Marsh Supermarkets, Inc. Announces First Quarter Results

Results of Operations Profitable

INDIANAPOLIS, Indiana, UNITED STATES


INDIANAPOLIS, Aug. 7, 2006 (PRIMEZONE) -- Marsh Supermarkets, Inc. (Nasdaq:MARSA) (Nasdaq:MARSB) reports results of operations for the 12 weeks ended June 24, 2006.

First Quarter Results

Net income for the first quarter of fiscal 2007, which ended June 24, 2006, was $1,117,000, or $0.15 per diluted share, as compared to net income of $674,000, or $0.08 per diluted share, for the first quarter of fiscal 2006. Operating income for the 2007 quarter was $7,098,000, which represented an increase of $1,709,000 or 31.7% over the fiscal 2006 quarter.

"We are pleased to report a profit after three consecutive quarters of losses," said Don E. Marsh, Chairman and CEO. "Our focus on controlling expenses helped to moderate the negative pressure on revenue caused by the effects of competition and the uncertainty in the marketplace regarding the outcome of the sale of the Company."

For the first quarter of fiscal 2007, total revenues were $401.6 million as compared to $409.8 million for the first quarter of fiscal 2006. Retail sales in comparable supermarkets and convenience stores for the 2007 quarter were 2.6% below sales for the 2006 quarter. Comparable store merchandise sales in the 2007 quarter, which exclude gasoline sales, decreased 4.9% from sales for the 2006 quarter. The Company excludes gasoline sales from its analysis of comparable store merchandise sales because retail gasoline prices fluctuate widely and frequently, making analytical comparisons difficult (see the included schedule reconciling comparable store sales and comparable store merchandise sales). High levels of competitive promotional activity and competitors' new store openings continue to affect adversely comparable store sales.

Selling, general and administrative expenses were $104.0 million for the quarter ended June 24, 2006, which represented a decrease of $7.0 million over the first quarter of the prior fiscal year. This decrease was a result of reductions in certain executive compensation plans, efficiencies gained in advertising and store wages, and the closing of two supermarkets and six convenience stores since last year. The decrease in selling, general and administrative expenses was achieved despite $1.6 million of transaction costs related to the proposed merger of the Company discussed below.

The Company also improved its liquidity during the quarter. At June 24, 2006, the Company had unused borrowing capacity under its revolving credit facility of $60.0 million, up from $49.3 million at April 1, 2006.

Subsequent Event

Subsequent to the end of the quarter, as part of its ongoing efforts to reduce expenses and to improve its financial condition, the Company negotiated a termination of the lease for the Marsh supermarket located in Naperville, Illinois and closed the store on July 22, 2006. In connection with the closing of the Naperville store, the Company expects to incur accounting charges of approximately $5.0 million in the second quarter of fiscal 2007. These charges are expected to include: (i) an estimated $1.5 million related to the real estate lease termination; (ii) an estimated $3.1 million related to equipment lease commitments; and (iii) an estimated $0.4 million related to employee severance and relocation. The amounts of these charges are preliminary and are subject to change pending, among other factors, the outcome of negotiations with third parties.

Proposed Merger

On May 2, 2006, the Company entered into an agreement and plan of merger under which it will become a wholly owned subsidiary of MSH Supermarkets Holding Corp. ("MSH Supermarkets"), an affiliate of Sun Capital Partners Group IV, Inc., a private investment firm. Pursuant to the merger agreement, all of the common shares of the Company will be converted to cash at $11.125 per share, or approximately $88.7 million in total. The Board of Directors of the Company unanimously recommended that the Company's shareholders approve the merger with MSH Supermarkets.

About Marsh Supermarkets, Inc.

Marsh is a leading regional supermarket chain with stores in Indiana and western Ohio, operating 68 Marsh(r) supermarkets, 38 LoBill(r) Food stores, 8 O'Malias(r) Food Markets, 154 Village Pantry(r) convenience stores, and 2 Arthur's Fresh Market stores. The Company also operates Crystal Food Services(sm) which provides upscale catering, cafeteria management, office coffee, coffee roasting, vending and concessions, and Primo Banquet Catering and Conference Centers; Floral Fashions(r), McNamara(r) Florist and Enflora(r) -- Flowers for Business.

Where to Find Additional Information

The Company has filed with the Securities and Exchange Commission (the "SEC") a preliminary proxy statement and will file with the SEC and mail to its shareholders a definitive proxy statement in connection with the proposed merger with MSH Supermarkets. Investors are urged to carefully read the preliminary proxy statement, the definitive proxy statement, and any other relevant documents filed with the SEC when they become available, because they will contain important information about the Company and the proposed merger. The definitive proxy statement will be mailed to the shareholders of the Company prior to the shareholder meeting. In addition, investors and security holders may obtain free copies of the preliminary proxy statement, and will be able to obtain free copies of the definitive proxy statement, when it becomes available, and other documents filed by the Company with the SEC, at the Web site maintained by the SEC at www.sec.gov. These documents may also be accessed and downloaded for free from the Company's Web site at www.marsh.net, or copies may be obtained, without charge, by directing a request to Secretary, Marsh Supermarkets, Inc., 9800 Crosspoint Boulevard, Indianapolis, Indiana 46256, (317) 594-2100.

Participants in the Solicitation

The Company and its directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of the Company in connection with the proposed transaction. Information regarding the Company's directors and executive officers is contained in the Company's Annual Report on Form 10-K, which was filed with the SEC on June 30, 2006, and the Company's Form 10-K/A, which was filed with the SEC on July 31, 2006. Additional information regarding the interests of participants in the solicitation is contained in the preliminary proxy statement on file with the SEC and will be set forth in the definitive proxy statement filed with the SEC in connection with the proposed transaction.

Cautionary Note Regarding Forward-Looking Statements

This document 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 purported class and derivative actions filed against the Company's directors, its former president and Sun Capital Partners, Inc; uncertainties regarding the approval and consummation of the proposed transaction with MSH Supermarkets, including the impact of an appeal of the order and judgment in the litigation concerning the Company's obligations under the merger agreement or other future action by Cardinal Paragon, Inc. and Drawbridge Special Opportunities Advisors LLC; 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 the cost savings of store closings and other restructuring efforts; 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.


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


                                          June 24,     June 25,
                                            2006         2005
                                            ----         ----

 Assets
 Current assets:

  Cash and equivalents                   $  26,717    $  46,305
  Accounts and notes receivable, net        19,666       22,941
  Inventories                              130,303      135,612
  Prepaid expenses                           4,068        4,869
  Assets held for sale                          --           --
  Recoverable income taxes                   2,152        1,226
                                         ---------    ---------
 Total current assets                      182,906      210,953
 Property and equipment, less
  allowances for depreciation              293,286      316,343
 Other assets                               33,272       50,529
                                         ---------    ---------
   Total Assets                          $ 509,464    $ 577,825
                                         =========    =========

 Liabilities and Shareholders' Equity
 Current liabilities:
  Accounts payable                       $  70,710    $  83,639
  Accrued liabilities                       67,511       48,322
  Current maturities of long-term 
   liabilities                               4,678       78,937
                                         ---------    ---------
   Total current liabilities               142,899      210,898

 Long-term liabilities:
  Long-term debt                           178,778      132,579
  Capital lease and financing
   obligations                              43,322       26,921
  Pension and post-retirement benefits      26,626       53,649
  Other long-term liabilities                9,197           --
                                         ---------    ---------
   Total long-term liabilities             257,923      213,149

 Deferred items:
  Income taxes                                  --        8,380
  Gains from sale/leasebacks                14,888       16,196
  Other                                      6,788        5,292
                                         ---------    ---------
   Total deferred items                     21,676       29,868

 Shareholders' Equity:
  Common stock, Classes A and B             26,706       26,699
  Retained earnings                         89,773      130,520
  Treasury stock, at cost                  (15,616)     (15,876)
  Deferred cost restricted stock                --         (120)
  Notes receivable stock purchases             (11)         (11)
  Accumulated other comprehensive loss     (13,886)     (17,302)
                                         ---------    ---------
   Total shareholders' equity               86,966      123,910
                                         ---------    ---------
    Total Liabilities and
     Shareholders' Equity                $ 509,464    $ 577,825
                                         =========    =========


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

                                                 12 Weeks Ended      
                                             ---------------------
                                              June 24,    June 25,
                                                2006        2005
                                                ----        ----

 Sales and other revenues                    $ 400,714   $ 409,780
 Gains from sales of property                      928          --
                                             ---------   ---------
 Total revenues                                401,642     409,780
 Cost of merchandise sold, including
  warehousing and transportation,
  excluding depreciation                       284,336     287,354
                                             ---------   ---------
 Gross profit                                  117,306     122,426
 Selling, general and administrative           104,031     111,065
 Depreciation                                    6,043       5,972
 Restructuring costs                               134          --
                                             ---------   ---------
 Operating income                                7,098       5,389
 Interest                                        5,375       4,447
 Other non-operating income                         --        (119)
                                             ---------   ---------
 Income before income taxes                      1,723       1,061
 Income taxes                                      546         387
                                             ---------   ---------
 Net income                                  $   1,177   $     674
                                             =========   =========

 Earnings per common share:
 Basic                                       $     .15   $     .09
 Diluted                                           .15         .08

 Dividends declared per share                $      --   $     .13

 Basic weighted average shares outstanding       7,920       7,897
 Diluted weighted average shares
  outstanding                                    7,959       8,004


                           MARSH SUPERMARKETS, INC.
            RECONCILIATION OF SALES AND OTHER COMPARABLE REVENUES
            -----------------------------------------------------
                               (In thousands)
                                (Unaudited)

                                                    12 Weeks Ended
                                                ---------------------
                                                 June 24,    June 25,
                                                   2006        2005
                                                   ----        ----

 Total revenues                                 $ 401,642   $ 409,780
 Less: other revenues, non-comparable sales,
  and gains from sales of property (a)             31,693      29,823
                                                ---------   ---------
 Comparable supermarket and convenience store
  sales                                           369,949     379,957
 Less: comparable gasoline sales (b)               46,707      40,022
                                                ---------   ---------
 Comparable supermarket and convenience store
  merchandise sales (c)                         $ 323,242   $ 339,935
                                                =========   =========



 (a) Other revenues and non-comparable sales include sales and
     revenues of both Crystal Foodservice and McNamara, as
     well as supermarket and convenience store revenues from video
     rental, lottery tickets, check cashing fees and other sources.

 (b) The Company excludes gasoline sales from its analysis of
     comparable store sales because retail gasoline prices fluctuate
     widely and frequently, making analytical comparisons difficult.

 (c) Comparable stores include stores open at least one full year,
     replacement stores and format conversions.


        

Contact Data