INDIANAPOLIS, Jan. 3, 2006 (PRIMEZONE) -- Marsh Supermarkets, Inc. (Nasdaq:MARSA) (Nasdaq:MARSB) reported in a Current Report on Form 8-K filed Friday, December 30, 2005 with the Securities and Exchange Commission that its Board of Directors had taken a number of actions to reduce the Company's future compensation obligations to executives.
Don E. Marsh, Chairman and Chief Executive Officer, stated, "These actions are part of the Company's announced plans to pursue strategic alternatives. The Company estimates that as a result of all of the actions described in this press release, the total after-tax cost of amounts payable to executives in the event of a change in control of the Company was reduced by approximately $28 million. The Company plans additional steps to reduce further compensation and other operating expenses in the coming year. All of these reductions should enhance shareholder value."
The actions include: terminating the Company's supplemental executive retirement plans (SERPs), effective December 30, 2005; eliminating the Company's option to pay out SERP benefits in a lump sum following a change in control; providing participants with a one-time election to receive in installments a reduced benefit under the SERPs; amending the employment agreements of certain executive officers to reduce the Company's obligations to continue salary or pay severance; and terminating severance benefits agreements.
All of the SERP participants have exercised the one-time election. As a result, the Company will pay three $6.3 million installments to the SERP participants on January 2006, June 2006, and January 2007. The amount payable is the amount the Company had accrued for the SERPs as of December 30, 2005. The amount to be paid in SERP benefits is approximately $5.4 million less than the Company's estimated liability to the SERP participants as of December 30, 2005. The SERP liability would have increased by over $13 million in the event that a change in control of the Company would have occurred while the SERPs were still in effect. The reduced payment to participants in the SERPs will reduce the Company's under-funded pension liability as of the end of the last fiscal year by approximately $23.3 million.
In a further show of commitment to the shareholders and employees, three of the executive officers of the Company who are SERP participants, Don E. Marsh, P. Lawrence Butt and William L. Marsh, have amended their employment agreements. The effect of the amendments is to change the term of the agreements from five to three years and to limit further the amounts payable to the executives following a change in control to an amount that does not result in a denial of deduction under Section 280G of the Internal Revenue Code or trigger any excise taxes under Section 4999. Two other executive officers who participate in the SERPs, Jack J. Bayt and Douglas W. Dougherty, have employment agreements that do not provide for payments in excess of the Section 280G and Section 4999 maximum.
The Company had also reported in a recent report on Form 8-K that it terminated its Deferred Compensation Plan in accordance with recent changes to federal tax law.
Marsh is a leading regional food retailer, operating 70 Marsh(r) supermarkets, 38 LoBill(r) Foods stores, 8 O'Malia(r) Food Markets, 160 Village Pantry(r) convenience stores, 2 Arthur's Fresh Market(r) stores, and 1 Savin$(sm), in Indiana, Illinois and western Ohio. The company also operates Crystal Food Services(sm), which provides upscale catering, business cafeteria management, office coffee, coffee roasting, vending and concessions, and Primo Banquet(sm) Catering and Conference Centers; Floral Fashions(r), McNamara(r) Florist and Enflora(r) -- Flowers for Business.
Cautionary Note Regarding Forward-Looking Statements
This report includes certain forward-looking statements (statements other than those made solely with respect to historical fact). Actual results could differ materially and adversely from those contemplated by the forward-looking statements due to known and unknown risks and uncertainties, many of which are beyond the Company's control. The forward-looking statements and the Company's future results, liquidity and capital resources are subject to risks and uncertainties including, but not limited to, the following: uncertainty regarding the effect or outcome of the Company's decision to explore strategic alternatives; the entry of new or remodeled competitive stores into the Company's market areas; the level of discounting and promotional spending by competitors; the Company's ability to improve comparable store sales; the level of margins achievable in the Company's operating divisions; the stability and timing of distribution incentives from suppliers; changes in the terms on which suppliers require the Company to pay for store merchandise; softness in the local economy; the Company's ability to control expenses including employee medical costs, labor, credit card fees, and workers compensation and general liability expense; uncertainties regarding gasoline prices and margins; the success of the Company's new and remodeled stores; uncertainties regarding future real estate gains due to limited real estate holdings available for sale; potential interest rate increases on variable rate debt, as well as terms, costs and the availability of capital, the Company's ability to collect outstanding notes and accounts receivable; uncertainties related to state and federal taxation and tobacco and environmental legislation; uncertainties associated with pension and other retirement obligations; uncertainties related to the outcome of pending litigation; the timely and on budget completion of store construction, conversion and remodeling; and other known and unknown risks and uncertainties. The Company undertakes no obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances.