MARSA Marsh Supermarkets

INDIANAPOLIS, Nov. 29 /PRNewswire-FirstCall/ -- Marsh Supermarkets, Inc. (NASDAQ:MARSANASDAQ:MARSB), today reported its financial results for the second fiscal quarter ended October 15, 2005. The Company reported a net loss of ($3.4) million compared to net income of $1.3 million for the same period last year. Losses per diluted common share were ($.43) compared to earnings per diluted common share of $0.16 last year. The Company attributed the losses to lower contribution from comparable stores (stores open during both quarters), startup and operating losses of new stores, and higher general and administrative expenses. Total revenues for the quarter increased to $549.6 million from $524.9 million for the prior year quarter. Sales in comparable supermarkets and convenience stores increased 3.6% in the second quarter of 2006 from the same period in 2005, but comparable store merchandise sales, which exclude gasoline sales, declined 0.7%. 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 attached schedule reconciling comparable store sales and comparable store merchandise sales). Engagement of Financial Advisor The Company also announced that it had retained Merrill Lynch & Co. to explore strategic alternatives for the enhancement of shareholder value, including a possible sale of the Company. The Company has authorized Merrill Lynch to contact a limited number of prospective strategic and financial purchasers and provide such information as determined to be necessary and/or appropriate. However, there can be no assurance that the Company will consummate a sale or other strategic alternative. The Company stated that it does not expect to update its progress or disclose developments with respect to the exploration of strategic alternatives unless and until the Board of Directors has approved a definitive transaction. Suspension of Dividends The Company also announced that the Board of Directors had determined to suspend the payment of future cash quarterly dividends on Company common stock until the Company improves its financial performance and its credit ratios on a sustainable basis. New Credit Agreement The Company also announced that on November 9, 2005, the Company and its subsidiaries entered into a new five-year $95 million revolving credit facility with a group of lenders led by Bank of America, N.A. The new credit facility is secured by eligible receivables, inventory, certain real estate and other fixed assets. The Company borrowed approximately $51 million to repay the previous credit facility that was scheduled to expire in February 2006. The agreement for the new credit facility contains covenants and events of default that are customary for a credit facility of this kind. Statement from Management "We are clearly disappointed with the loss reported for the quarter," stated Don E. Marsh, Chairman and Chief Executive Officer. "The positive developments of recording our sixth consecutive quarter of increases in sales from comparable stores and the new credit facility were outweighed by a number of negative factors." "During the past several months, management has been working diligently to reduce costs during a time of increasing competition, and while we believe our initiatives will improve profitability, our responsibility is to consider the best interests of our employees, the communities we serve and, above all, our shareholders. One of the strategic alternatives that we believe should be considered would be the possible sale of the Company to the right party. For this reason, we have authorized Merrill Lynch to investigate the potential of such a transaction as an integral part of our considerations." About Marsh Supermarkets, Inc. Marsh is a leading regional chain, operating 70 Marsh(R) supermarkets, 38 LoBill(R) Foods stores, 8 O'Malia(R) Food Markets, 160 Village Pantry(R) convenience stores, 2 Arthur's Fresh Market(R) stores, and 1 Savin*$(SM), in Indiana and western Ohio. The Company also operates Crystal Food Services(SM), which provides upscale catering, cafeteria management, office coffee, coffee roasting, vending and concessions, and restaurant management and Primo Banquet 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. MARSH SUPERMARKETS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) October 15, October 9, 2005 2004 Assets Current assets: Cash and equivalents $51,038 $37,188 Accounts receivable, net 20,984 19,944 Inventories 133,489 130,059 Prepaid expenses 5,617 5,232 Recoverable income taxes 3,572 4,647 Total current assets 214,700 197,070 Property and equipment, less allowances for depreciation 317,575 303,528 Other assets 47,593 55,526 Total Assets $579,868 $553,124 Liabilities and Shareholders' Equity Current liabilities: Accounts payable 80,096 74,981 Accrued liabilities 58,122 53,826 Current maturities of long-term liabilities 69,047 5,255 Total current liabilities 207,264 134,062 Long-term liabilities: Long-term debt 131,879 179,597 Capital lease obligations 42,117 27,767 Pension and post-retirement benefits 50,642 45,176 Total long-term liabilities 224,638 252,540 Deferred items: Income taxes 7,961 18,558 Gains from sale/leasebacks 15,805 14,975 Other 4,749 4,403 Total deferred items 28,515 37,936 Shareholders' Equity: Common stock, Classes A and B 26,660 26,615 Retained earnings 126,079 131,683 Cost of common stock in treasury (15,938) (15,656) Deferred cost - restricted stock (37) (170) Notes receivable - stock purchases (11) (11) Accumulated other comprehensive loss (17,302) (13,875) Total shareholders' equity 119,451 128,586 Total Liabilities and Shareholders' Equity $579,868 $553,124 MARSH SUPERMARKETS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) (Unaudited) 16 Weeks Ended 28 Weeks Ended Oct. 15, Oct. 9, Oct. 15, Oct. 9, 2005 2004 2005 2004 Sales and other revenues $549,103 $524,074 $958,883 $923,470 Gains from sales of property 532 818 532 1,274 Total revenues 549,635 524,892 959,415 924,744 Cost of merchandise sold, including warehousing and transportation, excluding depreciation 390,200 370,200 677,554 651,323 Gross profit 159,435 154,692 281,861 273,421 Selling, general and administrative 150,259 139,996 261,324 246,035 Depreciation 8,151 7,787 14,123 13,572 Operating income 1,025 6,909 6,414 13,814 Interest 6,254 5,704 10,701 9,987 Other non-operating income (264) (838) (383) (838) Income before income taxes (4,965) 2,043 (3,904) 4,665 Income taxes (1,549) 739 (1,162) 1,743 Net income $(3,416) $1,304 $(2,742) $2,922 Earnings per common share: Basic $(.43) $.17 $(.35) $.37 Diluted (.43) .16 (.35) .36 Dividends declared per share .13 .13 .26 .26 MARSH SUPERMARKETS, INC. RECONCILIATION OF SALES AND OTHER COMPARABLE REVENUES ($000) October 15, 2005 October 9, 2004 Year to Date Total revenues $959,415 $924,744 Less: other revenues, non-comparable sales and gains from sales of property (a) 73,137 61,915 Comparable supermarket and convenience store sales 886,278 862,829 Less: comparable gasoline sales 109,520 85,030 Comparable supermarket and convenience store merchandise sales (b) $776,758 $777,799 2nd Quarter Total revenues $549,635 $524,892 Less: other revenues, non-comparable sales and gains from sales of property (a) 42,367 35,098 Comparable supermarket and convenience store sales 507,268 489,794 Less: comparable gasoline sales 68,455 47,972 Comparable supermarket and convenience store merchandise sales (b) $438,813 $441,822 (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. Comparable stores include stores open at least one full year, replacement stores and format conversions. DATASOURCE: Marsh Supermarkets, Inc. CONTACT: Investor Contact: John Elbin, +1-317-594-2627, or Media Contact: Jodi Marsh, +1-317-594-2640, for Marsh Supermarkets, Inc.

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