Marsh Supermarkets, Inc. Announces Loss of $3.4 Million for Second Fiscal Quarter, Engagement of Financial Advisor, Intention to

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, [phone], or Media Contact:

Jodi Marsh, [phone], for Marsh Supermarkets, Inc.

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