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INDIANAPOLIS -- After three consecutive quarters of losses, Marsh Supermarkets, Inc. here turned a profit during the 12-week period ended June 24.
The chain, which has agreed to be acquired by an affiliate of Sun Capital Partners Group IV, Inc. in a deal valued at almost $89 million, said cost-cutting measures across the board enabled it to nearly double its net profit in spite of a decline in sales.
Marsh said net income for the first quarter of fiscal 2007 was $1.1 million, or 15 cents per diluted share, vs. $674,000, or eight cents per diluted share, for the first quarter of fiscal 2006. Operating income for the 2007 quarter was $7.1 million, which represented an increase of $1.7 million, or 31.7 percent, over the fiscal 2006 quarter. Meanwhile Marsh's total revenues were $401.6 million, vs. $409.8 million for the first quarter of fiscal 2006.
"We are pleased to report a profit after three consecutive quarters of losses," said Don E. Marsh, chairman and c.e.o. "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.'"
Same-store supermarket and convenience store sales for quarter dipped 2.6 percent below sales for the same period last year, while comparable-store merchandise sales in the first quarter, which exclude gasoline sales, decreased 5 percent from last year's same-quarter period. Marsh said high levels of competitive promotional activity and competitors' new-store openings continue to affect comparable-store sales adversely.
The chain's selling, general, and administrative expenses were $104 million for the quarter ended June 24 which represented a decrease of $7 million over the first quarter of the prior fiscal year. The chain said the decrease came about as a result of reductions in certain executive compensation plans, efficiencies gained in advertising and store wages, and the closing of two supermarkets and six c-stores since last year.
The company said that it also improved its liquidity during the quarter, as evidenced by unused borrowing capacity under its revolving credit facility of $60 million, up from $49.3 million on April 1.
Subsequent to the end of the quarter, as part of its ongoing efforts to reduce expenses and to improve its financial condition, Marsh negotiated a termination of the lease for its Naperville, Ill. store, which closed July 22. In connection with the closing of the Naperville store, the company said it expects to incur accounting charges of approximately $5 million in the second quarter of fiscal 2007.
Last week a Hamilton County Superior Court judge ruled that Marsh couldn't seek a higher bidder and must move forward with its sale to Florida-based Sun Capital Partners. Marsh sought clarification from the court after being pursued by Drawbridge Special Opportunities Advisors and Cardinal Paragon.
Marsh operates 68 Marsh supermarkets, 38 LoBill Foods stores, eight O'Malia Food Markets, 154 Village Pantry convenience stores, and two Arthur's Fresh Market stores in Indiana and western Ohio. The company also operates Crystal Food Services and Primo Banquet Catering and Conference Centers, Floral Fashions, McNamara Florist, and Enflora -- Flowers for Business.