         |           |   |            
|                                                         |                                                                                                               |   |                      |                             |   | (Unaudited) |         | (Note A)  |   | (Unaudited)
|Assets                                                   |                                                                                                               |   |                      |                             |   |             |         |           |   |             |         |        
|Current assets:                                          |                                                                                                               |   |                      |                             |   |             |         |           |   |             |         |        
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Cash and equivalents                                                                                          |   | $                    | 30,807                      |   |             | $       | 31,257    |   |             | $       | 39,219  |  
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Accounts receivable                                                                                           |   |                      | 47,991                      |   |             |         | 46,260    |   |             |         | 43,425  |  
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Inventories,
less LIFO reserve: October 13, 2001 - $2,636;
March 31, 2001 - $8,536; October 14, 2000 - $8,518 |   |                      | 140,172                     |   |             |         | 126,069   |   |             |         | 131,681 |  
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Prepaid expenses                                                                                              |   |                      | 6,147                       |   |             |         | 6,683     |   |             |         | 5,378   |  
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Recoverable income taxes                                                                                      |   |                      |                            |   |             |         | 999       |   |             |         | 246     |  
|                                                         |                                                                                                               |   |                      |                             |   |             |         |           |   |             |         |        
|                                                         |                                                                                                               |   | Total current assets |                             |   | 225,117     |         |           |   | 211,268     |         |         |   | 219,949 |        
|                                                        
|                                                        
|                                                        
|                                                        
|Property and equipment, less allowances for depreciation |                                                                                                               |   | 313,760              |                             |   |             | 307,781 |           |   |             | 301,024 |        
|                                                        
|                                                        
|                                                        
|                                                        
|Other assets                                             |                                                                                                               |   | 54,587               |                             |   |             | 58,765  |           |   |             | 51,540  |        
|                                                         |                                                                                                               |   |                      |                             |   |             |         |           |   |             |         |        
|                                                         |                                                                                                               | $ | 593,464              |                             |   | $           | 577,814 |           |   | $           | 572,513 |        
|                                                         |                                                                                                               |   |                      |                             |   |             |         |           |   |             |         |        
|Liabilities and Shareholders Equity                     |                                                                                                               |   |                      |                             |   |             |         |           |   |             |         |        
|Current liabilities:                                     |                                                                                                               |   |                      |                             |   |             |         |           |   |             |         |        
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Accounts payable                                                                                              |   | $                    | 90,791                      |   |             | $       | 80,598    |   |             | $       | 84,719  |  
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Accrued liabilities                                                                                           |   |                      | 59,180                      |   |             |         | 60,014    |   |             |         | 56,901  |  
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Current maturities of long-term liabilities                                                                   |   |                      | 2,512                       |   |             |         | 2,388     |   |             |         | 2,758   |  
|                                                         |                                                                                                               |   |                      |                             |   |             |         |           |   |             |         |        
|                                                         |                                                                                                               |   |                      | Total current liabilities   |   |             | 152,483 |           |   |             | 143,000 |         |   |         | 144,378 | 
|                                                        
|                                                        
|                                                        
|                                                        
|Long-term liabilities:                                   |                                                                                                               |   |                      |                             |   |             |         |           |   |             |         |        
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Long-term debt                                                                                                |   |                      | 246,814                     |   |             |         | 246,940   |   |             |         | 250,085 |  
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Capital lease obligations                                                                                     |   |                      | 15,234                      |   |             |         | 15,545    |   |             |         | 14,005  |  
|                                                         |                                                                                                               |   |                      |                             |   |             |         |           |   |             |         |        
|                                                         |                                                                                                               |   |                      | Total long-term liabilities |   |             | 262,048 |           |   |             | 262,485 |         |   |         | 264,090 | 
|                                                        
|                                                        
|                                                        
|                                                        
|Deferred items:                                          |                                                                                                               |   |                      |                             |   |             |         |           |   |             |         |        
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Income taxes                                                                                                  |   |                      | 13,866                      |   |             |         | 12,865    |   |             |         | 12,862  |  
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Other                                                                                                         |   |                      | 21,953                      |   |             |         | 21,188    |   |             |         | 16,473  |  
|                                                         |                                                                                                               |   |                      |                             |   |             |         |           |   |             |         |        
|                                                         |                                                                                                               |   |                      | Total deferred items        |   |             | 35,819  |           |   |             | 34,053  |         |   |         | 29,335  | 
|                                                        
|                                                        
|                                                        
|                                                        
|Shareholders Equity:                                    |                                                                                                               |   |                      |                             |   |             |         |           |   |             |         |        
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Common stock, Classes A and B                                                                                 |   |                      | 26,153                      |   |             |         | 26,066    |   |             |         | 25,588  |  
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Retained earnings                                                                                             |   |                      | 131,997                     |   |             |         | 125,645   |   |             |         | 121,131 |  
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Cost of common stock in treasury                                                                              |   |                      | (13,557                     | ) |             |         | (11,656   | ) |             |         | (9,867  | )
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Deferred cost  restricted stock                                                                              |   |                      | (421                        | ) |             |         | (730      | ) |             |         | (1,119  | )
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Notes receivable  stock options                                                                              |   |                      | (1,058                      | ) |             |         | (1,049    | ) |             |         | (1,023  | )
|                                                         |                                                                                                               |   |                      |                             |   |             |         |           |   |             |         |        
|                                                         |                                                                                                               |   |                      | Total shareholders equity  |   |             | 143,114 |           |   |             | 138,276 |         |   |         | 134,710 | 
|                                                         |                                                                                                               |   |                      |                             |   |             |         |           |   |             |         |        
|                                                         |                                                                                                               | $ | 593,464              |                             |   | $           | 577,814 |           |   | $           | 572,513 |        
|                                                         |                                                                                                               |   |                      |                             |   |             |         |           |   |             |         |        

See notes to condensed consolidated financial statements.

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##### Table of Contents






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

|                                                                                  |                                             |   |                |        |             |   |         |        | 
|--------------------------------------------------------------------------------- | ------------------------------------------- | - | -------------- | ------ | ----------- | - | ------- | ------ | 
|                                                                                  |                                             |   | 28 Weeks Ended
|                                                                                  |                                             |   |               
|                                                                                  |                                             |   | October 13,    |        | October 14,
|                                                                                  |                                             |   | 2001           |        | 2000       
|                                                                                  |                                             |   |                |        |            
|Operating activities                                                              |                                             |   |                |        |             |   |         |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Net income                                                                        |                                             | $ | 8,113          |        |             | $ | 5,616   |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Adjustments to reconcile net income to net
cash provided by operating activities: |                                             |   |                |        |             |   |         |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Depreciation                                |   |                | 12,070 |             |   |         | 14,604 | 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Amortization of other assets                |   |                | 852    |             |   |         | 3,008  | 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Gain on disposal of discontinued operation  |   |                | (5,039 | )           |   |         |       | 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Changes in operating assets and liabilities |   |                | (365   | )           |   |         | 4,599  | 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Other operating activities                  |   |                | (189   | )           |   |         | 361    | 
|                                                                                  |                                             |   |                |        |             |   |         |       
|Net cash provided by operating activities                                         |                                             |   | 15,442         |        |             |   | 28,188  |       
|                                                                                 
|Investing activities                                                              |                                             |   |                |        |             |   |         |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Net acquisition of property, equipment and land                                   |                                             |   | (36,552        | )      |             |   | (25,263 | )     
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Proceeds from sale of discontinued operation                                      |                                             |   | 14,062         |        |             |   |        |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Other investing activities                                                        |                                             |   | (652           | )      |             |   | (3,459  | )     
|                                                                                  |                                             |   |                |        |             |   |         |       
|Net cash used for investing activities                                            |                                             |   | (23,142        | )      |             |   | (28,722 | )     
|                                                                                 
|Financing activities                                                              |                                             |   |                |        |             |   |         |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Proceeds (repayments) of short-term borrowings                                    |                                             |   |               |        |             |   | (10,000 | )     
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Proceeds of long-term borrowings                                                  |                                             |   | 25,000         |        |             |   | 42,010  |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Repayments of long-term debt and capital leases                                   |                                             |   | (25,313        | )      |             |   | (36,249 | )     
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Proceeds from sale/leasebacks                                                     |                                             |   | 11,154         |        |             |   | 16,282  |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Purchases of shares for treasury                                                  |                                             |   | (1,966         | )      |             |   | (2,719  | )     
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Stock options exercised                                                           |                                             |   | 78             |        |             |   | 800     |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Cash dividends paid                                                               |                                             |   | (1,777         | )      |             |   | (1,849  | )     
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Other financing activities                                                        |                                             |   | 74             |        |             |   | 43      |       
|                                                                                  |                                             |   |                |        |             |   |         |       
|Net cash provided by financing activities                                         |                                             |   | 7,250          |        |             |   | 8,318   |       
|                                                                                  |                                             |   |                |        |             |   |         |       
|Net increase (decrease) in cash and equivalents                                   |                                             |   | (450           | )      |             |   | 7,784   |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Cash and equivalents at beginning of period                                       |                                             |   | 31,257         |        |             |   | 31,435  |       
|                                                                                  |                                             |   |                |        |             |   |         |       
|Cash and equivalents at end of period                                             |                                             | $ | 30,807         |        |             | $ | 39,219  |       
|                                                                                  |                                             |   |                |        |             |   |         |       

See notes to condensed consolidated financial statements.

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##### Table of Contents






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

October 13, 2001

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 generally accepted accounting
principles. This report should be read in conjunction with the Companys
Consolidated Financial Statements for the year ended March 31, 2001. The
balance sheet at March 31, 2001 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 2002 and 2001 relate to the fiscal
years ending March 30, 2002 and March 31, 2001, respectively.

The condensed consolidated financial statements for the sixteen and
twenty-eight week periods ended October 13, 2001 and October 14, 2000,
respectively, were not audited by independent auditors. Preparation of the
financial statements requires management to make estimates that affect the
reported amounts of assets, liabilities, revenues and expenses for the
reporting periods. In the opinion of management, the statements reflect all
adjustments (consisting of normal recurring accruals) considered necessary to
present fairly, on a consolidated basis, the financial position, results of
operations and cash flows for the periods presented. Certain amounts in the
2001 financial statements were reclassified to conform with the 2002
presentation.

Operating results for the twenty-eight week period ended October 13, 2001, are
not necessarily indicative of the results that may be expected for the full
fiscal year ending March 30, 2002.

Note B  Change in Estimated Useful Lives of Property and Equipment

As a result of the Companys periodic examination and review of its accounting
policies and practices, the Company determined that a revision of the estimated
useful lives used to depreciate buildings and land improvements, and leasehold
improvements was appropriate in light of the Companys historical experience
and its assessment of prevailing industry practice. The change was effected in
the third quarter of 2001. The effect of the change for the second quarter of
2002 was a decrease in depreciation expense of $1.4 million and an increase in
net income of $1.0 million, or $.10 per diluted share. The effect of the change
for the twenty-eight weeks ended October 13, 2001, was a decrease in
depreciation expense of $2.4 million and an increase in net income of $1.5
million, or $.16 per diluted share.

5



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##### Table of Contents



Note C  Discontinued Operation

On October 5, 2001, the Company completed the sale of certain assets of its
wholesale division. The sale included inventory, property, buildings and
equipment, and certain other assets plus the assumption by the buyer of certain
liabilities. Proceeds of $14.1 million from the sale were used primarily to
reduce amounts outstanding under the Companys revolving credit facilities. A
gain of $5.0 million ($3.3 million after tax) was recognized in the quarter
ended October 13, 2001. The condensed consolidated balance sheet at October 13,
2001, includes $12.8 million of accounts receivable and $2.0 million of
accounts payable and accrued expenses remaining from the discontinued
operation.

Operating results of the discontinued operation were as follows:

|                         |  |                |        |                |  |             |         |             |  |   |         |   |  |   |         | 
|------------------------ |  | -------------- | ------ | -------------- |  | ----------- | ------- | ----------- |  | - | ------- | - |  | - | ------- | 
|                         |  | 16 Weeks Ended |        | 28 Weeks Ended
|                         |  |                |        |               
|                         |  | October 13,    |        | October 14,    |  | October 13, |         | October 14,
|                         |  | 2001           |        | 2000           |  | 2001        |         | 2000       
|                         |  |                |        |                |  |             |         |            
|Sales and other revenues |  | $              | 78,568 |                |  | $           | 122,430 |             |  | $ | 140,991 |   |  | $ | 216,886 | 
|                         |  |                |        |                |  |             |         |             |  |   |         |   |  |   |         | 
|Income before tax        |  |                | (1,726 | )              |  |             | 1,143   |             |  |   | (1,322  | ) |  |   | 2,090   | 
|                        
|                        
|                        
|                        
|Income tax               |  |                | (604   | )              |  |             | 401     |             |  |   | (463    | ) |  |   | 732     | 
|                         |  |                |        |                |  |             |         |             |  |   |         |   |  |   |         | 
|Net income               |  | $              | (1,122 | )              |  | $           | 742     |             |  | $ | (859    | ) |  | $ | 1,358   | 
|                         |  |                |        |                |  |             |         |             |  |   |         |   |  |   |         | 

Note D  Income 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:

|                                                                              |                               |   |                |        |                |   |             |      |             |   |       |       |   |   |       |       |  
|----------------------------------------------------------------------------- | ----------------------------- | - | -------------- | ------ | -------------- | - | ----------- | ---- | ----------- | - | ----- | ----- | - | - | ----- | ----- | -
|                                                                              |                               |   | 16 Weeks Ended |        | 28 Weeks Ended
|                                                                              |                               |   |                |        |               
|                                                                              |                               |   | October 13,    |        | October 14,    |   | October 13, |      | October 14,
|                                                                              |                               |   | 2001           |        | 2000           |   | 2001        |      | 2000       
|                                                                              |                               |   |                |        |                |   |             |      |            
|Income from continuing operations                                             |                               | $ | 2,049          |        |                | $ | 1,397       |      |             | $ | 5,697 |       |   | $ | 4,258 |      
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Discontinued operation:                                                       |                               |   |                |        |                |   |             |      |             |   |       |       |   |   |       |      
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Income (loss) from operations |   |                | (1,122 | )              |   |             | 742  |             |   |       | (859  | ) |   |       | 1,358 |  
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Gain on disposal              |   |                | 3,275  |                |   |             |     |             |   |       | 3,275 |   |   |       |      |  
|                                                                              |                               |   |                |        |                |   |             |      |             |   |       |       |   |   |       |      
|Numerator for basic earnings per share                                        |                               |   | 4,202          |        |                |   | 2,139       |      |             |   | 8,113 |       |   |   | 5,616 |      
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Effect of convertible debentures                                              |                               |   | 293            |        |                |   |            | (a)  |             |   | 506   |       |   |   | 503   |      
|                                                                              |                               |   |                |        |                |   |             |      |             |   |       |       |   |   |       |      
|Numerator for diluted earnings per share
- income after assumed conversions   |                               | $ | 4,495          |        |                | $ | 2,139       |      |             | $ | 8,619 |       |   | $ | 6,119 |      
|                                                                              |                               |   |                |        |                |   |             |      |             |   |       |       |   |   |       |      
|                                                                             
|Weighted average shares outstanding                                           |                               |   | 8,023          |        |                |   | 8,338       |      |             |   | 8,033 |       |   |   | 8,362 |      
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Non-vested restricted shares  |   |                | (70    | )              |   |             | (115 | )           |   |       | (73   | ) |   |       | (119  | )
|                                                                              |                               |   |                |        |                |   |             |      |             |   |       |       |   |   |       |      
|Denominator for basic earnings per share                                      |                               |   | 7,953          |        |                |   | 8,223       |      |             |   | 7,960 |       |   |   | 8,243 |      
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Effect of dilutive securities:                                                |                               |   |                |        |                |   |             |      |             |   |       |       |   |   |       |      
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Non-vested restricted shares  |   |                | 70     |                |   |             | 115  |             |   |       | 73    |   |   |       | 119   |  
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Stock options                 |   |                | 147    |                |   |             | 94   |             |   |       | 137   |   |   |       | 85    |  
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Convertible debentures        |   |                | 1,284  |                |   |             |     | (a)         |   |       | 1,284 |   |   |       | 1,284 |  
|                                                                              |                               |   |                |        |                |   |             |      |             |   |       |       |   |   |       |      
|Denominator for diluted earnings per share
- adjusted weighted average shares |                               |   | 9,454          |        |                |   | 8,432       |      |             |   | 9,454 |       |   |   | 9,731 |      
|                                                                              |                               |   |                |        |                |   |             |      |             |   |       |       |   |   |       |      



---

|(a) |  | convertible debentures are excluded, as the effect would have been
anti-dilutive.
|--- |  | ---------------------------------------------------------------------------------

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##### 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 fully and unconditionally guaranteed on a
joint and several basis the Companys obligations under the $150.0 million of 8
7/8% Senior Subordinated Notes. The Guarantors are 100% wholly-owned
subsidiaries of the Company. The Company has not presented separate financial
statements and other disclosures concerning each Guarantor because management
has determined that such information is not material to investors.

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

|                       |  |             |         |           |  |             |         |  |  |   |         | 
|---------------------- |  | ----------- | ------- | --------- |  | ----------- | ------- |  |  | - | ------- | 
|                       |  | October 13, |         | March 31, |  | October 14,
|                       |  | 2001        |         | 2001      |  | 2000       
|                       |  |             |         |           |  |            
|Current assets         |  | $           | 217,671 |           |  | $           | 211,268 |  |  | $ | 219,451 | 
|                      
|                      
|                      
|                      
|Current liabilities    |  |             | 134,396 |           |  |             | 134,222 |  |  |   | 134,697 | 
|                      
|                      
|                      
|                      
|Noncurrent assets      |  |             | 331,793 |           |  |             | 327,210 |  |  |   | 310,843 | 
|                      
|                      
|                      
|                      
|Noncurrent liabilities |  |             | 121,213 |           |  |             | 120,209 |  |  |   | 115,416 | 

|               |  |                |         |                |  |             |         |             |  |   |           |  |  |   |         | 
|-------------- |  | -------------- | ------- | -------------- |  | ----------- | ------- | ----------- |  | - | --------- |  |  | - | ------- | 
|               |  | 16 Weeks Ended |         | 28 Weeks Ended
|               |  |                |         |               
|               |  | October 13,    |         | October 14,    |  | October 13, |         | October 14,
|               |  | 2001           |         | 2000           |  | 2001        |         | 2000       
|               |  |                |         |                |  |             |         |            
|Total revenues |  | $              | 580,517 |                |  | $           | 534,726 |             |  | $ | 1,018,178 |  |  | $ | 928,988 | 
|              
|              
|              
|              
|Gross profit   |  |                | 150,336 |                |  |             | 129,007 |             |  |   | 265,197   |  |  |   | 227,252 | 
|              
|              
|              
|              
|Net income     |  |                | 8,318   |                |  |             | 6,945   |             |  |   | 14,984    |  |  |   | 13,476  | 

Note F  Acquisition

On August 27, 2001, the Company acquired the assets of OMalia Food Markets
which operates eight supermarkets in the Indianapolis market. The results of
operations, assets and liabilities, and cash flows of OMalia Food Markets are
included in the condensed consolidated statements as of and for the period
ended October 13, 2001.

Note G  Goodwill

The Company adopted Statement of Financial Accounting Standards No. 142
Goodwill and Other Intangible Assets (FAS 142), effective April 1, 2001. FAS
142 discontinues the amortization of goodwill and prescribes future periodic
testing of goodwill for impairment. During the quarter ended October 13,
2001,the transitional impairment test required by FAS 142 was completed but did
not result in any impairment of goodwill.

Adjusted net income and net income per share were as follows:

|                                  |  |                |       |                |  |             |       |             |  |   |       |  |  |   |       | 
|--------------------------------- |  | -------------- | ----- | -------------- |  | ----------- | ----- | ----------- |  | - | ----- |  |  | - | ----- | 
|                                  |  | 16 Weeks Ended |       | 28 Weeks Ended
|                                  |  |                |       |               
|                                  |  | October 13,    |       | October 14,    |  | October 13, |       | October 14,
|                                  |  | 2001           |       | 2000           |  | 2001        |       | 2000       
|                                  |  |                |       |                |  |             |       |            
|Reported net income               |  | $              | 4,202 |                |  | $           | 2,139 |             |  | $ | 8,113 |  |  | $ | 5,616 | 
|                                 
|                                 
|                                 
|                                 
|Goodwill amortization, net of tax |  |                |      |                |  |             | 177   |             |  |   |      |  |  |   | 403   | 
|                                  |  |                |       |                |  |             |       |             |  |   |       |  |  |   |       | 
|Adjusted net income               |  | $              | 4,202 |                |  | $           | 2,316 |             |  | $ | 8,113 |  |  | $ | 6,019 | 
|                                  |  |                |       |                |  |             |       |             |  |   |       |  |  |   |       | 
|Basic earnings per share:         |  |                |       |                |  |             |       |             |  |   |       |  |  |   |       | 
|                                 
|                                 
|                                 
|                                 
|Reported net income               |  | $              | .53   |                |  | $           | .26   |             |  | $ | 1.02  |  |  | $ | .68   | 
|                                 
|                                 
|                                 
|                                 
|Goodwill amortization, net of tax |  |                |      |                |  |             | .02   |             |  |   |      |  |  |   | .05   | 
|                                  |  |                |       |                |  |             |       |             |  |   |       |  |  |   |       | 
|Adjusted net income               |  | $              | .53   |                |  | $           | .28   |             |  | $ | 1.02  |  |  | $ | .73   | 
|                                  |  |                |       |                |  |             |       |             |  |   |       |  |  |   |       | 
|Diluted earnings per share:       |  |                |       |                |  |             |       |             |  |   |       |  |  |   |       | 
|                                 
|                                 
|                                 
|                                 
|Reported net income               |  | $              | .48   |                |  | $           | .25   |             |  | $ | .91   |  |  | $ | .63   | 
|                                 
|                                 
|                                 
|                                 
|Goodwill amortization, net of tax |  |                |      |                |  |             | .02   |             |  |   |      |  |  |   | .04   | 
|                                  |  |                |       |                |  |             |       |             |  |   |       |  |  |   |       | 
|Adjusted net income               |  | $              | .48   |                |  | $           | .27   |             |  | $ | .91   |  |  | $ | .67   | 
|                                  |  |                |       |                |  |             |       |             |  |   |       |  |  |   |       | 

7



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##### Table of Contents



Note H  Recent Accounting Pronouncements

The Financial Accounting Standards Board recently issued Statement No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets (FAS 144). The
Statement will be effective for the Company at the beginning of fiscal year
2003. FAS 144 may require a change in the Companys financial reporting;
however, the extent of the change, if any, has not been determined.




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

Cautionary Note Regarding Forward-Looking Statements

This report includes certain forward-looking statements (statements other than
those made solely with respect to historical fact). Actual results could differ
materially and adversely from those contemplated by the forward-looking
statements due to known and unknown risks and uncertainties. The
forward-looking statements and the Companys future results, liquidity and
capital resources are subject to the following risks and uncertainties:
softness in the general retail food industry, the entry of new competitive
stores and e-retailers in the Companys market, the ability to predict the
impact of the revision of the estimated useful lives of building and land
improvements, the impact of any acquisitions or dispositions, the stability of
distribution incentives from suppliers, the level of discounting by
competitors, the timely and on budget completion of store construction,
expansion, conversion and remodeling, the ability to complete authorized share
repurchases, the successful integration of acquisitions, uncertainties relating
to tobacco and environmental regulations, and the level of margins achievable
in the Companys operating divisions and their ability to minimize operating
expenses. The Company undertakes no obligation to update or revise any
forward-looking statements to reflect subsequent events or circumstances.

General

At October 13, 2001, Marsh Supermarkets, Inc. (the Company or Marsh)
operated 102 supermarkets and 192 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 a food services
division, which provides upscale catering, vending, concession and business
cafeteria management services, and a floral division, which operates four
upscale retail floral shops under the name of McNamara and one business florist
under the name Enflora. The Company may from time to time explore various
strategic alternatives regarding one or more of its business divisions.

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 sales and other revenues, and the percentage change in such
components:

|                                    |  |                     |       |                  |  |        |       |                     |  |      |       |        |  |  |       |   |  |  |       |   |  |  |       |   
|----------------------------------- |  | ------------------- | ----- | ---------------- |  | ------ | ----- | ------------------- |  | ---- | ----- | ------ |  |  | ----- | - |  |  | ----- | - |  |  | ----- | --
|                                    |  | Second Quarter      |       | Year - to - Date
|                                    |  |                     |       |                 
|                                    |  | Percent of Revenues |       |                  |  |        |       | Percent of Revenues |  |      |       |       
|                                    |  |                     |       | Percent          |  |        |       | Percent            
|                                    |  | 2002                |       | 2001             |  | Change |       | 2002                |  | 2001 |       | Change
|                                    |  |                     |       |                  |  |        |       |                     |  |      |       |       
|Sales and other revenues            |  |                     | 100.0 | %                |  |        | 100.0 | %                   |  |      | 6.3   | %      |  |  | 100.0 | % |  |  | 100.0 | % |  |  | 7.7   | % 
|                                   
|                                   
|                                   
|                                   
|Gross profit                        |  |                     | 29.5  | %                |  |        | 29.9  | %                   |  |      | 5.2   | %      |  |  | 29.7  | % |  |  | 30.1  | % |  |  | 6.5   | % 
|                                   
|                                   
|                                   
|                                   
|Selling, general and administrative |  |                     | 26.3  | %                |  |        | 26.2  | %                   |  |      | 6.8   | %      |  |  | 26.1  | % |  |  | 26.0  | % |  |  | 8.1   | % 
|                                   
|                                   
|                                   
|                                   
|Depreciation                        |  |                     | 1.4   | %                |  |        | 1.7   | %                   |  |      | (16.2 | )%     |  |  | 1.3   | % |  |  | 1.7   | % |  |  | (17.6 | )%
|                                   
|                                   
|                                   
|                                   
|Operating income                    |  |                     | 1.9   | %                |  |        | 2.0   | %                   |  |      | 2.8   | %      |  |  | 2.3   | % |  |  | 2.3   | % |  |  | 6.2   | % 
|                                   
|                                   
|                                   
|                                   
|Interest                            |  |                     | 1.3   | %                |  |        | 1.5   | %                   |  |      | (8.8  | )%     |  |  | 1.3   | % |  |  | 1.6   | % |  |  | (7.6  | )%
|                                   
|                                   
|                                   
|                                   
|Income taxes                        |  |                     | 0.2   | %                |  |        | 0.1   | %                   |  |      | 37.8  | %      |  |  | 0.3   | % |  |  | 0.3   | % |  |  | 34.7  | % 
|                                   
|                                   
|                                   
|                                   
|Income from continuing operations   |  |                     | 0.4   | %                |  |        | 0.3   | %                   |  |      | 46.7  | %      |  |  | 0.6   | % |  |  | 0.5   | % |  |  | 33.8  | % 

8



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##### Table of Contents



Sales and Other Revenues

In the second quarter of 2002, consolidated sales and other revenues increased
$30.2 million, or 6.3%, from the second quarter of 2001 to $508.2 million.
Supermarket revenues increased $28.7 million, Village Pantry revenues increased
$0.2 million and Crystal Food Service revenues increased $0.4 million. Retail
sales (excluding fuel sales) increased 10.2%. Sales in comparable supermarkets
and convenience stores, including replacement stores and format conversions,
but excluding fuel, increased 4.9% from the second quarter of 2001.
Approximately 80% of the increase in supermarket revenues was from comparable
store sales gains with the remainder from stores opened since the beginning of
the year earlier quarter. Village Pantry inside store revenues decreased 8.3%
due primarily to a change in cigarette marketing. Village Pantry fuel gallons
sold increased 9.6% due to stores opened since the beginning of the year
earlier quarter.

For the twenty-eight weeks ended October 13, 2001, consolidated sales and other
revenues increased $63.3 million, or 7.7%, from the same twenty-eight week
period of 2001 to $883.5 million. Supermarket revenues increased $55.3 million,
Village Pantry revenues increased $5.1 million and Crystal Food Service
revenues increased $1.4 million. Retail sales (excluding fuel sales) increased
9.5%. Sales in comparable stores, including replacement stores and format
conversions, but excluding fuel, increased 4.0% from the prior year.
Approximately sixty percent of the increase in supermarket revenues was from
comparable store sales gains with the remainder from stores opened since the
beginning of the prior year. Village Pantry inside store revenues decreased
6.3% due primarily to the change in cigarette marketing. Village Pantry fuel
gallons sold increased 10.3% due to stores opened since the beginning of the
year earlier.

Gross Profit

Gross profit is calculated net of warehousing, transportation, and promotional
expenses. In the second quarter of 2002, consolidated gross profit increased
$7.4 million, or 5.2%, from the second quarter of 2001 to $150.1 million. As a
percentage of revenues, consolidated gross profit was 29.5% in the current
quarter compared to 29.9% for 2001, with the decline attributable to heavy
competition from a national grocery chain and newly opened superstores. Gross
profit, as a percentage of revenues, declined in supermarkets and Crystal Food
Service, but improved slightly in Village Pantry. Village Pantry fuel margin
per gallon improved from the year earlier quarter.

For the twenty-eight weeks ended October 13, 2001, consolidated gross profit
increased $16.0 million, or 6.5%, from the year earlier period to $262.7
million. As a percentage of revenues, consolidated gross profit was 29.7% in
the current year compared to 30.1% for 2001. Gross profit, as a percentage of
revenues, decreased in supermarkets, Village Pantry and in Crystal Food
Services.

Selling, General and Administrative Expenses

In the second quarter of 2002, consolidated selling, general and administrative
(SG&A) expenses increased $8.4 million, or 6.8%, from the second quarter of
2001 to $133.5 million. As a percentage of revenues, SG&A expenses increased to
26.3% from 26.2% in the comparable year earlier quarter. As a percentage of
revenues, SG&A declined in supermarkets and Crystal Food Service, but increased
in Village Pantry. Wage expense in stores open both quarters, excluding
supermarket conversions to the LoBill format, increased 0.7% as wage rate
increases and increased labor hours were partially mitigated by improved labor
scheduling.

For the twenty-eight weeks in 2002, SG&A increased $17.4 million, or 8.1%, from
the comparable twenty-eight weeks of 2001. As a percentage of revenues,
consolidated SG&A expenses increased to 26.1% from 26.0% in 2001. As a
percentage of revenues, SG&A expenses declined in supermarkets and Crystal Food
Service, but increased in Village Pantry. In identical stores, wage expense
decreased 0.2% from the comparable twenty-eight weeks of the prior year.

9



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##### Table of Contents



Depreciation Expense

Depreciation expense for the second quarter of 2002 was $6.9 million, compared
to $8.3 million for the same quarter of 2001. As a result of the Companys
periodic examination and review of its accounting policies and practices, the
Company determined that a revision of the estimated useful lives used to
depreciate building and land improvements, and leasehold improvements was
appropriate in light of the Companys historical experience and its assessment
of prevailing industry practice. The change was effected in the third quarter
of 2001. The effect of the change for the second quarter of 2002 was a decrease
in depreciation expense of $1.4 million from the same quarter of the prior year
and an increase in net income of $1.0 million, or $.10 per diluted share over
the prior years comparable quarter. As a percentage of revenues, depreciation
expense was 1.4% for the second quarter of 2002 compared to 1.7% for the prior
years quarter.

For the twenty-eight weeks in 2002, depreciation expense was $11.7 million,
compared to $14.2 million for the comparable period of the prior year. The
effect of the prior years change in useful lives for the first half of the
current year was a decrease in depreciation expense of $2.4 million from the
comparable period of the prior year and an increase in net income of $1.5
million, or $.16 per diluted share compared to the same period of 2001. As a
percentage of revenues, depreciation expense was 1.3% for the twenty-eight
weeks in 2002, compared to 1.7% for the comparable weeks of the prior year.

Operating Income

Operating income (income from continuing operations before interest and taxes)
increased $0.3 million to $9.7 million for the second quarter of 2002 from $9.4
million for the year earlier quarter. Gains on sales of real estate, reported
as revenues, were $1.4 million in the quarter compared to $0.6 million in the
year earlier quarter. The prior year quarter included a $0.4 million reduction
to SG&A expenses for reimbursement of expenses related to a construction
project. Operating income, as a percentage of revenues, was 1.9% in 2002,
compared to 2.0% for the comparable period in 2001.

Operating income was $20.3 million for the twenty-eight weeks in 2002, compared
to $19.1 million for the year earlier period. Gains on real estate sales were
$1.9 million in 2002 compared to $0.6 million in 2001 and the effect of the
change in useful lives was a decrease in depreciation expense of $2.4 million
in the current year. The increase in SG&A expenses outpaced the growth in gross
profit due to competitive pressures, as stated above. Operating income, as a
percentage of revenues, was 2.3% for both the twenty-eight weeks in 2002 and
2001.

Interest Expense

Interest expense for the second quarter of 2002 was $6.7 million, compared to
$7.4 million for the second quarter of 2001. For the twenty-eight weeks in
2002, interest expense was $11.8 million, compared to $12.8 million in 2001. As
a percentage of revenues, interest expense was 1.3% for the current quarter and
year to date, compared to 1.5% for the year earlier quarter and 1.6% for the
year earlier year to date.

Income Taxes

For the second quarter of 2002, the effective income tax rate was 31.5%,
compared to 32.8% for the comparable quarter in 2001. For the twenty-eight
weeks of 2002, the effective income tax rate was 32.9%, compared to 32.8% for
the comparable weeks of the prior year. It is expected the effective rate will
be 32.9% for the current year.

Income from Continuing Operations

Income from continuing operations for the second quarter of 2002 was $2.0
million, compared to $1.4 million for the second quarter of 2001. Income from
continuing operations, as a percentage of revenues, was 0.4% for the second
quarter of 2002 compared to 0.3% in 2001.

For the twenty-eight weeks of 2002, income from continuing operations was $5.7
million, compared to $4.3 million in 2001. Income from continuing operations,
as a percentage of revenues, was 0.6% for the twenty-eight weeks of 2002
compared to 0.5% for the year earlier period.

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Discontinued Operation

During the quarter ended October 13, 2001, the Company sold certain assets of
its wholesale division. The discontinued operation reported an after tax loss
of $1.1 million in the current quarter compared to net income of $0.7 million
for the year earlier quarter. For the twenty-eight weeks of 2002, the
discontinued operation reported a loss of $0.9 million compared to net income
of $1.4 million for the prior year period. The sale resulted in a net gain of
$3.3 million in the current quarter.

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 twenty-eight weeks of 2002, the following stores were opened
or were under construction:

|              |  |             |  |        |        |          |  |                  |  |                   
|------------- |  | ----------- |  | ------ | ------ | -------- |  | ---------------- |  | ------------------
|              |  |             |  | Square |        |          |  |                 
|Store Type    |  | Category    |  | Feet   |        | Location |  | Status          
|              |  |             |  |        |        |          |  |                 
|Supermarket   |  | Replacement |  |        | 54,000 |          |  | Kokomo, IN       |  | Open              
|             
|             
|             
|             
|Supermarket   |  | Remodel     |  |        | 48,000 |          |  | Indianapolis, IN |  | Open              
|             
|             
|             
|             
|Supermarket   |  | Remodel     |  |        | 58,000 |          |  | Fishers, IN      |  | Open              
|             
|             
|             
|             
|Supermarket   |  | Acquired    |  |        | 30,000 |          |  | Elwood, IN       |  | Open              
|             
|             
|             
|             
|Supermarket   |  | New         |  |        | 55,000 |          |  | Greenwood, IN    |  | Under construction
|             
|             
|             
|             
|Supermarket   |  | New         |  |        | 55,000 |          |  | Fishers, IN      |  | Under construction
|             
|             
|             
|             
|LoBill        |  | Replacement |  |        | 38,000 |          |  | Muncie, IN       |  | Open              
|             
|             
|             
|             
|Convenience   |  | Replacement |  |        | 2,100  |          |  | Kokomo, IN       |  | Open              
|             
|             
|             
|             
|Convenience   |  | New         |  |        | 3,800  |          |  | Fishers, IN      |  | Open              
|             
|             
|             
|             
|Convenience   |  | Acquired    |  |        | 2,000  |          |  | Lafayette, IN    |  | Open              
|             
|             
|             
|             
|Convenience   |  | New         |  |        | 2,600  |          |  | Gas City, IN     |  | Open              
|             
|             
|             
|             
|Convenience   |  | Acquired    |  |        | 2,000  |          |  | Plymouth, IN     |  | Open              
|             
|             
|             
|             
|Convenience   |  | Acquired    |  |        | 2,000  |          |  | Grainger, IN     |  | Open              
|             
|             
|             
|             
|Convenience   |  | New         |  |        | 2,600  |          |  | Bloomington, IN  |  | Open              
|             
|             
|             
|             
|Catering hall |  | Conversion  |  |        | 37,000 |          |  | Carmel, IN       |  | Open              

During the first half of 2002, five supermarkets were converted to the LoBill
format. Subsequent to the end of the current quarter, both the Fishers and
Greenwood supermarkets were opened. In 2002, the Company also plans to open one
new LoBill and seven new convenience stores. The cost of these projects and
other capital commitments is estimated to be $90.0 million. Of this amount, the
Company plans to fund $35.0 million through sale/leasebacks, $20.0 million
through equipment leasing and believes it can finance the balance with current
cash balances and internally generated funds. As of October 13, 2001, the
Company had expended $36.6 million for capital expenditures.

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 competitive influences, 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.

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##### Table of Contents



Liquidity and Capital Resources

Net cash provided by operating activities in the first half of 2002 was $15.4
million, compared to $28.2 million in the first half of 2001. The decrease in
net cash provided by operating activities was due primarily to an $18.1 million
increase in retail segment inventory in the current year compared to an
increase of $6.3 million in the year earlier period. Working capital increased
$4.4 million from March 31, 2001. Changes in working capital included a $14.1
million increase in inventory to support seasonal sales levels and a $10.2
million increase in trade accounts payable.

During 2001, $50.0 million in bank revolving credit facilities matured and were
replaced with a three year $90.0 million unsecured revolving credit
facility, at rates based on LIBOR or floating prime rate, of which $36.0
million was utilized at October 13, 2001. The credit facility contains various
financial covenants including a funded debt to EBITDA ratio and a fixed charge
coverage ratio. The Company also has a bank commitment that provides an
additional $5.0 million in short-term borrowing, at rates based upon the then
prevailing federal funds rate, none of which was utilized at October 13, 2001.

During the first half of 2002, the Company repurchased 65,000 shares of its
Class A Common Stock and 90,000 shares of its Class B Common Stock pursuant to
its Stock Repurchase Plan. As of October 13, 2001, the Company had spent $13.9
million of $18.0 million authorized by the Board of Directors for repurchases
under the Stock Repurchase Plan.

The Company believes amounts available under its revolving credit facility and
the bank commitment, cash flows from operating activities and lease financing
will be adequate to meet the Companys working capital needs, debt service
obligations and capital expenditures for the foreseeable future.

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##### Table of Contents






Part II Other Information




Item 1. Legal Proceedings

Not Applicable.




Item 2. Changes in Securities

Not Applicable.




Item 3. Defaults upon Senior Securities or Rights of Holders Thereof

Not Applicable.




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



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company held its Annual Meeting of Shareholders on August 7, 2001 (the
Annual Meeting). At the Annual Meeting, shareholders voted on the
following proposals: To elect three directors for terms of three years
each and until their successors are duly elected and qualified and to
amend the 1998 Stock Incentive Plan. The table below sets forth the number
of votes cast for, against or withheld with respect to each of such
proposals:

| |    |                      |                                        |  |           |           |  |     |      |         |  |         |         |        |  |                  | 
| | -- | -------------------- | -------------------------------------- |  | --------- | --------- |  | --- | ---- | ------- |  | ------- | ------- | ------ |  | ---------------- | 
| |    |                      |                                        |  |           |           |  | For |      |         |  | Against |         |        |  | Withheld/Abstain | 
| |    |                      |                                        |  |           |           |  |     |      |         |  |         |         |        |  |                  | 
| | 1. |                      | Election of Directors                  |  |           |           |  |     |      |         |  |         |         |        | 
|
|
|
|
| |    | Nominees:            |                                        |  |           |           |  |     |      |         |  |         |         |       
|
|
|
|
| |    | Garnet R. Marsh      |                                        |  | 3,176,325 |           |  |     | N.A. |         |  |         | 195,591 |       
|
|
|
|
| |    | Catherine A. Langham |                                        |  | 3,176,493 |           |  |     | N.A. |         |  |         | 195,423 |       
|
|
|
|
| |    | K. Clay Smith        |                                        |  | 3,174,601 |           |  |     | N.A. |         |  |         | 227,316 |       
|
| | 2. |                      | Amendment of 1998 Stock Incentive Plan |  |           | 2,984,974 |  |     |      | 283,537 |  |         |         | 41,836 | 




Item 5. Other Information

Not Applicable.




Item 6. Exhibits and Reports on Form 8-K

(a)  Reports on Form 8-K



| |                                                                                     
| | ------------------------------------------------------------------------------------
| | No reports on Form 8-K were filed during the quarter for which this
report is filed.

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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. | 
|                 
|November 26, 2001 |  | By:                      |  | /s/ Douglas W. DoughertyDouglas W. Dougherty
Senior Vice President, Chief Financial Officer
and Treasurer
|                 
|                  |  |                          |  |                                                                                                          
|                 
|November 26, 2001 |  | By:                      |  | /s/ Mark A. VarnerMark A. Varner
Chief Accounting Officer,
Vice President - Corporate Controller         

14