UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 1, 2005

Commission File Number 0-1532

MARSH SUPERMARKETS, INC.

9800 CROSSPOINT BOULEVARD

(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.

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

     Number of shares outstanding of each class of the registrant’s common stock as of February 3, 2005:

Table of Contents

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

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

See notes to condensed consolidated financial statements.

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MARSH SUPERMARKETS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)

See notes to condensed consolidated financial statements.

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

See notes to condensed consolidated financial statements.

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

January 1, 2005

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 accounting principles generally accepted in the United States. This report should be read in conjunction with the Company’s Consolidated Financial Statements for the year ended March 27, 2004. The balance sheet at March 27, 2004, 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 “2005” and “2004” relate to the fiscal years ending April 2, 2005, and March 27, 2004, respectively.

The condensed consolidated financial statements for the twelve and forty week periods ended January 1, 2005, and January 3, 2004, 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.

Operating results for the twelve and forty week periods ended January 1, 2005, are not necessarily indicative of the results that may be expected for the full fiscal year ending April 2, 2005.

Note B — Earnings 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:

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Note C — Stock Option Plans

The Company’s stock option plans are accounted for under the intrinsic value method of APB Opinion 25 and related interpretations. Since the exercise price of options granted under the plans is equal to the market price of the underlying common stock on the grant date, no stock-based compensation cost is recognized in net income.

The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of FAS 123:

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Note D — Long-Term Debt and Guarantor Subsidiaries

Other than three minor 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 its 8 7/8% senior subordinated notes. The Guarantors are wholly-owned subsidiaries of the Company.

Balance sheet as of January 1, 2005:

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Balance sheet as of March 27, 2004:

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Statement of income for the 12 weeks ended January 1, 2005:

Statement of income for the 12 weeks ended January 3, 2004:

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Statement of income for the 40 weeks ended January 1, 2005:

Statement of income for the 40 weeks ended January 3, 2004:

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Statement of cash flows for the forty weeks ended January 1, 2005:

Statement of cash flows for the forty weeks ended January 3, 2004:

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Note E — Employee Benefit Plans

The components of net periodic benefit cost for the forty week periods ended January 1, 2005, and January 3, 2004, were as follows:

Note F — Recent Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 123 (revised 2004), “Share-Based Payment”, which revised FASB Statement No. 123, “Accounting for Stock-Based Compensation.” Statement 123(R) supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and amends FASB Statement No. 95, “Statement of Cash Flows.” Statement No. 123(R) requires all share-based payments to employees, including grants of stock options, to be recognized in the income statement based on their fair values; pro forma disclosure is no longer an alternative.

Statement No. 123(R) will be effective for periods beginning after June 15, 2005, and, accordingly, the Company will adopt the statement for its second quarter of fiscal year 2006. The Company expects to adopt Statement No. 123(R) using the modified prospective method, in which compensation cost, if any, will be recognized beginning with the effective date.

As permitted by Statement No. 123, the Company currently accounts for shared-based payments using Opinion 25’s intrinsic value method and, as such, recognizes no compensation cost for employee stock options. The impact of the adoption of Statement No. 123(R) cannot be predicted because it will depend on levels of stock options and any other forms of share-based payments granted in the future. Had the Company adopted Statement No. 123(R) in prior periods, the impact of the standard would have approximated the impact of Statement No. 123 as described in the disclosure of pro forma net income and earnings per share in Note C. However, the Company expects the adoption will not have an immediate material impact on the financial statements as there will be a minimal number of unvested stock options outstanding at the adoption date.

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Note G — Contingencies

A complaint was filed against the Company on August 26, 2004, in the United States District Court for the Southern District of Indiana, Indianapolis Division, entitled C. Alan Marsh v. Marsh Supermarkets, Inc., Cause No. 1:04-CV-1407-SEB-VSS. The case involves claims for breach of contract and civil conversion and seeks damages and treble damages. The Company disputes the plaintiff’s claims and intends to defend this matter vigorously. The Company is unable to estimate the amount or range of potential loss, if any.

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

General

At January 1, 2005, Marsh Supermarkets, Inc. (the “Company” or “Marsh”) operated through wholly-owned subsidiaries 117 supermarkets under the Marsh, LoBill, O’Malia and Arthur’s Fresh Market banners and 162 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 Crystal Food Services, which provides upscale and mid-level catering, vending, concession, coffee roasting and distribution, and business cafeteria management services, and McNamara, which operates eight upscale retail floral shops and one business florist.

Business Overview

Revenues from supermarket operations represented 78.0% of total revenues for the forty weeks ended January 1, 2005, while convenience stores and foodservices contributed 17.2% and 3.7% of revenues, respectively. Sales are generally for cash. Data from various non-affiliated sources reported Marsh supermarkets market share at #1 or #2 in its marketing area as of February 2004.

Market Trends

The Company’s efforts to increase revenues continue to be affected by competitive store openings and remodels and the challenging local economy. At January 1, 2005, there were 12 major competitors’ stores opened or remodeled within the last 12 months. Although the Company believes that the number of competitors’ new store openings has peaked, it is expected that new stores will continue to be opened in the market area. According to U.S. Department of Labor statistics, the combined employment in the five largest cities in central Indiana declined 1.5% from December 2003 to December 2004.

The Company’s ability to increase gross profit rates continues to be a challenge due to competitors’ pricing and promotional activity. Also, recent commodity price increases, particularly in beef and gasoline, have created additional pressures on gross profit rates.

Management Focus

Given the continued pressures on revenues and gross profit rates, the Company’s management continues its focus on merchandising plans, expense reduction, asset management and cash flow.

The Company’s merchandising plan is currently focused on pricing strategies and the enhancement of its price image, increasing sales of its private label products and the effective execution of merchandising programs by store personnel.

The Company continues to pursue the expense reduction initiatives that were initiated in fiscal year 2003. Those initiatives included, among others, changes to employee medical benefits plans, seeking greater efficiencies in store labor scheduling, lowering interest expense by replacing fixed rate debt with lower variable rate debt, pursuing lower costs of goods, supplies and services, in-house handling versus outsourcing of certain support services, and improvements in warehousing and delivery logistics. The initiatives completed to date have partially offset increases in non-controllable and other selling, general and administrative expenses.

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Results of Operations

Results of operations for interim periods do not necessarily reflect the results of operations 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:

Total Revenues

Consolidated total revenues were $403.6 million for the third quarter of 2005, compared to $388.8 million for the third quarter of 2004, with the increase primarily due to new store openings and higher gasoline prices. Gasoline sales were $35.8 million for the third quarter of 2005, compared to $27.4 million for the third quarter of 2004, and consolidated total revenues excluding gasoline sales were $367.8 million and $361.4 million for the third quarter of 2005 and 2004, respectively. The Company excludes gasoline sales from its analysis of revenues and believes it is useful information for investors and the Company because gasoline prices fluctuate widely and frequently. Sales in comparable supermarkets and convenience stores increased 0.6% to $366.6 million from $364.6 million, but sales in comparable stores excluding gasoline declined 1.9% to $332.0 million from $338.3 million. Comparable stores include stores open at least one full year, replacement stores and format conversions. Competitors’ new store openings and continued high levels of competitive promotional activity combined with a weak economy continue to adversely affect comparable store sales.

Consolidated total revenues were $1,328.4 million for the forty weeks ended January 1, 2005, compared to $1,277.6 million for the same period of 2004, with the increase primarily due to new store openings and higher gasoline prices. Gasoline sales were $122.9 million for the forty weeks of 2005, compared to $92.0 million for same period of 2004, and consolidated total revenues excluding gasoline sales were $1,205.5 million and $1,185.6 million for the forty weeks of 2005 and 2004, respectively. Sales in comparable supermarkets and convenience stores increased 1.2% for the forty weeks of 2005 to $1,210.1 million from $1,196.0 million from the same period of 2004, but sales in comparable stores excluding gasoline declined 1.5% to $1,091.5 million from $1,107.9 million.

Gross Profit

Gross profit is calculated net of promotional expenses, and warehousing and transportation, excluding depreciation. Gross profit as a percentage of revenues may not be comparable to other supermarket retailers because the Company does not include purchasing and advertising costs in gross profit. Consolidated gross profit was 29.6% of revenues for the third quarter of 2005, compared to 30.3% for the third quarter of 2004. The rate decline results from higher gasoline sales at a profit rate significantly lower than the profit rates achieved in the Company’s other categories.

Consolidated gross profit as a percentage of revenues was 29.6% for the forty weeks ended January 1, 2005, compared to 30.1% for the same weeks of 2004 with the rate decline attributable to higher gasoline sales.

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Selling, General and Administrative

Selling, general and administrative (SG&A) expenses include store expenses, administrative and corporate expenses, advertising and purchasing personnel costs. Consolidated SG&A expenses increased $1.2 million for the third quarter of 2005 compared to the year earlier quarter due to new stores. As a percentage of total revenues, SG&A expenses were 26.0% in the third quarter of 2005 compared to 26.7% for the third quarter of 2004, with 0.5% of the rate change attributable to higher gasoline sales. Decreases in medical benefit costs and administrative and corporate expenses partially offset higher store expenses. Wage expense in stores open both quarters, excluding supermarket conversions to the LoBill format, decreased 0.7% due to a reduction in hours worked. The continued refinement of store specific labor profiles accounted for the reduction in hours worked.

Consolidated SG&A expenses increased $7.1 million for the forty weeks in 2005 from the comparable weeks in 2004 due to new stores. As a percentage of total revenues SG&A expenses decreased to 26.5% for 2005, compared to 26.9% for 2004 due to higher gasoline sales. In stores open both periods, wage expense for the forty weeks of 2005 declined 2.1% from the forty weeks of 2004 for the reason cited above.

Depreciation

Depreciation was $5.8 million for the third quarters of both 2005 and 2004. Depreciation as a percentage of revenues was 1.4% for the third quarter of 2005 compared to 1.5% for the third quarter of 2004.

For the forty weeks ended January 1, 2005, depreciation was $19.4 million compared to $19.2 million for the forty weeks in 2004. Depreciation as a percentage of revenues was 1.5% for the forty weeks of both 2005 and 2004.

Interest

Interest was $4.5 million for the third quarter of 2005, compared to $4.3 million for the third quarter of 2004. The increase results from a higher interest rate on the revolving credit facility combined with higher average borrowings under the credit facility.

For the forty weeks ended January 1, 2005, interest was $14.5 million, compared to $14.8 million for the forty weeks of 2004. The decline results from the repurchase of $16.75 million of the Company’s 8 7/8% senior subordinated notes during the first half of 2004, net of an increase in interest due to higher borrowing under the revolving credit facility.

Other Non-operating Income

During the first half of 2005, the Company sold its minority interest in a real estate partnership resulting in a gain of $0.8 million.

During the first and second quarters of 2004, the Company purchased and retired $7.25 million and $9.50 million, respectively, of its 8 7/8% senior subordinated notes at less than face value. The purchases resulted in gains of $1.0 million during the forty weeks ended January 3, 2004.

Deferred Pension and Post-retirement Benefits

Deferred pension and post-retirement benefit obligations increased to $46.4 million at January 1, 2005, from $42.7 million at March 27, 2004. The increase is attributable to the recognition of current year expense of the plans.

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Capital Expenditures

The Company’s capital requirements have traditionally been financed through long-term borrowings and lease financing, including capital and operating leases, and internally generated funds.

During the forty weeks ended January 1, 2005, one new Marsh supermarket was opened, two Marsh supermarkets were remodeled, one new LoBill Foods was opened, one Marsh supermarket and one O’Malia store were converted to the LoBill format and a new concept 21,000 square foot Arthur’s Fresh Market was opened. Also, construction began on one new Marsh supermarket and a second Arthur’s market that are scheduled to open during the last quarter of the year. Additionally, during the fourth quarter of 2005, the Company plans to remodel three Marsh supermarkets. The cost of these projects and other capital commitments is estimated to be $68 million. Of this amount, the Company plans to fund $27 million through sale/leasebacks or build-to-suit arrangements, $13 million through equipment leasing and the remainder from internally generated funds. Cash capital expenditures totaled $51 million for the forty weeks ended January 1, 2005.

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 availability and cost of financing, competitive influences, its ability to negotiate successfully 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.

Liquidity and Capital Resources

Net cash provided by operating activities for the forty weeks ended January 1, 2005, was $28.1 million, compared to $36.8 million for the year earlier period. Changes in other assets and liabilities, primarily deferred taxes and inventory, provided $2.9 million of cash in 2005 compared to $10.4 million in 2004. Working capital increased $14.0 million to $72.0 million from March 27, 2004. Changes in working capital included a $19.7 million increase in cash and equivalents, of which $15.0 million was used to reduce revolving credit facility borrowings subsequent to January 1, 2005. Accrued liabilities increased $4.3 million due primarily to amounts accrued that are paid subsequent to January 1, 2005, including property taxes, vacation pay and store management incentive compensation.

The Company has a revolving credit facility that permits total borrowings of up to $82.5 million. Amounts borrowed are for terms selected by the Company at the time of borrowing. Interest rates are based on LIBOR or floating prime rate, and principal and interest are payable at maturity. Commitment fees of 0.5% are paid on unused amounts and the facility matures in February 2006. The Company had borrowings of $65.0 million under the facility at January 1, 2005. The credit facility is secured by land and buildings having a net carrying cost of $67.9 million at January 1, 2005, and the facility contains certain debt covenants, including limits on future indebtedness, cash dividends, repurchases of common stock and disposition of assets. Under the most restrictive debt covenant, the Company would have had additional permitted borrowing of $17.5 million as of January 1, 2005.

In November 2004, Standard and Poor’s (S&P) Ratings Services placed its ratings on the Company on CreditWatch with negative implications. S&P stated it will resolve the CreditWatch listing after further discussions with management regarding the Company’s financial plans. S&P also indicated that the Company’s B+ corporate credit rating might be lowered by one notch. The Company does not anticipate any current material adverse effects from the downgrade, including no changes in borrowing capacity or interest rates.

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Critical Accounting Policies

The preparation of financial statements requires management to make assumptions and estimates that could have a material impact on the reported results of operations. Although management applies its judgment based on assumptions believed to be reasonable under the circumstances, actual results could vary from those assumptions and it is possible that materially different amounts would be reported using different assumptions.

The Company is self-insured for most healthcare, workers compensation and general liability claims. Reported claims and related loss reserves are estimated by third party administrators and utilized by management to develop appropriate accruals. Claims incurred but not reported are recorded based on historical experience and industry trends, which are regularly monitored, and accruals are adjusted when warranted by changes in facts and circumstances.

Pension and other retirement plans are administered by the Retirement Committee of the Employees’ Pension Plan of Marsh Supermarkets, Inc. and Subsidiaries. An independent financial consulting firm is engaged to advise the Retirement Committee regarding investment manager performance and independent actuaries are consulted to assist in determining appropriate assumptions and are engaged to calculate estimated future obligations under the various plans.

Long-lived assets are depreciated over estimated useful lives based on the Company’s historical experience and prevailing industry practice. Estimated useful lives are periodically reviewed to ensure they remain appropriate. Long-lived assets are tested for impairment whenever an event occurs that indicates an impairment may exist.

Income tax assets and liabilities are recognized generally based upon tax statutes, regulations and case law, but also include estimates. The estimated amounts are reviewed periodically and adjusted based upon factual changes and the related impact on management’s judgment.

The Company receives allowances and credits from many of the vendors whose products the Company purchases for resale. Allowances related to a specific purchase quantity are recorded as a component of item cost inventory and recognized in merchandise costs when the item is sold. Other allowances include consideration received for new item introduction, item shelf placement and temporary retail price reduction. Due to system constraints and the nature of certain of these allowances, it is sometimes not practicable to apply allowances to the item cost of inventory. In those instances, the allowances are applied as a reduction of merchandise costs using a systematic and rational methodology, which results in the recognition of these incentives when the related merchandise is sold.

Notes and accounts receivable are reviewed for collectibility on a regular and periodic basis. Valuation allowances are adjusted for small recurring type transactions based on past experience, while large notes and amounts receivable are reviewed and adjusted on a specific transaction basis.

In light of recent industry communications, including a February 7, 2005, letter from the Chief Accountant of the Securities and Exchange Commission to the Chairman, Center for Public Company Audit Firms, the Company is reviewing certain aspects of its accounting for leases and leasehold improvements to determine whether certain changes in its accounting that may accelerate the recognition of rent and depreciation expenses are required by GAAP. The Company is discussing these matters with its independent auditors and has not reached a conclusion regarding whether a change is required or the amount of any such change. Based on a preliminary analysis, the Company believes that any adjustments that may result from its review would not affect cash flows and would not be material to its financial condition. The Company expects to complete its review during its fourth quarter ending April 2, 2005.

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: the entry of new competitive stores and their impact on the Company; the Company’s ability to improve comparable store sales; the level of discounting and promotional spending by competitors; the stability and timing of distribution incentives from suppliers; the level of margins achievable in the Company’s operating divisions; softness in the local and national economies and the general retail food industry; the success of the Company’s new and remodeled stores, including image and rebranding programs; potential interest rate increases on variable rate debt, as well as terms, costs and the availability of capital; the Company’s ability to control employee medical costs; uncertainties regarding future real estate gains due to limited real estate holdings available for sale; the ability of the Company to predict and respond to changes in customer preferences and lifestyles; the ability of the Company to respond to commodity price fluctuations; uncertainties regarding gasoline prices and margins;

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the Company’s ability to control costs including labor, rent, credit card, and workers compensation and general liability expense; the Company’s ability to implement cost improvement initiatives; uncertainties related to state and federal taxation and tobacco and environmental legislation; the Company’s ability to collect outstanding notes and accounts receivable; uncertainties associated with pension and other retirement obligations; the successful economic implementation of new technology; uncertainties related to the outcome of pending litigation; uncertainties regarding the outcome of the Company’s review of certain aspects of lease and leasehold accounting; the impact of any acquisitions and dispositions; the timely and on budget completion of store construction, expansion, 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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company, as a policy, does not engage in significant speculative or derivative transactions, nor does it hold or issue financial instruments for trading purposes. The Company is exposed to changes in interest rates primarily as a result of its borrowing activities. Based on interest rates at January 1, 2005, a one percent change in interest rates would not have had a material impact on the Company.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Chief Executive Officer and the Chief Financial Officer carried out an evaluation of the effectiveness of the Company’s “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report. Based on that evaluation, these officers have concluded that as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective and designed to ensure that material information relating to the Company would be made known to them by others within the Company on a timely basis.

Internal Control over Financial Reporting

There was no change in the Company’s internal control over financial reporting during the quarter ended January 1, 2005, that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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Part II Other Information

Item 1. Legal Proceedings

     Not Applicable.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

     In July 1994, the Board of Directors announced a plan for the repurchase of its Class A Common Stock and/or Class B Common Stock. The amount originally authorized has been subsequently amended, most recently to $18.0 million. Share repurchases during the twelve weeks ended January 1, 2005, were as follows:

     All of the share purchases during the twelve weeks ended January 1, 2005, were made under the plan. At January 1, 2005, the maximum amount that may yet be purchased under the plan was $0.9 million. The plan does not have a specified termination date.

Item 3. Defaults upon Senior Securities

     Not Applicable.

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

     Not Applicable.

Item 5. Other Information

     Not Applicable.

Item 6. Exhibits

The following exhibits are included herein:

	31.1	Rule 13(a)-14(a)/15(d)-14(a) Certification of Don E. Marsh.
	31.2	Rule 13(a)-14(a)/15(d)-14(a) Certification of Douglas W. Dougherty.
	32.1	Section 1350 Certification of Don E. Marsh.
	32.2	Section 1350 Certification of Douglas W. Dougherty.

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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.

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