UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

þ		ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 0-785

NASH-FINCH COMPANY

Delaware		41 -0431960
(State of Incorporation)		(I.R.S. Employer Identification No.)
7600 France Avenue South		55440-0355
P.O. Box 355		(Zip Code)
Minneapolis, Minnesota
(Address of principal executive offices)

Registrant’s telephone number, including area code: (952) 832-0534

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act.
Yes o No þ

Indicate by check mark whether the 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 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the proceeding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a small reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “small reporting company” in Rule 12b-2 of the Securities Exchange Act.

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o
				Do not check if a smaller reporting company.

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act). Yes o No þ

The aggregate market value of the voting stock held by non-affiliates of the Registrant as of June 19, 2010 (the last business day of the Registrant’s most recently completed second fiscal quarter) was $450,761,160, based on the last reported sale price of $36.37 on that date on NASDAQ.

As of February 22, 2011, 12,108,622 shares of Common Stock of the Registrant were outstanding.

Portions of the Registrant’s definitive Proxy Statement for its Annual Meeting of Stockholders to be held on May 18, 2011 (the “2011 Proxy Statement”) are incorporated by reference into Part III of this report, as specifically set forth in Part III.

 

 

Nash Finch Company

Index

		Page No.
Part I
Forward-Looking Information			3
Item 1. Business			4
Item 1A. Risk Factors			10
Item 1B. Unresolved Staff Comments			16
Item 2. Properties			16
Item 3. Legal Proceedings			18
Item 4. (Removed and Reserved)			19
Part II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			19
Item 6. Selected Financial Data			22
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations			23
Item 7A. Quantitative and Qualitative Disclosures about Market Risk			40
Item 8. Financial Statements and Supplementary Data			41
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			82
Item 9A. Controls and Procedures			82
Item 9B. Other Information			85
Part III
Item 10. Directors, Executive Officers and Corporate Governance			85
Item 11. Executive Compensation			87
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			87
Item 13. Certain Relationships and Related Transactions and Director Independence			88
Item 14. Principal Accountant Fees and Services			88
Part IV
Item 15. Exhibits and Financial Statement Schedules			88
SIGNATURES			95
Exhibit 3.10
Exhibit 10.31
Exhibit 12.1
Exhibit 21.1
Exhibit 23.1
Exhibit 23.2
Exhibit 24.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1

Nash Finch Company

PART I

     Throughout this report, we refer to Nash-Finch Company, together with its subsidiaries, as “we,” “us,” “Nash Finch” or “the Company.”

Forward-Looking Information

     This report, including the information that is or will be incorporated by reference into this report, contains forward-looking statements that relate to trends and events that may affect our future financial position and operating results. Such statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The statements in this report that are not historical in nature, particularly those that use terms such as “may,” “will,” “should,” “likely,” “expect,” “anticipate,” “estimate,” “believe” or “plan,” or comparable terminology, are forward-looking statements based on current expectations and assumptions, and entail various risks and uncertainties that could cause actual results to differ materially from those expressed in such forward-looking statements. Important factors known to us that could cause material differences include the following:

•		the effect of competition on our food distribution, military and retail businesses;
•		general sensitivity to economic conditions, including the uncertainty related to the current state of the economy in the U.S. and worldwide economic slowdown; disruptions to the credit and financial markets in the U.S. and worldwide; changes in market interest rates; continued volatility in energy prices and food commodities;
•		macroeconomic and geopolitical events affecting commerce generally;
•		changes in consumer buying and spending patterns;
•		our ability to identify and execute plans to expand our food distribution, military and retail operations;
•		possible changes in the military commissary system, including those stemming from the redeployment of forces, congressional action and funding levels;
•		our ability to identify and execute plans to improve the competitive position of our retail operations;
•		the success or failure of strategic plans, new business ventures or initiatives;
•		our ability to successfully integrate and manage current or future businesses we acquire, including the ability to manage credit risks and retain the customers of those operations;
•		changes in credit risk from financial accommodations extended to new or existing customers;
•		significant changes in the nature of vendor promotional programs and the allocation of funds among the programs;
•		limitations on financial and operating flexibility due to debt levels and debt instrument covenants;
•		legal, governmental, legislative or administrative proceedings, disputes, or actions that result in adverse outcomes;
•		failure of our internal control over financial reporting;
•		changes in accounting standards;
•		technology failures that may have a material adverse effect on our business;
•		severe weather and natural disasters that may impact our supply chain;
•		unionization of a significant portion of our workforce;
•		costs related to a multi-employer pension plan which has liabilities in excess of plan assets;
•		changes in health care, pension and wage costs and labor relations issues;
•		product liability claims, including claims concerning food and prepared food products;
•		threats or potential threats to security;
•		unanticipated problems with product procurement; and
•		maintaining our reputation and corporate image.

     A more detailed discussion of many of these factors is contained in Part I, Item 1A, “Risk Factors,” of this report on Form 10-K. You should carefully consider each of these factors and all of the other information in this report. We undertake no obligation to revise or update publicly any forward-looking statements. You are advised, however, to consult any future disclosures we make on related subjects in future reports to the Securities and Exchange Commission (“SEC”).

ITEM 1. BUSINESS

     Originally established in 1885 and incorporated in 1921, we are the second largest publicly traded wholesale food distributor in the United States, in terms of revenue, serving the retail grocery industry and the military commissary and exchange systems. Our sales in fiscal 2010 were approximately $5.0 billion. Our business currently consists of three primary operating segments: military food distribution, food distribution and retail. Financial information about our business segments for the three most recent fiscal years is contained in Part II, Item 8 of this report under Note (18) — “Segment Information” in the Notes to Consolidated Financial Statements.

     In November 2006, we announced the launch of a strategic plan, Operation Fresh Start, designed to sharpen our focus and provide a strong platform to support growth initiatives. Our strategic plan is built upon extensive knowledge of current industry, consumer and market trends, and is formulated to differentiate the Company. The strategic plan includes long-term initiatives to increase revenues and earnings, improve productivity and cost efficiencies of our Military, Food Distribution and Retail business segments, and leveraging our corporate support services. The Company has strategic initiatives to improve working capital, manage debt, and increase shareholder value through capital expenditures with acceptable returns on investment. Several important elements of the strategic plan include:

	•		Supply chain services focused on supporting our businesses with warehouse management, inbound and outbound transportation management and customized solutions for each business;
	•		Growing the Military business segment through acquisition and expansion of products and services, as well as creating warehousing and transportation cost efficiencies with a long-term distribution center strategic plan;
	•		Providing our independent retail customers with high level of order fulfillment, broad product selection including leveraging the Our Family brand , support services emphasizing best-in-class offerings in marketing, advertising, merchandising, store design and construction, market research, retail store support, retail pricing and license agreement opportunities; and
	•		Retail formats designed to appeal to the needs of today’s consumers.

     The strategic plan includes the following long-term financial targets:

	•		2% organic revenue growth
	•		4% Consolidated EBITDA1 as a percentage of sales
	•		10% trailing four quarters Free Cash Flow as a percentage of Net Assets2
	•		2.5 to 3.0x total leverage ratio (i.e., total debt divided by trailing four quarters Consolidated EBITDA)

     We have made significant progress towards achieving our long-term financial targets. From fiscal 2006 to the end of fiscal 2010, our Consolidated EBITDA margin improved from 2.2% of sales to 2.8% of sales and the debt leverage ratio has improved by nearly one full turn of Consolidated EBITDA from 3.11x to 2.29x. The ratio of free cash flow to net assets metric was 0.9% in fiscal 2010, however, excluding strategic investments made during the year, primarily associated with the expansion of our military food distribution business, our free cash flow to net assets metric was 8.4%. The organic revenue growth metric has been negatively affected by the economic environment in fiscal 2010 and was negative 5.4%.

     During fiscal 2010, we continued expansion activities associated with our military food distribution business, including our Columbus, Georgia facility becoming operational, and our purchases of new properties in Bloomington, Indiana and two adjacent facilities in Oklahoma City, Oklahoma, while continuing to maintain

conservative debt levels in relation to our strategic target. Additionally, we continued cost reduction and working capital initiatives during a challenging business environment. In addition to the strategic initiatives already in progress, our 2011 initiatives include the following:

	•		Continued implementation of our military distribution center network expansion.
	•		Execute supply chain and center store initiatives within our food distribution segment.
	•		Implement cost reduction and profit improvement initiatives.
	•		Identify acquisitions that support our strategic plan.

     Additional description of our business is found in Part II, Item 7 of this report.

Military Segment

     Our military segment is one of the largest distributors, by revenue, of grocery products to U.S. military commissaries and exchanges. On January 31, 2009, the Company completed the purchase from GSC Enterprises, Inc., of substantially all of the assets relating to three wholesale food distribution centers located in San Antonio, Texas, Pensacola, Florida and Junction City, Kansas, including all inventory and customer contracts related to the purchased facilities. On December 1, 2009, we purchased a facility in Columbus, Georgia, which began servicing military commissaries and exchanges in the third quarter of fiscal 2010. During the third quarter of fiscal 2010, we purchased a facility in Bloomington, Indiana and two adjacent facilities in Oklahoma City, Oklahoma for expansion of our military food distribution business. The Bloomington, Indiana facility became operational during the fourth quarter of fiscal 2010, while the Oklahoma City, Oklahoma facilities are scheduled to become operational during fiscal 2012. In addition, we purchased the real estate associated with our Pensacola, Florida facility, which had previously been a leased facility, during the third quarter of fiscal 2010.

     We serve 181 military commissaries and over 200 exchanges located in 33 states across the United States and the District of Columbia, Europe, Puerto Rico, Cuba, the Azores and Egypt. Our military distribution centers are exclusively dedicated to supplying products to military commissaries and exchanges. These distribution centers are strategically located among the largest concentration of military bases in the areas we serve and near Atlantic ports used to ship grocery products to overseas commissaries and exchanges. We have an outstanding reputation as a distributor focused exclusively on U.S. military commissaries and exchanges, based in large measure on our excellent service metrics, which include fill rate, on-time delivery and shipping accuracy.

     The Defense Commissary Agency, also known as DeCA, operates a chain of commissaries on U.S. military installations throughout the world. DeCA contracts with manufacturers to obtain grocery and related products for the commissary system. Manufacturers either deliver the products to the commissaries themselves or, more commonly, contract with distributors such as us to deliver the products. These distributors act as drayage agents for the manufacturers by purchasing and maintaining inventories of products DeCA purchases from the manufacturers, and providing handling, distribution and transportation services for the manufacturers. Manufacturers must authorize the distributors as their official representatives to DeCA, and the distributors must adhere to DeCA’s frequent delivery system procedures governing matters such as product identification, ordering and processing, information exchange and resolution of discrepancies. We obtain distribution contracts with manufacturers through competitive bidding processes and direct negotiations.

     As commissaries need to be restocked, DeCA identifies each manufacturer with which an order is to be placed for additional products, determines which distributor is the manufacturer’s official representative in a particular region, and places a product order with that distributor under the auspices of DeCA’s master contract with the applicable manufacturer. The distributor selects that product from its existing inventory, delivers it to the commissary or commissaries designated by DeCA, and bills the manufacturer for the product shipped. The manufacturer then bills DeCA under the terms of its master contract. Overseas commissaries are serviced in a similar fashion, except that a distributor’s responsibility is to deliver products as and when needed to the port designated by DeCA, which in turn bears the responsibility for shipping the product to the applicable commissary or overseas warehouse.

     After we ship a particular manufacturer’s products to commissaries in response to an order from DeCA, we invoice the manufacturer for the product price plus a service and or drayage fee that is typically

based on a percentage of the purchase price, but may in some cases be based on a dollar amount per case or pound of product handled. Our order handling and invoicing activities are facilitated by a procurement and billing system developed specifically for the military business, which addresses the unique aspects of its business, and provides our manufacturer customers with a web-based, interactive means of accessing critical order, inventory and delivery information.

     We have approximately 600 distribution contracts with manufacturers that supply products to the DeCA commissary system and various exchange systems. These contracts generally have an indefinite term, but may be terminated by either party without cause upon 30 days prior written notice to the other party. The contracts typically specify the commissaries and exchanges we are to supply on behalf of the manufacturer, the manufacturer’s products to be supplied, service and delivery requirements and pricing and payment terms. Our ten largest manufacturer customers represented approximately 43% of the military segment’s fiscal 2010 sales.

Food Distribution Segment

     Our food distribution segment sells and distributes a wide variety of nationally branded and private label grocery products and perishable food products from 14 distribution centers to approximately 1,800 independent retail locations located in 28 states across the United States. During the third quarter of fiscal 2010, we closed our food distribution center in Bridgeport, Michigan at the end of its lease term. Our customers are relatively diverse with the largest customer, excluding our corporate-owned stores, consisting of a consortium of stores representing 7.6%, and two others representing 5.6% and 3.5%, of our fiscal 2010 food distribution sales. No other customer represents greater than 3.0% of our food distribution business.

     Our distribution centers are strategically located to efficiently serve our independent customer stores and our corporate-owned stores. The distribution centers are equipped with modern materials handling equipment for receiving, storing and shipping merchandise and are designed for high volume operations at low unit costs. We continue to implement operating initiatives to enhance productivity and expand profitability while providing a higher level of service to our distribution customers. Our distribution centers have varying levels of available capacity giving us enough flexibility to service additional customers by leveraging our existing fixed cost base, which can enhance our profitability.

     Depending upon the size of the distribution center and the profile of the customers served, our distribution centers typically carry a full line of national brand and private label grocery products and perishable food products. Non-food items and specialty grocery products are distributed from two distribution centers located in Bellefontaine, Ohio and Sioux Falls, South Dakota. We currently operate a fleet of tractors and semi-trailers that deliver the majority of our products to our customers. Approximately 23% of deliveries are made through contract carriers.

     Our retailers order their inventory at regular intervals through direct linkage with our information systems. Our food distribution sales are made on a market price plus fee and freight basis, with the fee based on the type of commodity and quantity purchased. We adjust our selling prices based on the latest market information, and our freight policy contains a fuel surcharge clause that allows us to mitigate the impact of rising fuel costs.

     Products

     We primarily sell and distribute nationally branded products and a number of unbranded products, principally meat and produce, which we purchase directly from various manufacturers, processors and suppliers or through manufacturers’ representatives and brokers. We also sell and distribute high quality private label products under the proprietary trademark Our Family¹, a long-standing brand of Nash Finch that offers an alternative to national brands. In addition, we sell and distribute a premium line of branded products

under the Nash Brothers Trading Company trademark, a lower priced line of private label products under the Value Choice trademark and private label products for two of our independent customer groups. We offer over 3,400 stock-keeping units of competitively priced, high quality grocery products and perishable food products which compete with national branded and other value brand products.

     Services

     To further strengthen our relationships with our food distribution customers, we offer, either directly or through third parties, a wide variety of support services to help them develop and operate stores, as well as compete more effectively. These services include:

	•		promotional, advertising and merchandising programs;
	•		installation of computerized ordering, receiving and scanning systems;
	•		retail equipment procurement assistance;
	•		providing contacts for accounting, budgeting and payroll services;
	•		consumer and market research;
	•		remodeling and store development services;
	•		securing existing grocery stores that are for sale or lease in the market areas we serve and occasionally acquiring or leasing existing stores for resale or sublease to these customers; and
	•		NashNet, which provides supply chain efficiencies through internet services.

     During fiscal 2010 and 2009, 49% of food distribution revenues were from customers with whom we had entered into long-term supply agreements. The long-term supply agreements range from 2 to 20 years. These agreements also may contain provisions that give us the opportunity to purchase customers’ independent retail businesses before any third party.

     We also provide financial assistance to our food distribution customers, primarily in connection with new store development or the upgrading and expansion of existing stores. As of January 1, 2011, we had loans, net of reserves, of $25.6 million outstanding to 33 of our food distribution customers, and had guaranteed outstanding debt and lease obligations of certain food distribution customers in the amount of $9.4 million. We also, in the normal course of business, sublease retail properties and assign retail property leases to third parties. As of January 1, 2011, the present value of our maximum contingent liability exposure, net of reserves, with respect to the subleases and assigned leases was $22.8 million and $8.9 million, respectively.

     We distribute products to independent stores that carry the IGA banner and our proprietary Food Pride banner. We encourage our independent customers to join one of these banner groups to receive many of the same marketing programs and procurement efficiencies available to grocery store chains while allowing them to maintain their flexibility and autonomy as independents. To use either of these banners, these independents must comply with applicable program standards. As of January 1, 2011, we served 107 retail stores under the IGA banner and 58 retail stores under our Food Pride banner.

Retail Segment

     Our retail segment is made up of 52 corporate-owned stores, located primarily in the Upper Midwest, in the states of Colorado, Iowa, Minnesota, Nebraska, North Dakota, Ohio, South Dakota and Wisconsin. Our corporate-owned stores principally operate under the Sun Mart, Econofoods, AVANZA, Family Thrift Center, Pick ‘n Save, Family Fresh Market, Prairie Market and Wholesale Food Outlet banners. Our stores are typically located close to our distribution centers in order to create certain operating and logistical efficiencies. As of January 1, 2011, we operated 45 conventional supermarkets, five AVANZA grocery stores, one Wholesale Food Outlet grocery store and one other retail store. Our retail segment also includes three corporate-owned pharmacies and one convenience store that are not included in our store count.

     Our conventional grocery stores offer a wide variety of high quality grocery products and services. Many have specialty departments such as fresh meat counters, delicatessens, bakeries, eat-in cafes, pharmacies, banks and floral departments. These stores also provide services such as check cashing, fax services and

money transfers. We emphasize outstanding customer service and have created our G.R.E.A.T. (Greet, React, Escort, Anticipate and Thank) Customer Service Program to train every associate (employee) on the core elements of providing exceptional customer service. “The Fresh Place” concept within our conventional grocery stores is an umbrella banner that emphasizes our high quality perishable products, such as fresh produce, deli, meats, seafood, baked goods and takeout foods for today’s busy consumer. The AVANZA grocery stores offer products designed to meet the specific tastes and needs of Hispanic shoppers.

Competition

     Military Segment

     We are one of five distributors with annual sales to the DeCA commissary system in excess of $100 million that distributes products via the frequent delivery system. The remaining distributors that supply DeCA tend to be smaller, regional and local providers. In addition, manufacturers contract with others to deliver certain products, such as baking supplies, produce, deli items, soft drinks and snack items, directly to DeCA commissaries and service exchanges. Because of the narrow margins in this industry, it is of critical importance for distributors to achieve economies of scale, which is typically a function of the density or concentration of military bases within the geographic market(s) a distributor serves, and the distributor’s share of that market. As a result, no distributor in this industry has a nationwide presence. Rather, distributors tend to concentrate on specific regions, or areas within specific regions, where they can achieve critical mass and utilize warehouse and distribution facilities efficiently. In addition, distributors that operate larger non-military specific distribution businesses tend to compete for DeCA commissary business in areas where such business would enable them to more efficiently utilize the capacity of their existing distribution centers. We believe the principal competitive factors among distributors within this industry are customer service, price, operating efficiencies, reputation with DeCA and location of distribution centers. We believe our competitive position is very strong with respect to all these factors within the geographic areas where we compete.

     Food Distribution Segment

     The food distribution segment is highly competitive as evidenced by the low margin nature of the business. Success in this segment is measured by the ability to leverage scale in order to gain pricing advantages and operating efficiencies, to provide superior merchandising programs and services to the independent customer base and to use technology to increase distribution efficiencies. We compete with local, regional and national food distributors, as well as with vertically integrated national and regional chains using a variety of formats, including supercenters, supermarkets and warehouse clubs that purchase directly from suppliers and self-distribute products to their stores. We face competition from these companies on the basis of price, quality, variety, availability of products, strength of private label brands, schedules and reliability of deliveries and the range and quality of customer services.

     Continuing our quality service by focusing on key metrics such as our on-time delivery rate, fill rate, order accuracy and customer service is essential in maintaining our competitive advantage. During fiscal 2010, our distribution centers had an on-time delivery rate, defined as being within ¹/2 hour of our committed delivery time, of 96.8%; and a fill rate, defined as the percentage of cases shipped relative to the number of cases ordered, of 96.6%. We believe we are an industry leader with respect to these key metrics.

     Retail Segment

     Our retail segment is also highly competitive. We compete with many organizations of various sizes, ranging from national and regional chains that operate a variety of formats (such as supercenters, supermarkets, extreme value food stores and membership warehouse club stores) to local grocery store chains and privately owned unaffiliated grocery stores. Although our target geographic areas have a relatively low presence of national and multi-regional grocery store chains, we are facing increasing competitive pressure from the expansion of supercenters and regional chains. During fiscal 2010 and fiscal 2009, there were three and two, respectively, of our stores that were impacted by the opening of new supercenters in their markets and a total of 42 stores as of January 1, 2011, now compete with supercenters. Depending upon the market, we compete based on price, quality and assortment, store appeal (including store location and format), sales promotions, advertising, service and convenience. We believe our ability to provide convenience, outstanding perishable execution and exceptional customer service are particularly important factors in achieving competitive success.

Vendor Allowances and Credits

     We participate with our vendors in a broad menu of promotions to increase sales of products. These promotions fall into two main categories, off-invoice allowances and performance-based allowances, and are often subject to negotiation with our vendors. In the case of off-invoice allowances, discounts are typically offered by vendors with respect to certain merchandise purchased by us during a specified period of time. We use off-invoice allowances to support a variety of marketing programs such as reduced price offerings for specific time periods, food shows, pallet promotions and private label promotions. The discounts are either reflected directly on the vendor invoice, as a reduction from the normal wholesale prices for merchandise to which the allowance applies, or we are allowed to deduct the allowance as an offset against the vendor’s invoice when it is paid.

     In the case of performance-based allowances, the allowance or rebate is based on our completion of some specific activity, such as purchasing or selling product during a certain time period. This basic performance requirement may be accompanied by an additional performance requirement such as providing advertising or special in-store promotions, tracking specific shipments of goods to retailers (or to customers in the case of our own retail stores) during a specified period (retail performance allowances), slotting (adding a new item to the system in one or more of our distribution centers) and merchandising a new item, or achieving certain minimum purchase quantities. The billing for these performance-based allowances is normally in the form of a “bill-back” in which case we are invoiced at the regular price with the understanding that we may bill back the vendor for the requisite allowance when the performance is satisfied. We also assess an administrative fee, reflected on the invoices sent to vendors, to recoup our reasonable costs of performing the tasks associated with administering retail performance allowances.

     We collectively plan promotions with our vendors and arrive at the amount the respective vendor plans to spend on promotions with us. Each vendor has its own method for determining the amount of promotional funds to be spent with us. In most situations, the vendor allowances are based on units we purchased from the vendor. In other situations, the allowances are based on our past or anticipated purchases and/or the anticipated performance of the planned promotions. Forecasting promotional expenditures is a critical part of our frequently scheduled planning sessions with our vendors. As individual promotions are completed and the associated billing is processed, the vendors track our promotional program execution and spend rate, and discuss the tracking, performance and spend rate with us on a regular basis throughout the year. These communications include discussions with respect to future promotions, product cost, targeted retails and price points, anticipated volume, promotion expenditures, vendor maintenance, billing issues and procedures, new items/discontinued items, and trade spend levels relative to budget per event and per year, as well as the resolution of any issues that arise between the vendor and us. In the future, the nature and menu of promotional programs and the allocation of dollars among them may change as a result of our ongoing negotiations and commercial relationships with our vendors.

Trademarks and Servicemarks

     We own or license a number of trademarks, tradenames and servicemarks that relate to our products and services, including those mentioned in this report. We consider certain of these trademarks, tradenames and servicemarks, such as Our Family, Value Choice and Nash Brothers Trading Company, to be of material value to the business conducted by our food distribution and retail segments, and we actively defend and enforce such trademarks, tradenames and servicemarks.

Employees

     As of January 1, 2011, we employed 6,822 persons, of whom 4,474 were employed on a full-time basis and 2,348 employed on a part-time basis. Of our total number of employees, 638 were represented by unions (9.4% of all employees) and consisted primarily of warehouse personnel and drivers in our Ohio and Indiana distribution centers. We consider our employee relations to be good.

Available Information

     Our internet website is www.nashfinch.com. The references to our website in this report are inactive references only, and the information on our website is not incorporated by reference in this report. Through the Investor Relations portion of our website and a link to a third-party content provider (under the tab “SEC Filings”), you may access, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such reports filed or furnished pursuant to Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. We have also posted on the Investor Relations portion of our website, under the caption “Corporate Governance,” our Code of Business Conduct that is applicable to all our directors and employees, as well as our Code of Ethics for Senior Financial Management that is applicable to our Chief Executive Officer, Chief Financial Officer and Corporate Controller. Any amendment to or waiver from the provisions of either of these Codes that is applicable to any of these three executive officers will be disclosed on the Investor Relations portion of our website under the “Corporate Governance” caption.

ITEM 1A. RISK FACTORS

     In addition to the other information in this Form 10-K, you should carefully consider the specific risk factors set forth below in evaluating Nash Finch because any of the following risks could materially affect our business, financial condition, results of operations and future prospects.

We face substantial competition, and our competitors may have superior resources, which could place us at a competitive disadvantage and adversely affect our financial performance.

     Our businesses are highly competitive and are characterized by high inventory turnover, narrow profit margins and increasing consolidation. Our food distribution and military businesses compete not only with local, regional and national food distributors, but also with vertically integrated national and regional chains that employ a variety of formats, including supercenters, supermarkets and warehouse clubs. Our retail business, focused in the Upper Midwest, has historically competed with traditional grocery stores and is increasingly competing with alternative store formats such as supercenters, warehouse clubs, dollar stores and extreme value food stores.

     Some of our food distribution and retail competitors are substantially larger and may have greater financial resources and geographic scope, lower merchandise acquisition costs and lower operating expenses than we do, intensifying price competition at the wholesale and retail levels. Industry consolidation and the expansion of alternative store formats, which have gained and continue to gain market share at the expense of traditional grocery stores, tend to produce even stronger competition for our retail business and for the independent customers of our distribution business. To the extent our independent customers are acquired by our competitors or are not successful in competing with other retail chains and non-traditional competitors, sales by our distribution business will also be affected. If we fail to effectively implement strategies to respond to these competitive pressures, our operating results could be adversely affected by price reductions, decreased sales or margins, or loss of market share.

     In the military food distribution business we face competition from large national and regional food distributors as well as smaller food distributors. Due to the narrow margins in the military food distribution industry, it is of critical importance for distributors to achieve economies of scale, which are typically a function of the density or concentration of military bases in the geographic markets a distributor serves and a distributor’s share of that market. As a result, no distributor in this industry has a nationwide presence and it is very difficult, other than through acquisitions, to expand operations in this industry beyond the geographic regions where we currently can utilize our warehouse and distribution capacity.

Our business is sensitive to economic conditions that impact consumer spending.

     Our business is sensitive to changes in overall economic conditions that impact consumer spending, including discretionary spending and buying habits. Economic downturns or uncertainty has adversely affected overall demand and intensified price competition, but also has caused consumers to “trade down” by purchasing lower margin items and to make fewer purchases in traditional supermarket channels. Continued negative economic conditions affecting disposable consumer income such as employment levels, business conditions, changes in housing market conditions, the availability of credit, interest rates, volatility in fuel and energy

costs, food price inflation or deflation, employment trends in our markets and labor costs, the impact of natural disasters or acts of terrorism, and other matters affecting consumer spending could cause consumers to continue shifting even more of their spending to lower-priced competitors. The continued general reductions in the level of discretionary spending or shifts in consumer discretionary spending to our competitors could continue to adversely affect our growth and profitability.

     The worldwide financial and credit market disruptions have reduced the availability of liquidity and credit generally necessary to fund a continuation and expansion of global economic activity. The shortage of liquidity and credit combined with substantial losses in equity markets has led to a worldwide economic recession that could be prolonged. The general slowdown in economic activity caused by an extended recession could adversely affect our business. A continuation or worsening of the current difficult financial and economic conditions could adversely affect our customers’ ability to meet the terms of sale or our suppliers’ ability to fully perform their commitments to us.

Macroeconomic and geopolitical events may adversely affect our customers, access to products, or lead to general cost increases which could negatively impact our results of operations and financial condition.

     Recent events in foreign countries which have resulted in political instability and social unrest and significant deficits in the United States at both the federal and state levels could adversely affect our businesses and customers. Adverse economic or geopolitical events could potentially reduce our access or increase prices associated with products sourced abroad. Such adverse events could lead to significant increases in the price of the products we procure, fuel and other supplies used in our business, utilities, or taxes that cannot be fully recovered through price increases. In addition, disposable consumer income could be affected by these events which could have a negative impact on our results of operations and financial condition.

Our businesses could be negatively affected if we fail to retain existing customers or attract significant numbers of new customers.

     Growing and increasing the profitability of our distribution businesses is dependent in large measure upon our ability to retain existing customers and capture additional distribution customers through our existing network of distribution centers, enabling us to more effectively utilize the fixed assets in those businesses. Our ability to achieve these goals is dependent, in part, upon our ability to continue to provide a high level of customer service, offer competitive products at low prices, maintain high levels of productivity and efficiency, particularly in the process of integrating new customers into our distribution system, and offer marketing, merchandising and ancillary services that provide value to our independent customers. If we are unable to execute these tasks effectively, we may not be able to attract significant numbers of new customers and attrition among our existing customer base could increase, either or both of which could have an adverse impact on our revenue and profitability.

     Growing and increasing the profitability of our retail business is dependent on increasing our market share in the markets our retail stores are located. We plan to invest in redesigning some of our retail stores into other formats in order to attract new customers and increase our market share. Our results of operations may be adversely impacted if we are unable to attract significant numbers of new retail customers.

Our military segment operations are dependent upon domestic and international military distribution, and a change in the military commissary system, or level of governmental funding, could negatively impact our results of operations and financial condition.

     Because our military segment sells and distributes grocery products to military commissaries and exchanges in the U.S. and overseas, any material changes in the commissary system, the level of governmental funding to DeCA, military staffing levels or in locations of bases may have a corresponding impact on the sales and operating performance of this segment. These changes could include privatization of some or all of the military commissary system, relocation or consolidation in the number of commissaries and exchanges, base closings, troop redeployments or consolidations in the geographic areas containing commissaries and exchanges served by us, or a reduction in the number of persons having access to the commissaries and exchanges.

Our results of operations and financial condition could be adversely affected if we are unable to improve the competitive position of our retail operations.

     Our retail food business faces competition from regional and national chains operating under a variety of formats that devote square footage to selling food (i.e., supercenters, supermarkets, extreme value stores, membership warehouse clubs, dollar stores, drug stores, convenience stores, various formats selling prepared foods, and other specialty and discount retailers), as well as from independent food store operators in the markets where we have retail operations. During fiscal 2006, we announced new strategic initiatives designed to create value within our organization. These initiatives include designing and reformatting our base of retail stores to increase overall retail sales performance. In connection with these efforts, there are numerous risks and uncertainties, including our ability to successfully identify which course of action will be most financially advantageous for each retail store, our ability to identify those initiatives that will be the most effective in improving the competitive position of the retail stores we retain, our ability to efficiently and timely implement these initiatives, and the response of competitors to these initiatives. If we are unable to improve the overall competitive position of our remaining retail stores the operating performance of that segment may continue to decline and we may need to recognize additional impairments of our long-lived assets and goodwill, be compelled to close or dispose of additional stores and may incur restructuring or other charges to our earnings associated with such closure and disposition activities. In addition, we cannot assure you that we will be able to replace any of the revenue lost from these closed or sold stores from our other operations.

We may not be able to achieve the expected benefits from the implementation of new strategic initiatives.

     We have begun taking action to improve our competitive performance through a series of strategic initiatives. The goal of this effort is to develop and implement a comprehensive and competitive business strategy, addressing the food distribution industry environment and our position within the industry and ultimately create increased shareholder value.

     We may not be able to successfully execute our strategic initiatives and realize the intended synergies, business opportunities and growth prospects. Many of the other risk factors mentioned may limit our ability to capitalize on business opportunities and expand our business. Our efforts to capitalize on business opportunities may not bring the intended results. Assumptions underlying estimates of expected revenue growth or overall cost savings may not be met or economic conditions may deteriorate. Customer acceptance of new retail formats developed may not be as anticipated, hampering our ability to attract new retail customers or maintain our existing retail customer base. Additionally, our management may have its attention diverted from other important activities while trying to execute new strategic initiatives. If these or other factors limit our ability to execute our strategic initiatives, our expectations of future results of operations, including expected revenue growth and cost savings, may not be met.

Our ability to operate effectively could be impaired by the risks and costs associated with the current and future efforts to grow our business through acquisitions.

     Efforts to grow our business may include acquisitions. Acquisitions entail various risks such as identifying suitable candidates, effecting acquisitions at acceptable rates of return, obtaining adequate financing and acceptable terms and conditions. Our success depends in a large part on factors such as our ability to identify suitable acquisition candidates and successfully integrate such operations and personnel in a timely and efficient manner while retaining the customer base of the acquired operations. If we cannot identify suitable acquisition candidates, successfully integrate these operations and retain the customer base, we may experience material adverse consequences to our results of operations and financial condition. The integration of separately managed businesses operating in different markets involves a number of risks, including the following:

	•		demands on management related to the significant increase in our size after the acquisition of operations;
	•		difficulties in the assimilation of different corporate cultures and business practices, such as those involving vendor promotions, and of geographically dispersed personnel and operations;

	•		difficulties in the integration of departments, information technology systems, operating methods, technologies, books and records and procedures, as well as in maintaining uniform standards and controls, including internal accounting controls, procedures and policies; and
	•		expenses of any undisclosed liabilities, such as those involving environmental or legal matters.

     Successful integration of new operations, including the acquisition of three distribution facilities from GSC Enterprises Inc. on January 31, 2009, our December 1, 2009 purchase of a facility in Columbus, Georgia, and our purchases of a facility in Bloomington, Indiana and two adjacent facilities in Oklahoma City, Oklahoma during the third quarter of fiscal 2010 will depend on our ability to manage those operations, fully assimilate the operations into our distribution network, realize opportunities for revenue growth presented by strengthened product offerings and expanded geographic market coverage, maintain the customer base and eliminate redundant and excess costs. We may not realize the anticipated benefits or savings from an acquisition in the time frame anticipated, if at all, or such benefits and savings may include higher costs than anticipated.

Substantial operating losses may occur if the customers to whom we extend credit or for whom we guarantee loan or lease obligations fail to repay us.

     In the ordinary course of business, we extend credit, including loans, to our food distribution customers, and provide financial assistance to some customers by guaranteeing their loan or lease obligations. We also lease store sites for sublease to independent retailers. Generally, our loans and other financial accommodations are extended to small businesses that are unrated and may have limited access to conventional financing. As of January 1, 2011, we had loans, net of reserves, of $25.6 million outstanding to 33 of our food distribution customers and had guaranteed outstanding debt and lease obligations of food distribution customers totaling $9.4 million. In the normal course of business, we also sublease retail properties and assign retail property leases to third parties. As of January 1, 2011, the present value of our maximum contingent liability exposure, net of reserves, with respect to subleases and assigned leases was $22.8 million and $8.9 million, respectively. While we seek to obtain security interests and other credit support in connection with the financial accommodations we extend, such collateral may not be sufficient to cover our exposure. Greater than expected losses from existing or future credit extensions, loans, guarantee commitments or sublease arrangements could negatively and potentially materially impact our operating results and financial condition.

Changes in vendor promotions or allowances, including the way vendors target their promotional spending, and our ability to effectively manage these programs could significantly impact our margins and profitability.

     We engage in a wide variety of promotional programs cooperatively with our vendors. The nature of these programs and the allocation of dollars among them evolve over time as the parties assess the results of specific promotions and plan for future promotions. These programs require careful management in order for us to maintain or improve margins while at the same time driving sales for us and for the vendors. A reduction in overall promotional spending or a shift in promotional spending away from certain types of promotions that we have historically utilized could have a significant impact on our gross profit margin and profitability. Our ability to anticipate and react to changes in promotional spending by, among other things, planning and implementing alternative programs that are expected to be mutually beneficial to the manufacturers and us, will be an important factor in maintaining or improving margins and profitability. If we are unable to effectively manage these programs, it could have a material adverse effect on our results of operations and financial condition.

Our debt instruments include financial and other covenants that limit our operating flexibility and may affect our future business strategies and operating results.

     Covenants in the documents governing our outstanding or future debt, or our future debt levels, could limit our operating and financial flexibility. Our ability to respond to market conditions and opportunities as well as capital needs could be constrained by the degree to which we are leveraged, by changes in the availability or cost of capital, and by contractual limitations on the degree to which we may, without the consent of our lenders, take actions such as engaging in mergers, acquisitions or divestitures, incurring additional debt, making capital expenditures, repurchasing shares of our stock and making investments, loans or advances. If needs or opportunities were identified that would require financial resources beyond existing resources, obtaining those

resources could increase our borrowing costs, further reduce financial flexibility, require alterations in strategies and affect future operating results.

Legal, governmental, legislative or administrative proceedings, disputes or actions that result in adverse outcomes or unfavorable changes in government regulations may affect our businesses and operating results.

     Adverse outcomes in litigation, governmental, legislative or administrative proceedings and/or other disputes may result in significant liability to the Company and affect our profitability or impose restrictions on the manner in which we conduct our business. Our businesses are also subject to various federal, state and local laws and regulations with which we must comply. Changes in applicable laws and regulations that impose additional requirements or restrictions on the manner in which we operate our businesses could increase our operating costs.

Failure of our internal control over financial reporting could materially impact our business and results.

     The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting. An internal control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all internal control systems, internal control over financial reporting may not prevent or detect misstatements. Any failure to maintain an effective system of internal control over financial reporting could limit our ability to report our financial results accurately and timely or to detect and prevent fraud, and could expose us to litigation or adversely affect the market price of our common stock.

Changes in accounting standards could materially impact our results.

     Generally accepted accounting principles and related accounting pronouncements, implementation guidelines, and interpretations for many aspects of our business, such as accounting for insurance and self-insurance, inventories, goodwill and intangible assets, store closures, leases, income taxes and share-based payments, are highly complex and involve subjective judgments. Changes in these rules or their interpretation could significantly change or add significant volatility to our reported earnings without a comparable underlying change in cash flow from operations.

We may experience technology failures which could have a material adverse effect on our business.

     We have large, complex information technology systems that are important to our business operations. Although we have an off-site disaster recovery center and have installed security programs and procedures, security could be compromised and technology failures and systems disruptions could occur. This could result in a loss of sales or profits or cause us to incur significant costs, including payments to third parties for damages.

Severe weather and natural disasters can adversely impact our operations, our suppliers or the availability and cost of products we purchase.

     Severe weather conditions and natural disasters could damage our properties and adversely impact the geographic areas where we conduct our business. Severe weather and natural disasters could also affect the suppliers from whom we procure products and could cause disruptions in our operations and affect our supply chain capabilities. In addition, unseasonably adverse climatic conditions that impact growing conditions and the crops of food producers may adversely affect the availability or cost of certain products.

Unions may attempt to organize our employees.

     While our management believes that our employee relations are good, we cannot be assured that we will not experience pressure from labor unions or become the target of campaigns similar to those faced by our competitors. The potential for unionization could increase if the United States Congress passes the Federal Employee Free Choice Act legislation. We have always respected our employees’ right to unionize or not to unionize. However, the unionization of a significant portion of our workforce could increase our overall costs at the affected locations and adversely affect our flexibility to run our business in the most efficient manner to

remain competitive or acquire new business. In addition, significant union representation would require us to negotiate wages, salaries, benefits and other terms with many of our employees collectively and could adversely affect our results of operations by increasing our labor costs or otherwise restricting our ability to maximize the efficiency of our operations.

Costs related to a multi-employer pension plan, which has liabilities in excess of plan assets, may have a material adverse effect on the Company’s financial condition and results of operations.

     The Company participates in the Central States Southeast and Southwest Areas Pension Funds (“CSS” or “the plan”), a multi-employer pension plan, for certain unionized employees. The Company’s contributions to the plan may escalate in future years should we withdraw from the plan or factors outside the Company’s control, including the bankruptcy or insolvency of other participating employers, actions taken by trustees who manage the plan, government regulations, or a funding deficiency in the plan. Escalating costs associated with the plan may have a material adverse effect on the Company’s financial condition and results of operations.

     CSS adopted a rehabilitation plan as a result of its actuarial certification for the plan year beginning January 1, 2008 which placed the plan in critical status. The Actuarial Certification of Plan Status as of January 1, 2010 certified that the Central States Pension Fund remains in critical status with a funded percentage of 63.1%. The plan adopted an updated rehabilitation plan effective December 31, 2010 which implements additional measures to improve the plan’s funded level, including establishing an increased minimum retirement age and actuarially adjusting certain pre-age 65 benefits for participants who retire after July 1, 2011. Despite these changes, we can make no assurances of the extent to which the updated rehabilitation plan will improve the funded status of the plan.

     Effective July 9, 2009, the trustees of CSS formalized a decision to terminate the participation of YRC Worldwide, Inc. (formerly Yellow Freight and Roadway Express, “YRC”) and USF Holland, Inc. from the pension fund. Under an agreement between the Teamsters and YRC dated September 24, 2010, YRC would resume participation in the plan in July 2011 at a reduced contribution rate. It is our understand that the Trustees of the plan have not yet agreed to accept this agreement. At this time, there is no change to the funding obligations due from other participating employers in the fund as a result of this termination; however, further developments may necessitate a reevaluation of the funding obligations at some point in the future.

     The underfunding of the plan is not a direct obligation or liability of the Company. Moreover, if the Company were to exit certain markets or otherwise cease making contributions to the Plan, the Company could trigger a substantial withdrawal liability. However, the amount of any increase in contributions will depend upon several factors, including the number of employers contributing to the Plan, results of the Company’s collective bargaining efforts, investment returns on assets held by the Plan, actions taken by the trustees of the Plan, and actions that the Federal government may take. We are currently unable to reasonably estimate a liability. Any adjustment for withdrawal liability will be recorded when it is probable that a liability exists and can be reasonably estimated.

Increases in employee benefit costs and other labor relations issues may lead to labor disputes and disruption of our businesses.

     If we are unable to control health care, pension and wage costs, or gain operational flexibility under our collective bargaining agreements, we may experience increased operating costs and an adverse impact on future results of operations. There can be no assurance that the Company will be able to negotiate the terms of any expiring or expired agreement in a manner that is favorable to the Company. Therefore, potential work disruptions from labor disputes could result, which may affect future revenues and profitability.

We are subject to the risk of product liability claims, including claims concerning food and prepared food products.

     The sale of food and prepared food products for human consumption may involve the risk of injury. Injuries may result from tampering by unauthorized third parties, product contamination or spoilage, including the presence of foreign objects, substances, chemicals, other agents, or residues introduced during the growing, storage, handling and transportation phases. We cannot be sure that consumption of products we distribute and sell will not cause a health-related illness in the future or that we will not be subject to claims or lawsuits relating to such matters.

     Negative publicity related to these types of concerns, or related to product contamination or product tampering, whether valid or not, might negatively impact demand for products we distribute and sell, or cause production and delivery disruptions. We may need to recall products if any of these products become unfit for consumption. Costs associated with these potential actions could adversely affect our operating results.

Threats or potential threats to security may adversely affect our business.

     Threats or acts of terror, data theft, information espionage, or other criminal activity directed at the food industry, the transportation industry, or computer or communications systems, including security measures implemented in recognition of actual or potential threats, could increase security costs and adversely affect our operations.

We depend upon vendors to supply us with quality merchandise at the right time and at the right price.

     We depend heavily on our ability to purchase merchandise in sufficient quantities at competitive prices. We have no assurances of continued supply, pricing, or access to new products and any vendor could at any time change the terms upon which it sells to us or discontinue selling to us. Sales demands may lead to insufficient in-stock positions of our merchandise.

     Significant changes in our ability to obtain adequate product supplies due to weather, food contamination, regulatory actions, labor supply, or product vendor defaults or disputes that limit our ability to procure products for sale to customers could have an adverse effect on our operating results.

Maintaining our reputation and corporate image is essential to our business success.

     Our success depends on the value and strength of our corporate name and reputation. Our name, reputation and image are integral to our business as well as to the implementation of our strategies for expanding our business. Our business, prospects, financial condition and results of operations could be adversely affected if our public image or reputation were to be tarnished by negative publicity including dissemination via print, broadcast and social media and other forms of Internet-based communications. Adverse publicity about regulatory or legal action against us could damage our reputation and image, undermine our customers’ confidence and reduce long-term demand for our products and services, even if the regulatory or legal action is unfounded or not material to our operations. Any of these events could have a negative impact on our results of operations and financial condition.

     The foregoing discussion of risk factors is not exhaustive and we do not undertake to revise any forward-looking statement to reflect events or circumstances that occur after the date the statement is made.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

     Our principal executive offices are located in Minneapolis, Minnesota and consist of approximately 135,400 square feet of office space in a building that we own.

Military Segment

     The table below lists the locations and sizes of our facilities exclusively used in our military distribution business as of January 1, 2011. Unless otherwise indicated, we own each of these distribution centers. Leased locations for our military segment have original lease terms ranging from five to 20 years plus renewal options ranging up to five years. The military segment lease expirations range from December 2011 to November 2029.

     The lease that expires in December 2011 pertains to our Junction City, Kansas facility which requires lease payments be made to the holders of outstanding industrial revenue bonds. As of January 1, 2011, all of

the outstanding industrial revenue bonds are held by the Company, and upon expiration of the lease term, the Company will take title to the property upon redemption of the outstanding bonds.

		Approx. Size
Location		(Square Feet)
Norfolk, Virginia (2)			756,200
Jessup, Maryland (1)			115,200
Junction City, Kansas (1) (3)			132,000
Pensacola, Florida			355,900
San Antonio, Texas			486,800
Columbus, Georgia (1) (3)			531,900
Bloomington, Indiana (4)			302,600
Oklahoma City, Oklahoma (5)			544,200
Total Square Footage			3,224,800

Food Distribution Segment

     The table below lists, as of January 1, 2011, the locations and sizes of our distribution centers primarily used in our food distribution operations. Unless otherwise indicated, we own each of these distribution centers. Leased locations of our food distribution segment have original lease terms ranging from 15 to 20 years plus renewal options ranging up to five years. The food distribution segment lease expirations range from July 2015 to July 2016.

		Approx. Size
Location		(Square Feet)
Midwest Region:
Omaha, Nebraska			626,900
Cedar Rapids, Iowa			351,900
St. Cloud, Minnesota			329,000
Sioux Falls, South Dakota (2)			275,400
Fargo, North Dakota			288,800
Rapid City, South Dakota (3)			195,100
Minot, North Dakota			185,200
Southeast Region:
Lumberton, North Carolina (1)			336,500
Statesboro, Georgia (1)			230,500
Bluefield, Virginia			187,500
Great Lakes Region:
Bellefontaine, Ohio			666,000
Lima, Ohio (4)			617,000
Westville, Indiana			631,900
Cincinnati, Ohio			403,300
Total Square Footage			5,325,000

Retail Segment

     The table below contains selected information regarding our 52 corporate-owned stores as of January 1, 2011. We own the facilities of 22 of these stores and lease the facilities of 30 of these stores.

		Number of								Average
Banner		Stores				Areas of Operation				Square Feet
Sun Mart			20				CO, MN, ND, NE				33,359
Econofoods			16				IA, MN, SD, WI				32,711
AVANZA			5				CO, NE				34,945
Family Thrift Center			4				SD				48,449
Family Fresh Market			2				WI				48,776
Pick ‘n Save			2				OH				49,588
Prairie Market			1				SD				29,480
Wholesale Food Outlet			1				IA				19,620
Other Stores			1				MN				3,500
Total			52

     The table excludes three corporate-owned stand-alone pharmacies and one convenience store. As of January 1, 2011, the aggregate square footage of our 52 retail grocery stores totaled 1,808,393 square feet.

ITEM 3. LEGAL PROCEEDINGS

Roundy’s Supermarkets, Inc. v. Nash Finch

     On February 11, 2008, Roundy’s Supermarkets, Inc. (“Roundy’s”) filed suit against us claiming we breached the Asset Purchase Agreement (“APA”), entered into in connection with our acquisition of certain

distribution centers and other assets from Roundy’s, by not paying approximately $7.9 million that Roundy’s claimed was due under the APA as a purchase price adjustment. We answered the complaint denying any payment was due to Roundy’s and asserted counterclaims against Roundy’s for, among other things, breach of contract, misrepresentation, and breach of the duty of good faith and fair dealing. In our counterclaim we demanded damages from Roundy’s in excess of $18.0 million.

     On September 14, 2009, we entered into a settlement agreement with Roundy’s that fully resolved all claims brought in the lawsuit. Under the terms of the settlement agreement, both parties agreed to dismiss their claims against the other in exchange for a release of claims. Neither party was required to pay any money to the other. We recorded a $7.6 million gain in fiscal 2009 which represented the reversal of the liability we had recorded in conjunction with the disputed APA purchase price adjustment.

Other

     We are also engaged from time-to-time in routine legal proceedings incidental to our business. We do not believe that these routine legal proceedings, taken as a whole, will have a material impact on our business or financial condition.

ITEM 4. RESERVED

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

     Our common stock is quoted on the NASDAQ Global Select Market and currently trades under the symbol NAFC. The following table sets forth, for each of the calendar periods indicated, the range of high and low closing sales prices for our common stock as reported by the NASDAQ Global Select Market, and the quarterly cash dividends paid per share of common stock. At February 22, 2011, there were 1,822 stockholders of record.

																		Dividends
		2010								2009								Per Share
		High				Low				High				Low				2010				2009
First Quarter		$	37.66			$	32.87			$	45.70			$	27.16			$	0.18			$	0.18
Second Quarter			38.10				33.65				34.36				27.69			$	0.18			$	0.18
Third Quarter			43.62				34.20				30.75				26.28			$	0.18			$	0.18
Fourth Quarter			43.78				36.08				37.49				28.00			$	0.18			$	0.18

     On March 1, 2011, the Nash Finch Board of Directors declared a cash dividend of $0.18 per common share, payable on March 25, 2011, to stockholders of record as of March 11, 2011.

Issuer Purchases of Equity Securities

     The following table provides information about shares of common stock the Company acquired during the fourth quarter of fiscal 2010:

(c) Total number

of shares

(d) Maximum

(a) Total

purchased as part

amount that

number of

(b) Average

of publicly

may be spent

shares

price paid per

announced plans

under plans or

Period

purchased (1)

share (1)

or programs (1)

programs (1)

Period 13 (December 5, 2010 to January 1, 2011)

60,499

$

41.55

60,499

$

—

Total Shareholder Return Graph

     The line graph below compares the cumulative total shareholder return on the Company’s common stock for the last five fiscal years with cumulative total return on the S&P SmallCap 600 Index and the peer group index described below. This graph assumes a $100 investment in each of Nash Finch Company, the S&P SmallCap 600 Index and the peer group index at the close of trading on December 31, 2005, and also assumes the reinvestment of all dividends. The stock price performance shown below is not necessarily indicative of future performance.

     The peer group represented in the line graph above includes the following nine publicly traded companies: SuperValu Inc., Arden Group, Inc., The Great Atlantic & Pacific Tea Company, Inc., Ingles Markets, Incorporated, Ruddick Corporation, Spartan Stores, Inc., United Natural Foods, Inc., Weis Markets, Inc. and Core-Mark Holding Company, Inc. The peer group cumulative return is weighted by market capitalization of each peer company as of the beginning of the five-year performance period. The decline of the peer group initial investment is representative of the bankruptcy filing of The Great Atlantic & Pacific Tea Company, Inc. during fiscal 2010 and a significant decline in the value of the common stock of SuperValu, Inc.

     From time-to-time, the peer group companies have changed due to merger and acquisition activity, bankruptcy filings, company delistings and other similar occurrences. There were no changes to the peer group during fiscal 2010.

     The performance graph above is being furnished solely to accompany this Annual Report on Form 10-K pursuant to Item 201(e) of Regulation S-K, is not being filed for purposes of Section 18 of the Securities

Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

ITEM 6. SELECTED FINANCIAL DATA

NASH FINCH COMPANY AND SUBSIDIARIES
Consolidated Summary of Operations
Five years ended January 1, 2011 (not covered by Independent Auditors’ Report)
(Dollar amounts in thousands except per share amounts)

		2010				2009 (1)				2008				2007				2006
		(52 Weeks)				(52 Weeks)				(53 Weeks)				(52 Weeks)				(52 Weeks)
Results of Operations
Sales		$	4,991,979			$	5,212,655			$	4,633,494			$	4,464,035			$	4,581,563
Cost of sales			4,591,191				4,793,967				4,226,545				4,066,381				4,179,741
Gross profit			400,788				418,688				406,949				397,654				401,822
Selling, general and administrative			269,140				287,328				288,263				280,818				319,678
Gains on sale of real estate			—				—				—				(1,867	)			(1,130	)
Special charges			—				6,020				—				(1,282	)			6,253
Gain on acquisition of a business			—				(6,682	)			—				—				—
Gain on litigation settlement			—				(7,630	)			—				—				—
Goodwill impairment			—				50,927				—				—				26,419
Depreciation and amortization			36,119				40,603				38,429				38,882				41,451
Interest expense			23,403				24,372				26,466				28,088				30,840
Income tax expense			21,185				20,972				20,646				16,984				4,198
Earnings (loss) from continuing operations			50,941				2,778				33,145				36,031				(25,887	)
Net earnings from discontinued operations			—				—				—				—				160
Cumulative effect of change in accounting principle, net of income tax (2)			—				—				—				—				169
Net earnings (loss)		$	50,941			$	2,778			$	33,145			$	36,031			$	(25,558	)
Basic earnings (loss) per share		$	3.97			$	0.21			$	2.57			$	2.67			$	(1.91	)
Diluted earnings (loss) per share		$	3.86			$	0.21			$	2.52			$	2.64			$	(1.91	)
Cash dividends declared per common share		$	0.72			$	0.72			$	0.72			$	0.72			$	0.72
Selected Data
Pretax earnings (loss) from continuing operations as a percent of sales			1.44	%			0.46	%			1.16	%			1.19	%			(0.47	)%
Net earnings (loss) as a percent of sales			1.02	%			0.05	%			0.72	%			0.81	%			(0.56	)%
Effective income tax rate			29.4	%			88.3	%			38.4	%			32.0	%			19.4	%
Current assets		$	591,510			$	557,816			$	467,951			$	477,934			$	457,053
Current liabilities		$	293,242			$	308,509			$	297,729			$	282,357			$	278,222
Net working capital		$	298,268			$	249,307			$	170,222			$	195,577			$	178,831
Ratio of current assets to current liabilities			2.02				1.81				1.57				1.69				1.64
Total assets		$	1,050,675			$	999,536			$	952,546			$	949,267			$	952,480
Capital expenditures		$	59,295			$	30,402			$	31,955			$	21,419			$	27,469
Long-term obligations (long-term debt and capitalized lease obligations)		$	311,186			$	279,032			$	248,026			$	280,010			$	315,321
Stockholders’ equity		$	377,004			$	350,559			$	349,019			$	331,600			$	313,113
Stockholders’ equity per share (3)		$	31.14			$	27.36			$	27.23			$	25.26			$	23.39
Return on stockholders’ equity (4)			13.51	%			0.79	%			9.50	%			10.87	%			(8.27	)%
Common stock high price (5)		$	43.78			$	45.70			$	46.33			$	51.29			$	31.74
Common stock low price (5)		$	32.87			$	26.28			$	30.97			$	26.89			$	19.42

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

     In terms of revenue, we are the second largest publicly traded wholesale food distributor in the United States serving the military commissary and exchange systems and the retail grocery industry. Our business consists of three primary operating segments: military food distribution, food distribution and retail.

     Our military segment contracts with manufacturers to distribute a wide variety of grocery products to military commissaries and exchanges located in the United States and the District of Columbia, and in Europe, Puerto Rico, Cuba, the Azores and Egypt. We have over 30 years of experience acting as a distributor to U.S. military commissaries and exchanges. On January 31, 2009, we completed the purchase from GSC Enterprises, Inc., of substantially all of the assets relating to three wholesale food distribution centers located in San Antonio, Texas, Pensacola, Florida and Junction City, Kansas, including all inventory and customer contracts related to the purchased facilities (“GSC acquisition”). On December 1, 2009, we purchased a facility in Columbus, Georgia which began servicing military commissaries and exchanges in the third quarter of fiscal 2010. During the third quarter of fiscal 2010, we purchased a facility in Bloomington, Indiana and two adjacent facilities in Oklahoma City, Oklahoma for expansion of our military food distribution business. The Bloomington, Indiana facility became operational during the fourth quarter of fiscal 2010, while the Oklahoma City, Oklahoma facilities are scheduled to become operational during fiscal 2012. In addition, we purchased the real estate associated with our Pensacola, Florida facility, which had previously been a leased facility, during the third quarter of fiscal 2010.

     Our food distribution segment sells and distributes a wide variety of nationally branded and private label grocery products and perishable food products from 14 distribution centers to approximately 1,800 independent retail locations located in 28 states, primarily in the Midwest and Southeast regions of the United States. During the third quarter of fiscal 2010, we closed our food distribution center in Bridgeport, Michigan at the end of its lease term and transitioned the majority of the business to our Lima, Ohio distribution center.

     Our retail segment operated 52 corporate-owned stores primarily in the Upper Midwest as of January 1, 2011. Primarily due to highly competitive conditions in which supercenters and other alternative formats compete for price conscious customers, we closed or sold four retail stores in 2008, four retail stores in 2009 and two retail stores in 2010. We are implementing initiatives of varying scope and duration with a view toward improving our response to and performance under these highly competitive conditions. These initiatives include designing and reformatting some of our retail stores into alternative formats to increase overall retail sales performance. As we continue to assess the impact of performance improvement initiatives and the operating results of individual stores, we may need to recognize additional impairments of long-lived assets and goodwill associated with our retail segment, and may incur restructuring or other charges in connection with closure or sales activities. The retail segment yields a higher gross profit percent of sales and higher selling, general and administrative (“SG&A”) expenses as a percent of sales compared to our food distribution and military segments. Thus, changes in sales of the retail segment can have a disproportionate impact on consolidated gross profit and SG&A as compared to similar changes in sales in our food distribution and military segments.

Results of Operations

     The following discussion summarizes our operating results for fiscal 2010 compared to fiscal 2009 and fiscal 2009 compared to fiscal 2008. However, fiscal 2008 results are not directly comparable to fiscal 2009 or fiscal 2010 because fiscal 2008 contained an additional week.

     Sales

     The following tables summarize our sales activity for fiscal 2010, 2009 and 2008. Certain prior year sales amounts for our food distribution and military segments below have been revised to conform to our current year presentation. Please refer to Part II, Item 8 in this report under Note (18) — “Segment Reporting” of this Form 10-K for additional information regarding our segment reporting revision.

		2010												2009												2008
						Percent				Percent								Percent				Percent								Percent
(in millions)		Sales				of Sales				Change				Sales				of Sales				Change				Sales				of Sales
Segment Sales:
Military		$	2,290.0				45.9	%			1.6	%		$	2,254.4				43.2	%			45.0	%		$	1,555.2				33.6	%
Food Distribution			2,183.7				43.7	%			(8.5	)%			2,385.9				45.8	%			(3.6	)%			2,475.8				53.4	%
Retail			518.3				10.4	%			(9.4	)%			572.3				11.0	%			(5.0	)%			602.5				13.0	%
Total Sales		$	4,992.0				100.0	%			(4.2	)%		$	5,212.6				100.0	%			12.5	%		$	4,633.5				100.0	%

     The following table provides comparable sales for fiscal 2009 in comparison to fiscal 2008 by excluding the first week of sales from fiscal 2008:

										Fiscal 2008
						Fiscal 2008				Comparable				Comparable
(in millions)		Fiscal 2008				Week 1				52 Weeks of				Percent Change
Segment Sales:		Sales				Sales				Sales				2009 to 2008
Military		$	1,555.2			$	24.7			$	1,530.5				47.3	%
Food Distribution			2,475.8				41.6				2,434.2				(2.0	)%
Retail			602.5				11.2				591.3				(3.2	)%
Total Sales		$	4,633.5			$	77.5			$	4,556.0				14.4	%

     Total Company sales declined 4.2% during fiscal 2010 as compared to the comparable prior year period. However, excluding the additional sales of $59.4 million attributable to acquired military locations during the first quarter 2010 and the previously announced transition of a portion of a food distribution customer buying group to another supplier of $95.2 million during the second quarter 2010, total Company comparable sales declined 3.6% during fiscal 2010.

     Total Company sales increased 12.5% during fiscal 2009 in comparison to fiscal 2008 and increased 14.4% in comparison to fiscal 2008 after excluding the additional week of sales in fiscal 2008. Excluding the $683.3 million of sales attributable to the acquisition of three military distribution centers on January 31, 2009 and the extra week of sales in fiscal 2008, total company comparable sales for fiscal 2009 decreased 0.6%.

     Fiscal 2010 military sales increased 1.6% in comparison to the fiscal 2009. However, excluding the non-comparable sales attributable to the acquired locations during the first quarter 2010 of $59.4 million, fiscal 2010 comparable military segment sales decreased by 1.1% in comparison to the prior year. The comparable decrease in fiscal 2010 military sales is due to a 1.4% decrease in domestic sales which was partially offset by a 0.8% increase in sales overseas.

     Fiscal 2009 military sales increased 45.0% in comparison to fiscal 2008 and increased 47.3% in comparison to fiscal 2008 after excluding the additional week of sales in fiscal 2008. However, after excluding the sales attributable to the acquired locations and the additional week of sales in fiscal 2008, comparable military segment sales increased by 2.7% in comparison to the prior year. The comparable increase in military segment sales is due to 3.5% stronger sales domestically.

     Domestic and overseas sales represented the following percentages of military segment sales. Note that the business acquired through the GSC acquisition services domestic military bases only.

		2010				2009				2008
Domestic			83.3	%			83.2	%			75.2	%
Overseas			16.7	%			16.8	%			24.8	%

     Fiscal 2010 food distribution sales decreased 8.5% in comparison to fiscal 2009, which is primarily attributable to the previously announced transition of a portion of a food distribution customer buying group to another supplier during the second quarter 2010 which accounted for $95.2 million in sales during fiscal 2009 and a decline in comparable sales to existing customers. Excluding the impact of the customer transition, food distribution sales declined 4.7%. The decrease in comparable sales to existing customers was partially attributable to deflation in certain product categories.

     Fiscal 2009 food distribution sales decreased 3.6% in comparison to fiscal 2008 and decreased 2.0% in comparison to fiscal 2008 after excluding the additional week of sales in fiscal 2008. This decrease was due primarily to a decrease in sales to existing customers which was driven by deflation in certain perishable categories.

     Retail sales for fiscal 2010 decreased 9.4% in comparison to fiscal 2009. The decrease in retail sales for fiscal 2010 was primarily attributable to a 5.0% decrease in same store sales, which compare retail sales for stores which were in operation for the same number of weeks in the comparative periods, and the closure of two stores during the year.

     Retail sales for fiscal 2009 decreased 5.0% in comparison to fiscal 2008 and decreased 3.2% in comparison to fiscal 2008 after excluding the additional week of sales in fiscal 2008. The decrease in retail sales for fiscal 2009 was primarily attributable to a 2.4% decrease in same store sales, which compare retail sales for stores which were in operation for the same number of weeks in the comparative periods, and the closure of four stores during the year.

     During fiscal 2010, 2009 and 2008, our corporate store count changed as follows:

		Fiscal Year				Fiscal Year				Fiscal Year
		2010				2009				2008
Number of stores at beginning of year			54				57				59
New stores			—				1				—
Acquired stores			—				—				2
Closed or sold stores			(2	)			(4	)			(4	)
Number of stores at end of year			52				54				57

     The table excludes corporate-owned stand-alone pharmacies and convenience stores.

     Gross Profit

     Consolidated gross profit for fiscal 2010 was 8.0% of sales compared to 8.0% for fiscal 2009 and 8.8% for fiscal 2008.

     The fiscal 2010 gross profit margin remained flat at 8.0% in comparison to the prior year. Our fiscal 2010 gross profit margin was positively impacted by 0.2% of sales driven primarily by higher gross margin performance in our food distribution and military segments. However, our gross profit margin was negatively affected by 0.2% of sales in fiscal 2010 due to a sales mix shift between our business segments between the years. This was due to a higher percentage of 2010 sales occurring in the military segment which have a lower gross profit margin than the retail and food distribution segments.

     Our fiscal 2009 gross profit margin was negatively affected by 0.6% of sales in comparison to fiscal 2008 due to a sales mix shift between our business segments between the years. This was due to a higher percentage of 2009 sales occurring in the military segment due to the GSC acquisition and a lower percentage in the retail and food distribution segments which have a higher gross profit margin. In addition, high levels of inflation resulted in higher than normal prior year gross profit margin performance while declines in commodity prices during the current year have had a negative impact on gross profit performance.

     Inventory markdown and wind down costs related to retail store closings and retail markdown adjustments are included in cost of sales and were $0.2 million, $0.2 million and $0.4 million in fiscal 2010, 2009 and 2008, respectively.

     Selling, General and Administrative Expense

     The following table outlines consolidated SG&A and the significant factors affecting consolidated SG&A:

						2010								2009								2008
										% of								% of								% of
(in millions except percentages)		Segment								sales								sales								sales
SG&A						$	269.1				5.4	%			287.3				5.5	%			288.3				6.2	%
Significant factors affecting SG&A:
Retail store impairments and lease reserves		Corporate overhead					0.4				0.0	%			5.3				0.1	%			0.9				0.0	%
Reversal of food distribution customers reserves		Food distribution					—				0.0	%			—				0.0	%			(3.3	)			-0.1	%
Gain on sale of assets		Retail					(0.3	)			0.0	%			(0.7	)			0.0	%			(0.6	)			0.0	%
Acquisition and conversion costs		Military					1.7				0.0	%			1.9				0.0	%			0.5				0.0	%
Share-based compensation over prior year		Corporate overhead					—				0.0	%			1.4				0.0	%			—				0.0	%
Store opening expenses		Retail					—				0.0	%			0.7				0.0	%			—				0.0	%
Food distribution center closing costs		Food distribution					0.8				0.0	%			—				0.0	%			—				0.0	%
Tax consulting fees		Corporate overhead					—				0.0	%			0.4				0.0	%			—				0.0	%
Total significant factors affecting SG&A						$	2.6				0.1	%			9.0				0.2	%			(2.5	)			-0.1	%

     Consolidated SG&A for fiscal 2010 was 5.4% of sales as compared to 5.5% of sales in fiscal 2009. Our SG&A margin benefited by 0.2% of sales in fiscal 2010 due to the sales mix shift between our business segments due to the higher level of military sales relative to the other business segments in 2010. However, we experienced acquisition and conversion costs of $1.7 million and costs associated with the closing of a food distribution center of $0.8 million that negatively impacted our SG&A margin during fiscal 2010.

     Consolidated SG&A for fiscal 2009 was 5.5% of sales as compared to 6.2% of sales in fiscal 2008. Our SG&A margin benefited by 0.6% of sales in fiscal 2009 due to the sales mix shift between our business segments due to the higher level of military sales due to the GSC acquisition relative to the other business segments in 2009. In addition, certain variable employee compensation and benefit expenses were $11.4 million lower than those incurred during fiscal 2008 which contributed to a lower SG&A margin during fiscal 2009.

     Special Charge

     A special charge of $6.0 million was recognized in fiscal 2009 due to asset impairments in our food distribution segment. The charge included write-downs of $5.5 million to leasehold improvements and $0.5 million to fixtures and equipment.

     Gain on Acquisition of a Business

     A gain on the acquisition of a business of $6.7 million (net of tax) was recognized during fiscal 2009 related to the GSC acquisition. The fair value of the identifiable assets acquired and liabilities assumed of $84.8 million exceeded the fair value of the purchase price of the business of $78.1 million. Consequently, we reassessed the recognition and measurement of identifiable assets acquired and liabilities assumed and concluded that the valuation procedures and resulting measures were appropriate.

     Gain on Litigation Settlement

     A gain of $7.6 million was recognized in fiscal 2009 related to the settlement of litigation in connection with our 2005 acquisition of certain distribution centers and other assets from Roundy’s Supermarkets, Inc (“Roundy’s”). This gain represented the reversal of the liability we had recorded in connection with this litigation. Please refer to Part II, Item 8 in this report under Note (15) — “Commitments and Contingencies” of this Form 10-K for additional information.

     Goodwill Impairment

     Annually, we perform an impairment test of goodwill during the fourth quarter based on conditions as of the end of our third fiscal quarter in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 350 (“ASC 350”). No goodwill impairment changes were recorded during fiscal 2010 or fiscal 2008. We recorded a goodwill impairment charge of $50.9 million in fiscal 2009 that related to our retail reporting unit. Please refer to Part II, Item 8 in this report under Note (1) — “Summary of Significant Accounting Policies” under the caption “Goodwill and Intangible Assets” of this Form 10-K for additional information pertaining to our annual goodwill impairment analysis.

     Depreciation and Amortization Expense

     Depreciation and amortization expense for fiscal 2010, 2009 and 2008 was $36.1 million, $40.6 million and $38.4 million, respectively. The decrease in depreciation and amortization expense for fiscal 2010 in comparison to fiscal 2009 is attributable to lower depreciation and amortization expense in our food distribution and retail segments. The increase in depreciation and amortization expense for fiscal 2009 in comparison to fiscal 2008 was primarily attributable to the GSC acquisition.

     Interest Expense

     Interest expense decreased $1.0 million to $23.4 million in fiscal 2010 as compared to $24.4 million in fiscal 2009. Average borrowing levels decreased by $29.1 million from $362.7 million during fiscal 2009 to $333.6 million during fiscal 2010. The effective interest rate was 4.5% for fiscal 2010 as compared to 4.6% for fiscal 2009.

     Interest expense decreased $2.1 million to $24.4 million in fiscal 2009 as compared to $26.5 million in fiscal 2008. Fiscal 2008 interest expense includes the write-off of deferred financing costs of $1.0 million associated with the refinancing of our senior secured bank credit facility. Average borrowing levels increased by $21.1 million from $341.6 million during fiscal 2008 to $362.7 million during fiscal 2009. The effective interest rate was 4.6% for fiscal 2009 as compared to 5.4% for fiscal 2008. However, excluding the impact of the write-off of deferred financing costs, the effective interest rate was 5.1% for fiscal 2008.

     The calculation of our effective interest rates excludes non-cash interest required to be recognized on our senior subordinated convertible notes under ASC Subtopic 470-20. Non-cash interest expense recognized under ASC 470-20 was $5.3 million, $4.9 million and $4.7 million during fiscal 2010, 2009 and 2008, respectively. Additionally, the calculation of our average borrowing levels includes the unamortized equity component of our senior subordinated convertible notes that is required to be recognized under ASC Subtopic 470-20. The inclusion of the unamortized equity component brings the basis in our senior subordinated convertible notes to $150.1 million for purposes of calculating our average borrowing levels, or their aggregate issue price, which we are required to pay semi-annual cash interest on at a rate of 3.50% until March 15, 2013.

     Income Tax Expense

     The effective tax rate for income from continuing operations was 29.4%, 88.3% and 38.4% for fiscal 2010, 2009 and 2008, respectively. Income tax expense from continuing operations differed from amounts computed by applying the federal income tax rate to pre-tax income as a result of the following:

		2010				2009				2008
Federal statutory tax rate			35.0	%			35.0	%			35.0	%
State taxes, net of federal income tax benefit			3.7	%			4.7	%			4.0	%
Non-deductible goodwill			0.0	%			73.6	%			0.0	%
Change in tax contingencies			(8.0	)%			4.4	%			1.1	%
Gain on litigation settlement			0.0	%			(12.7	)%			0.0	%
Gain on acquisition of a business			0.0	%			(11.2	)%			0.0	%
Federal refund claim			0.0	%			(6.8	)%			0.0	%
Other, net			(1.3	)%			1.3	%			(1.7	)%
Effective tax rate			29.4	%			88.3	%			38.4	%

     The effective tax rate for fiscal 2010 was impacted by the increase in tax reserves of $3.4 million and the reversal of previously unrecognized tax benefits of $13.6 million primarily due to statute of limitation expirations and audit resolutions. In fiscal 2009, we increased tax reserves by $2.7 million and reversed previously unrecognized tax benefits of $0.2 million also, primarily due to state statute of limitation expirations and audit resolutions. Other items impacting the rate in 2009 include a large non-deductible goodwill charge, the litigation settlement related to Roundy’s of $3.0 million, the gain on the acquisition of the GSC assets of $2.7 million, and a refund on a claim made with the Internal Revenue Service of $1.7 million. The effective tax rate for fiscal 2008 was impacted by the reversal of previously unrecognized tax benefits of $2.6 million, primarily due to the filing of reports with various taxing authorities which resulted in the settlement of uncertain tax positions, a refund on a claim made with the Internal Revenue Service of $1.2 million and an increase in reserves of $2.7 million.

     Net Earnings

     Net earnings for fiscal 2010 were $50.9 million, or $3.86 per diluted share, compared to net earnings of $2.8 million, or $0.21 per diluted share, for fiscal 2009, and net earnings of $33.1 million, or $2.52 per diluted share, for fiscal 2008. Net earnings in each of the three years were affected by a number of events included in the discussion above that affected the comparability of results.

Liquidity and Capital Resources

     Historically, we have financed our capital needs through a combination of internal and external sources. We expect that cash flow from operations will be sufficient to meet our working capital needs and enable us to reduce our debt, with temporary draws on our revolving credit line needed during the year to build inventories for certain holidays. Longer term, we believe that cash flows from operations, short-term bank borrowings, various types of long-term debt and lease and equity financing will be adequate to meet our working capital needs, planned capital expenditures and debt service obligations. There can be no assurance, however, that we will continue to generate cash flows at current levels as our business is sensitive to trends in consumer spending at our customer locations and our owned retail food stores, as well as certain factors outside of our control, including, but not limited to, the current and future state of the U.S. and global economy, competition, recent and potential future disruptions to the credit and financial markets in the U.S. and worldwide and continued volatility in food and energy commodities. Please see Part I, Item 1A “Risk Factors” of this Form 10-K for a more detailed discussion of potential factors that may have an impact on our liquidity and capital resources.

     The following table summarizes our cash flow activity for fiscal 2010, 2009 and 2008 and should be read in conjunction with the consolidated statements of cash flows:

(In thousands)		2010				2009				2008
Net cash provided by operating activities		$	66,116			$	102,373			$	111,999
Net cash used in investing activities			(57,938	)			(105,670	)			(60,414	)
Net cash provided by (used in) financing activities			(8,178	)			3,303				(51,623	)
Net change in cash and cash equivalents		$	—			$	6			$	(38	)

     Operating cash flows were $66.1 million for fiscal 2010, a decrease of $36.3 million from $102.4 million in fiscal 2009. An increase in our investment in our inventories of $47.8 million during fiscal 2010 as compared to a decline in our inventories of $21.1 million during fiscal 2009 is the primary factor driving the decline in operating cash flows during fiscal 2010 as compared to fiscal 2009. The increase in our inventories during fiscal 2010 was primarily driven by expansion activities associated with our military food distribution business. However, the impact our inventory investment had on our operating cash flows was partially offset by a year-over-year decline in our accounts receivable of $20.9 million.

     Operating cash flows were $102.4 million for fiscal 2009, a decrease of $9.6 million from $112.0 million in fiscal 2008. The primary reason for the fiscal 2009 decrease in operating cash flows was our net earnings, after adjusting for reconciling items to convert it to net cash provided, were $12.2 million lower than in fiscal 2008, which included one additional week or earnings in comparison to fiscal 2009. In addition, significant changes in operating assets and liabilities consisted of a $21.1 million decrease in our investment in our inventories during fiscal 2009 in comparison to a $31.5 million increase during fiscal 2008 which was offset by a year-over-year increase in our accounts receivable of $23.7 million, a year-over year decrease in our accrued expenses of $16.3 million, a year-over-year decrease in our accounts payable of $7.1 million and a year-over-year decrease in our income taxes payable of $6.2 million. The year-over year increase in our accounts receivable was due to a temporary timing difference related to our military accounts receivable billing cycle that accelerated collections into the last week of fiscal 2008 and the decrease in year-over-year accrued expense was primarily due to decreases in certain variable employee compensation and benefit expense accruals.

     Cash used for investing activities was $57.9 million in fiscal 2010, which consisted primarily of additions to property, plant and equipment of $59.3 million. The additions to property, plant and equipment during fiscal 2010 consisted primarily of expansion activities associated with our military distribution business, including the purchase of new facilities in Bloomington, Indiana and Oklahoma City, Oklahoma during the third quarter fiscal 2010, the addition of fixtures and equipment and conversion activities associated with our Columbus, Georgia facility, and our purchase of our Pensacola, Florida property during the fourth quarter of fiscal 2010, which had previously been a leased location. Cash used for investing activities was $105.7 million in fiscal 2009, which was primarily attributable to the GSC acquisition of $78.1 million and additions to property, plant and equipment of $30.4 million. Cash used for investing activities in fiscal 2008 were $60.4 million and consisted primarily of additions to property, plant and equipment of $32.0 million, loans to customers of $24.1 million and the acquisition of a business, net of cash, for $6.6 million.

     Cash used by financing activities was $8.2 million for fiscal 2010 which consisted primarily of $22.0 million used to repurchase shares of our common stock and $8.9 million in dividend payments, which was partially offset by net proceeds of long-term debt of $29.4 million. Cash provided by financing activities was $3.3 million for fiscal 2009 which consisted primarily of net proceeds of long-term debt of $29.9 million, a decrease in outstanding checks of $10.1 million and $9.2 million used to pay dividends on our common stock. Cash used by financing activities was $51.6 million for fiscal 2008 as $32.0 million was used to pay down long-term debt, $14.3 million was used to repurchase shares of our common stock and $9.2 million was used to pay dividends on our common stock.

     Share Repurchase

     On November 10, 2009, our Board of Directors approved a share repurchase program authorizing the Company to spend up to $25.0 million to purchase shares of the Company’s common stock (“2009 Repurchase Program”). The 2009 Repurchase Program took effect on November 16, 2009 and expired on December 31, 2010. During fiscal 2010, we repurchased a total of 643,234 shares for $22.8 million, at an average price per

share of $35.42. During fiscal 2009, we repurchased a total of 30,720 shares for $1.0 million, at an average price per share of $33.10.

     On November 13, 2007, we announced that our Board of Directors had authorized a share repurchase program to purchase up to 1,000,000 shares of the Company’s common stock (“2007 Repurchase Program”). The 2007 Repurchase Program took effect on November 19, 2007 and concluded on January 3, 2009. During fiscal 2008 we repurchased 429,082 shares at an average price per share of $33.44 under the 2007 Repurchase Program.

     The average prices per share referenced above include commissions.

     Contractual Obligations and Commercial Commitments

     The following table summarizes our significant contractual cash obligations as of January 1, 2011, and the expected timing of cash payments related to such obligations in future periods:

		Amount Committed By Period
		Total
		Amount								Fiscal 2012-				Fiscal 2014-
(in thousands)		Committed				Fiscal 2011				2013				2015				Thereafter
Contractual Cash Obligations:
Long-Term Debt (1)		$	292,936			$	670			$	155,516			$	40			$	136,710
Interest on Long-Term Debt (2)			192,314				9,428				15,168				11,086				156,632
Capital Lease Obligations (3) (4)			33,413				4,826				8,800				6,760				13,027
Operating Leases (3)			86,804				20,517				32,336				18,994				14,957
Benefit Obligations (5)			29,804				3,212				6,008				5,803				14,781
Purchase Obligations (6)			11,549				3,777				3,462				1,900				2,410
Total (7)		$	646,820			$	42,430			$	221,290			$	44,583			$	338,517

     We have also made certain commercial commitments that extend beyond 2010. These commitments include standby letters of credit and guarantees of certain food distribution customer debt and lease obligations. The following summarizes these commitments as of January 1, 2011:

		Total				Commitment Expiration Per Period
Other Commercial Commitments (in		Amount								Fiscal 2012-				Fiscal 2014-
thousands)		Committed				Fiscal 2011				2013				2015				Thereafter
Standby Letters of Credit (1)		$	11,700			$	11,335			$	365			$	—			$	—
Guarantees (2)			22,578				3,863				6,325				4,687				7,703
Total Other Commercial Commitments		$	34,278			$	15,198			$	6,690			$	4,687			$	7,703

     Asset-backed Credit Agreement

     Our credit agreement is an asset-backed loan consisting of a $340.0 million revolving credit facility, which includes a $50.0 million letter of credit sub-facility (the “Revolving Credit Facility”). Provided no default is then existing or would arise, we may from time-to-time, request that the Revolving Credit Facility be increased by an aggregate amount (for all such requests) not to exceed $110.0 million.

     The Revolving Credit Facility has a 5-year term and will be due and payable in full on April 11, 2013. We can elect, at the time of borrowing, for loans to bear interest at a rate equal to the base rate or LIBOR plus a margin. The LIBOR interest rate margin currently is 2.00% and can vary quarterly in 0.25% increments between three pricing levels ranging from 1.75% to 2.25% based on the excess availability, which is defined in the credit agreement as (a) the lesser of (i) the borrowing base; or (ii) the aggregate commitments; minus (b) the aggregate of the outstanding credit extensions.

     The credit agreement contains no financial covenants unless and until (i) the continuance of an event of default under the credit agreement, or (ii) the failure of us to maintain excess availability (A) greater than 10% of the borrowing base for more than two (2) consecutive business days or (B) greater than 7.5% of the borrowing base at any time, in which event, we must comply with a trailing 12-month basis consolidated fixed charge covenant ratio of 1.0:1.0, which ratio shall continue to be tested each month thereafter until excess availability exceeds 10% of the borrowing base for ninety (90) consecutive days.

     The credit agreement contains standard covenants requiring us, among other things, to maintain collateral, comply with applicable laws, keep proper books and records, preserve the corporate existence, maintain insurance, and pay taxes in a timely manner. Events of default under the credit agreement are usual and customary for transactions of this type including, among other things: (a) any failure to pay principal thereunder when due or to pay interest or fees on the due date; (b) material misrepresentations; (c) default under other agreements governing material indebtedness of the Company; (d) default in the performance or observation of any covenants; (e) any event of insolvency or bankruptcy; (f) any final judgments or orders to pay more than $15.0 million that remain unsecured or unpaid; (g) change of control, as defined in the credit agreement; and (h) any failure of a collateral document, after delivery thereof, to create a valid mortgage or first-priority lien.

     At January 1, 2011, $174.2 million was available under the Revolving Credit Facility after giving effect to outstanding borrowings and to $11.7 million of outstanding letters of credit primarily supporting workers’ compensation obligations. We are currently in compliance with all covenants contained within the credit agreement.

     Our Revolving Credit Facility represents one of our primary sources of liquidity, both short-term and long-term, and the continued availability of credit under that agreement is of material importance to our ability to fund our capital and working capital needs.

     Senior Subordinated Convertible Debt

     On March 15, 2005, we completed a private placement of $150.1 million in aggregate issue price (or $322.0 million aggregate principal amount at maturity) of senior subordinated convertible notes due 2035. The funds were used to finance a portion of the acquisition of the Lima and Westville divisions from Roundy’s. The notes are unsecured senior subordinated obligations and rank junior to our existing and future senior indebtedness, including borrowings under our Revolving Credit Facility.

     Cash interest at the rate of 3.50% per year is payable semi-annually on the issue price of the notes until March 15, 2013. After that date, cash interest will not be payable, unless contingent cash interest becomes payable, and original issue discount for non-tax purposes will accrue on the notes at a daily rate of 3.50% per year until the maturity date of the notes. On the maturity date of the notes, a holder will receive $1,000 per note. Contingent cash interest will be paid on the notes during any six-month period, commencing March 16, 2013, if the average market price of a note for a ten trading day measurement period preceding the applicable six-month period equals 130% or more of the accreted principal amount of the note, plus accrued cash interest, if any. The contingent cash interest payable with respect to any six-month period will equal an annual rate of 0.25% of the average market price of the note for the ten trading day measurement period described above.

     The notes will be convertible at the option of the holder, only upon the occurrence of certain events, at an adjusted conversion rate of 9.5222 shares (initially 9.3120) of our common stock per $1,000 principal amount at maturity of notes (equal to an adjusted conversion price of approximately $48.95 per share). Upon conversion, we will pay the holder the conversion value in cash up to the accreted principal amount of the note and the excess conversion value, if any, in cash, stock or a combination of both, at our option.

     We may redeem all or a portion of the notes for cash at any time on or after the eighth anniversary of the issuance of the notes. Holders may require us to purchase for cash all or a portion of their notes on the 8th, 10th, 15th, 20th and 25th anniversaries of the issuance of the notes. In addition, upon specified change in control events, each holder will have the option, subject to certain limitations, to require us to purchase for cash all or any portion of such holder’s notes.

     In connection with the closing of the sale of the notes, we entered into a registration rights agreement with the initial purchasers of the notes. In accordance with that agreement, we filed with the Securities and Exchange Commission on July 13, 2005, a shelf registration statement covering the resale by security holders of the notes and the common stock issuable upon conversion of the notes. The shelf registration statement was declared effective by the Securities and Exchange Commission on October 5, 2005. Our contractual obligation, however, to maintain the effectiveness of the shelf registration statement has expired. As a result, we removed from registration, by means of a post-effective amendment filed on July 24, 2007, all notes and common stock that remained unsold at such time.

     Debt Obligations

     For debt obligations, the following table presents principal cash flows, related weighted average interest rates by expected maturity dates and fair value as of January 1, 2011:

		Fixed Rate												Variable Rate
(in thousands)		Fair Value				Amount				Rate				Fair Value				Amount				Rate
2011						$	670				6.0	%						$	—				—
2012							704				6.2	%							—				—
2013							712				6.1	%							154,100				2.6	%
2014							40				5.6	%							—				—
2015							—				—								—				—
Thereafter							136,710				3.5	%							—				—
		$	151,458			$	138,836							$	154,100			$	154,100

     Consolidated EBITDA (Non-GAAP Measurement)

     The following is a reconciliation of EBITDA and Consolidated EBITDA to net earnings for fiscal 2010, 2009 and 2008 (amounts in thousands):

		2010				2009				2008
Net earnings		$	50,941				2,778				33,145
Income tax expense			21,185				20,972				20,646
Interest expense			23,403				24,372				26,466
Depreciation and amortization			36,119				40,603				38,429
EBITDA			131,648				88,725				118,686
LIFO charge (credit)			53				(3,033	)			19,740
Lease reserves			320				3,135				(1,832	)
Goodwill impairment			—				50,927				—
Asset impairments			937				2,460				2,555
Gains on sale of real estate			—				(54	)			—
Gain on acquisition of a business			—				(6,682	)			—
Gain on litigation settlement			—				(7,630	)			—
Share-based compensation			7,871				9,084				8,792
Special charges			—				6,020				—
Settlement of pre-acquisition contingency			(310	)			—				—
Subsequent cash payments on non-cash charges			(3,055	)			(2,815	)			(4,218	)
Total Consolidated EBITDA		$	137,464				140,137				143,723

     EBITDA and Consolidated EBITDA are measures used by management to measure operating performance. EBITDA is defined as net earnings before interest, taxes, depreciation, and amortization. Consolidated EBITDA excludes certain non-cash charges and other items that management does not utilize in assessing operating performance and is a metric used to determine payout of performance units pursuant to our Short-Term and Long-Term Incentive Plans. The above table reconciles net earnings to EBITDA and Consolidated EBITDA. Not all companies utilize identical calculations; therefore, the presentation of EBITDA and Consolidated EBITDA may not be comparable to other identically titled measures of other companies. Neither EBITDA or Consolidated EBITDA are recognized terms under GAAP and do not purport to be an alternative to net earnings as an indicator of operating performance or any other GAAP measure. In addition, EBITDA and Consolidated EBITDA are not intended to be measures of free cash flow for management’s discretionary use since they do not consider certain cash requirements, such as interest payments, tax payments and capital expenditures.

     Free Cash Flow as a percentage of Net Assets (Non-GAAP Measurement)

     The following is a reconciliation of Free Cash Flow to cash provided by operations and a reconciliation of Net Assets to Total Assets:

		52 Weeks Ended
(In thousands)		January 1, 2011
Free cash flow / Net assets
Net cash provided by operations		$	66,116
Less capital expenditures			(59,295	)
Free cash flow		$	6,821
Strategic project adjustment (trailing 4 quarters)			51,950
Adjusted free cash flow (trailing 4 quarters)		$	58,771
		January 1, 2011				January 2, 2010
Net assets
Total assets		$	1,050,675				999,536
Less current liabilities			(293,242	)			(308,509	)
Plus current maturities of long-term debt and capitalized lease obligations			3,159				4,438
Net assets		$	760,592				695,465
Strategic project adjustment			(52,985	)			(9,879	)
Adjusted net assets		$	707,607				685,586
Average net assets (simple average)		$	728,029
Adjusted average net assets (simple average)		$	696,597
Free cash flow/ net assets			0.9	%
Free cash flow/ net assets (ex. strategic projects)			8.4	%

     Free cash flow and the ratio of free cash flow to net assets are measures used by management to measure operating performance and the ratio of free cash flow to net assets is a metric used to determine payout of performance units pursuant to one of our Long-Term Incentive Plans. Our free cash flow to net assets ratio is defined as cash provided from operations less capital expenditures for property, plant and equipment during the trailing four quarters divided by the average Net Assets for the current period and prior year comparable period (total assets less current liabilities plus current portion of long-term debt and capital leases). Free cash flow is not a recognized term under GAAP and does not purport to be an alternative to net earnings as an indicator of operating performance or any other GAAP measure. In addition, free cash flow is not intended to represent the residual cash flow available for discretionary expenditures as certain non-discretionary expenditures, including debt service payments, are not deducted from the measure.

     Derivative Instruments

     We have market risk exposure to changing interest rates primarily as a result of our borrowing activities and commodity price risk associated with anticipated purchases of diesel fuel. Our objective in managing our exposure to changes in interest rates and commodity prices is to reduce fluctuations in earnings and cash flows. From time-to-time we use derivative instruments, primarily interest rate and commodity swap agreements, to manage risk exposures when appropriate, based on market conditions. We do not enter into derivative agreements for trading or other speculative purposes, nor are we a party to any leveraged derivative instrument.

     The interest rate swap agreements are designated as cash flow hedges and are reflected at fair value in our Consolidated Balance Sheet and the related gains or losses on these contracts are deferred in stockholders’ equity as a component of other comprehensive income. Deferred gains and losses are amortized as an adjustment to expense over the same period in which the related items being hedged are recognized in income. However, to the extent that any of these contracts are not considered to be effective in accordance with ASC Topic 815 (“ASC 815”) in offsetting the change in the value of the items being hedged, any changes in fair value relating to the ineffective portion of these contracts are immediately recognized in income.

     As of January 1, 2011, we had two outstanding interest rate swap agreements with notional amounts totaling $17.5 million, as follows (amounts in thousands):

Notional

Effective Date

Termination Date

Fixed Rate

$10,000

10/15/2010

10/15/2011

3.49

%

Notional

Effective Date

Termination Date

Fixed Rate

$7,500

10/15/2010

10/15/2011

3.38

%

     From time-to-time we use commodity swap agreements to reduce price risk associated with anticipated purchases of diesel fuel. The agreements call for an exchange of payments with us making payments based on fixed price per gallon and receiving payments based on floating prices, without an exchange of the underlying commodity amount upon which the payments are made. Resulting gains and losses on the fair market value of the commodity swap agreement are immediately recognized as income or expense.

     As of January 1, 2011, there were no commodity swap agreements in existence. Our only commodity swap agreement in place during fiscal 2008 expired during the first quarter and was settled for fair market value.

     In addition to the previously discussed interest rate and commodity swap agreements, from time-to-time we enter into fixed price fuel supply agreements to support our food distribution segment. On January 1, 2009, we entered into an agreement which required us to purchase a total of 252,000 gallons of diesel fuel per month at prices ranging from $1.90 to $1.98 per gallon. The term of the agreement was for one year and expired on December 31, 2009. The fixed price fuel agreement qualified for the “normal purchase” exception under ASC 815, therefore the fuel purchases under the contract were expensed as incurred as an increase to cost of sales.

     Off-Balance Sheet Arrangements

     As of the date of this report, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, often referred to as structured finance or special purpose entities, which are generally established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Critical Accounting Policies

     The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that may not be readily apparent from other sources. Senior management has discussed the development, selection and disclosure of these estimates with the Audit and Finance Committee of our Board of Directors and with our independent auditors.

     An accounting policy is considered critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact our financial statements. We consider the following accounting policies to be critical and could result in materially different amounts being reported under different conditions or using different assumptions:

Customer Exposure and Credit Risk

     Allowance for Doubtful Accounts — Methodology. We evaluate the collectability of our accounts and notes receivable based on a combination of factors. In most circumstances when we become aware of factors that may indicate a deterioration in a specific customer’s ability to meet its financial obligations to us (e.g., reductions of product purchases, deteriorating store conditions, changes in payment patterns), we record a specific reserve for bad debts against amounts due to reduce the net recognized receivable to the amount we reasonably believe will be collected. In determining the adequacy of the reserves, we analyze factors such as the value of any collateral, customer financial statements, historical collection experience, aging of receivables and other economic and industry factors. It is possible that the accuracy of the estimation process could be materially affected by different judgments as to the collectability based on information considered and further deterioration of accounts. If circumstances change (i.e., further evidence of material adverse creditworthiness, additional accounts become credit risks, store closures), our estimates of the recoverability of amounts due us could be reduced by a material amount, including to zero.

     As of January 1, 2011, we have recorded an allowance for doubtful accounts reserve for our accounts and notes receivables of $6.2 million as compared to $5.7 million as of January 2, 2010. During fiscal 2010, we recorded additional allowance for doubtful account reserves of $0.7 million and experienced write-offs of $0.2 million.

     Lease Commitments. We have historically leased store sites for sublease to qualified independent retailers at rates that are at least as high as the rent paid by us. Under terms of the original lease agreements, we remain primarily liable for any commitments an independent retailer may no longer be financially able to satisfy. We also lease store sites for our retail segment. Should a retailer be unable to perform under a sublease or should we close underperforming corporate stores, we record a charge to earnings for costs of the remaining term of the lease, less any anticipated sublease income. Calculating the estimated losses requires that significant estimates and judgments be made by management. Our reserves for such properties can be materially affected by factors such as the extent of interested sub-lessees and their creditworthiness, our ability to negotiate early termination agreements with lessors, general economic conditions and the demand for commercial property. Should the number of defaults by sub-lessees or corporate store closures materially increase; the remaining lease commitments we must record could have a material adverse effect on operating results and cash flows. Refer to Part II, Item 8 of this report under Note (12) — “Leases” in the Notes to Consolidated Financial Statements for a discussion of Lease Commitments.

     As of January 1, 2011, we have recorded a provision for losses related to leases on closed locations of $6.8 million as compared to $9.3 million as of January 2, 2010. During fiscal 2010, we recorded additional provisions for losses related to leases on closed locations of $0.3 million, which was partially offset by payments made of $2.8 million.

     Guarantees of Debt and Lease Obligations of Others. We have guaranteed the debt and lease obligations of certain food distribution customers. In the event these retailers are unable to meet their debt service payments or otherwise experience an event of default, we would be unconditionally liable for the outstanding balance of their debt and lease obligations ($9.4 million as of January 1, 2011 as compared to $13.5 million as of January 2, 2010), which would be due in accordance with the underlying agreements.

     We have entered into loan and lease guarantees on behalf of certain food distribution customers that are accounted for under ASC Topic 460. ASC Topic 460 provides that at the time a company issues a guarantee, the company must recognize an initial liability for the fair value of the obligation it assumes under that guarantee. The maximum undiscounted payments we would be required to make in the event of default under the guarantees is $6.7 million, which is included in the $9.4 million total referenced above. These guarantees are secured by certain business assets and personal guarantees of the respective customers. We believe these customers will be able to perform under the lease agreements and that no payments will be required and no loss will be incurred under the guarantees. As required by ASC Topic 460, a liability representing the fair value of the obligations assumed under the guarantees of $1.0 million is included in the accompanying consolidated financial statements. All of the other guarantees were issued prior to December 31, 2002 and therefore not subject to the recognition and measurement provisions of ASC Topic 460.

     We have also assigned various leases to certain food distribution customers and other third parties. If the assignees were to become unable to continue making payments under the assigned leases, we estimate our

maximum potential obligation with respect to the assigned leases, net of reserves, to be approximately $8.9 million as of January 1, 2011 as compared to $8.0 million as of January 2, 2010. In circumstances when we become aware of factors that indicate deterioration in a customer’s ability to meet its financial obligations guaranteed or assigned by us, we record a specific reserve in the amount we reasonably believe we will be obligated to pay on the customer’s behalf, net of any anticipated recoveries from the customer. In determining the adequacy of these reserves, we analyze factors such as those described above in “Allowance for Doubtful Accounts — Methodology” and “Lease Commitments.” It is possible that the accuracy of the estimation process could be materially affected by different judgments as to the obligations based on information considered and further deterioration of accounts, with the potential for a corresponding adverse effect on operating results and cash flows. Triggering these guarantees or obligations under assigned leases would not, however, result in cross default of our debt, but could restrict resources available for general business initiatives. Refer to Part II, Item 8 of this report under Note (13) — “Concentration of Credit Risk” in the Notes to Consolidated Financial Statements for more information regarding customer exposure and credit risk.

Impairment of Long-Lived Assets

     Property, plant and equipment are tested for impairment in accordance with ASC Subtopic 360-10-35 whenever events or changes in circumstances indicate that the carrying amounts of such long-lived assets may not be recoverable from future net pretax cash flows. Impairment testing requires significant management judgment including estimating future sales and costs, alternative uses for the assets and estimated proceeds from disposal of the assets. Estimates of future results are often influenced by assessments of changes in competition, merchandising strategies, human resources and general market conditions, which may result in not recognizing an impairment loss. Impairment testing is conducted at the lowest level where cash flows can be measured and are independent of cash flows of other assets. An asset impairment would be indicated if the sum of the expected future net pretax cash flows from the use of the asset (undiscounted and without interest charges) is less than the carrying amount of the asset. An impairment loss would be measured based on the difference between the fair value of the asset and its carrying amount. We generally determine fair value by discounting expected future cash flows at a rate which management has determined to be consistent with assumptions used by market participants.

     The estimates and assumptions used in the impairment analysis are consistent with the business plans and estimates we use to manage our business operations and to make acquisition and divestiture decisions. The use of different assumptions would increase or decrease the impairment charge. Actual outcomes may differ from the estimates. It is possible that the accuracy of the estimation of future results could be materially affected by different judgments as to competition, strategies and market conditions, with the potential for a corresponding adverse effect on financial condition and operating results.

Goodwill

     We maintain three reporting units for purposes of our goodwill impairment testing, which are the same as our reporting segments disclosed in Part II, Item 8 of this report under Note (18) — “Segment Reporting”. Goodwill for each of our reporting units is tested for impairment in accordance with ASC 350 annually and/or when factors indicating impairment are present, which requires a significant amount of management’s judgment. Such indicators may include a decline in our expected future cash flows, unanticipated competition, the loss of a major customer, slower growth rates or a sustained significant decline in our share price and market capitalization, among others. Any adverse change in these factors could have a significant impact on the recoverability of our goodwill and could have a material impact on our consolidated financial statements.

     During fiscal 2009, we began applying the provision of ASC Topic 820 in relation to our goodwill impairment testing by applying, to the extent possible, observable market inputs to arrive at the fair values of our reporting units.

     Our fair value for each reporting unit is determined based on an income approach which incorporates a discounted cash flow analysis and a market approach that utilizes current earnings multiples for comparable publically-traded companies. Our income approach is based on an estimate of five years of future cash flows and a terminal value that factors in estimated long-term growth. The estimate of future cash flows are dependent on our knowledge and experience about past and current events and assumptions about conditions

we expect to exist, including operating performance, economic conditions, long-term growth rates, capital expenditures, changes in working capital and effective tax rates. The discount rates applied to the income approach reflect a weighted average cost of capital for comparable publicly-traded companies which are adjusted for equity and size risk premiums based on market capitalization.

     We have weighted the valuation of our reporting units at 70% based on the income approach and 30% based on the market approach. We believe that this weighting is appropriate since it is often difficult to find other appropriate publicly-traded companies that are similar to our reporting units and it is our view that future discounted cash flows are more reflective of the value of the reporting units.

     Our estimates could be materially impacted by factors such as competitive forces, customer behaviors, changes in growth trends and specific industry conditions, with the potential for a corresponding adverse effect on financial condition and operating results potentially resulting in impairment of the goodwill. None of the reporting units are more susceptible to economic conditions than others. The income approach and market approach used to determine fair value are sensitive to changes in discount rates and market trading multiples.

     We performed our fiscal 2010 annual impairment test of goodwill during the fourth quarter of fiscal 2010 based on conditions as of the end of our third quarter of fiscal 2010 and determined that no indication of impairment existed in any of our reporting segments. The fair value of the retail segment was approximately 13% higher than its carrying value, while the food distribution segment’s fair value exceeded its carrying value by approximately 17% and the military segment’s fair value was approximately 54% higher than its carrying value.

     Discount rates applied in our income approach during fiscal 2010 ranged from 8.75% to 10.5% and were reflective of the weighted average cost of capital of comparable publically-trade companies with an adjustment for equity and size premiums based on market capitalization. Growth rates ranged from -2.5% to 2.0%. For the food distribution segment to have an indication of impairment the discount rate applied would need to increase over 2.0% or the assumed long-term growth rate would need to decrease by 2.0% with a corresponding increase in the discount rate of over 1.0%. For the retail segment to have an indication of impairment the discount rate applied would need to increase approximately 2.0% or the assumed long-term growth rate would need to decrease by 2.0% with a corresponding increase in the discount rate of over 1.0%.

     While we believe our estimates of fair value of our reporting units are reasonable, there can be no assurance that deterioration in economic conditions, customer relationships or adverse changes to expectations of future performance will not occur, resulting in a goodwill impairment loss. Please refer to Part II, Item 8 in this report under Note (1) — “Summary of Significant Accounting Policies” under the caption “Goodwill and Intangible Assets” of this Form 10-K for additional information pertaining to our annual goodwill impairment analysis.

Income Taxes

     When preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. The process involves estimating our actual current tax obligations based on expected income, statutory tax rates and tax planning opportunities in the various jurisdictions in which we operate. In the event there is a significant unusual or one-time item recognized in our results of operations, the tax attributable to that item would be separately calculated and recorded in the period the unusual or one-time item occurred.

     We utilize the liability method of accounting for income taxes as set forth in ASC Topic 740. Under the liability method, deferred taxes are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the basis differences reverse or are settled. A valuation allowance is recorded when it is more likely than not that all or a portion of the deferred tax assets will not be realized. Changes in valuation allowances from period to period are included in our tax provision in the period of change.

     We establish reserves when, despite our belief that the tax return positions are fully supportable, certain positions could be challenged and we may ultimately not prevail in defending our positions. These

reserves are adjusted in light of changing facts and circumstances, such as the closing of a tax audit or the expiration of statutes of limitations. The effective tax rate includes the impact of reserve provisions and changes to reserves that are considered appropriate, as well as, related penalties and interest. These reserves relate to various tax years subject to audit by taxing authorities.

     Income tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized. We recognize potential accrued interest and penalties related to the unrecognized tax benefits in income tax expense.

Reserves for Self Insurance

      We are primarily self-insured for workers’ compensation, general and automobile liability and health insurance costs. It is our policy to record our self-insurance liabilities based on claims filed and an estimate of claims incurred but not yet reported. Worker’s compensation, general and automobile liabilities are actuarially determined on a discounted basis. We have purchased stop-loss coverage to limit our exposure to any significant exposure on a per claim basis. On a per claim basis, our exposure for workers compensation is $0.6 million, auto liability and general liability is $0.5 million and for health insurance our exposure is $0.4 million. Any projection of losses concerning workers’ compensation, general and automobile and health insurance liability is subject to a considerable degree of variability. Among the causes of this variability are unpredictable external factors affecting future inflation rates, litigation trends, legal interpretations, benefit level changes and claim settlement patterns. Although our estimates of liabilities incurred do not anticipate significant changes in historical trends for these variables, such changes could have a material impact on future claim costs and currently recorded liabilities. A 100 basis point change in discount rates would increase our liability by approximately $0.2 million.

Vendor Allowances and Credits

     As is common in our industry, we use a third party service to undertake accounts payable audits on an ongoing basis. These audits examine vendor allowances offered to us during a given year as well as cash discounts, freight allowances and duplicate payments and establish a basis for us to recover overpayments made to vendors. We reduce future payments to vendors based on the results of these audits, at which time we also establish reserves for commissions payable to the third party service provider as well as for amounts that may not be collected. We also establish reserves for future repayments to vendors for disputed payment deductions related to accounts payable audits, promotional allowances and other items. Although our estimates of reserves do not anticipate changes in our historical payback rates, such changes could have a material impact on our currently recorded reserves.

Share-based Compensation

     ASC Topic 718 requires companies to estimate the fair value of share-based payment awards on the date of grant. The Company uses the grant date closing price per share of Nash Finch common stock to estimate the fair value of Restricted Stock Units (RSUs) and performance units granted pursuant to its long-term incentive plan (LTIP). The Company uses the Black-Scholes option-pricing model to estimate the fair value of stock options. No options were granted during fiscal 2010, fiscal 2009 or fiscal 2008 and no options were outstanding as of January 1, 2011. The Company uses a lattice model to estimate the fair value of stock appreciation rights (SARs) which contain market conditions. The value of the portion of the awards ultimately expected to vest is recognized as expense over the requisite service period which is derived from the data in the lattice valuation model. Share-based compensation is based on awards ultimately expected to vest, and is reduced for estimated forfeitures. ASC Topic 718 requires forfeitures be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ materially from those estimates. Significant judgment is required in selecting the assumptions used for estimating fair value of share-based compensation as well estimating forfeiture rates. Further, any awards with performance conditions that can affect vesting also add additional judgment in determining the amount expected to vest. There can be significant volatility in many of our assumptions and therefore our estimates of fair value, forfeitures, etc. are sensitive to changes in these assumptions.

     Please refer to Part II, Item 8 in this Form 10-K under Note (10) — “Share-based Compensation Plans” for a comprehensive discussion related to our share-based compensation plans.

New Accounting Standards

     In June 2009, the FASB issued amendments to ASC Topic 810 (“ASC 810”), which addresses the elimination of the concept of a qualifying special purpose entity. The amended guidance also replaces the quantitative-based risks and rewards calculation for determining which enterprise has a controlling financial interest in a variable interest entity with an approach focused on identifying which enterprise has the power to direct the activities of a variable interest entity and the obligation to absorb losses of the entity or the right to receive benefits from the entity. Additionally, the amended guidance provides more timely and useful information about an enterprise’s involvement with a variable interest entity. Effective January 3, 2010, we adopted the amended provisions of ASC 810 which had no impact on our consolidated financial statements.

     On December 15, 2009, the FASB issued Accounting Standards Update No. 2010-06, Fair Value Measurements and Disclosures Topic 820 “Improving Disclosures about Fair Value Measurements”. This ASU requires some new disclosures and clarifies some existing disclosure requirements about fair value measurement as set forth in ASC Subtopic 820-10. The FASB’s objective is to improve these disclosures and, thus, increase the transparency in financial reporting. The Company adopted the provision of ASU 2010-06 effective January 3, 2010. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Our exposure in the financial markets consists of changes in interest rates relative to our investment in notes receivable, the balance of our debt obligations outstanding and derivatives employed from time to time to manage our exposure to changes in interest rates and diesel fuel prices. We do not use financial instruments or derivatives for any trading or other speculative purposes.

     We carry notes receivable because, in the normal course of business, we make long-term loans to certain retail customers. Substantially all notes receivable are based on floating interest rates which adjust to changes in market rates. As a result, the carrying value of notes receivable approximates market value. Refer to Part II, Item 8 of this report under Note (6) — “Accounts and Notes Receivable” in the Notes to Consolidated Financial Statements for more information.

     The table below provides information about our debt obligations that are sensitive to changes in interest rates. For debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity dates.

		January 1, 2011
		Fair
(in millions, except rates)		Value				Total				2011				2012				2013				2014				2015				Thereafter
Debt with variable interest rate:
Principal payable		$	154.1			$	154.1			$	—			$	—			$	154.1			$	—			$	—			$	—
Average variable rate payable							2.6	%											2.6	%
Debt with fixed interest rates:
Principal payable		$	151.5			$	138.8			$	0.7			$	0.7			$	0.7			$	—			$	—			$	136.7
Average fixed rate payable							3.5	%			6.0	%			6.2	%			6.1	%			5.6	%							3.5	%

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Nash-Finch Company

We have audited the accompanying consolidated balance sheet of Nash-Finch Company (a Minnesota Corporation) and subsidiaries (collectively, the Company) as of January 1, 2011, and the related consolidated statement of income, stockholders’ equity and cash flows for the year ended January 1, 2011. Our audit of the basic financial statements included the financial statement schedule referenced in Part IV, Item 15(2) of this report. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Nash-Finch Company and subsidiaries as of January 1, 2011, and the results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Nash-Finch Company and subsidiaries’ internal control over financial reporting as of January 1, 2011, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 3, 2011, expressed an unqualified opinion thereon.

/s/ Grant Thornton LLP

Minneapolis, Minnesota
March 3, 2011

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Nash-Finch Company

We have audited the accompanying consolidated balance sheet of Nash Finch Company and subsidiaries (collectively, the Company) as of January 2, 2010, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the two years in the period ended January 2, 2010. Our audits also included the financial statement schedule referenced in Part IV, Item 15(2) of this report. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Nash Finch Company and subsidiaries at January 2, 2010, and the consolidated results of their operations and their cash flows for each of the two years in the period ended January 2, 2010, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

/s/ Ernst & Young LLP

Minneapolis, Minnesota
March 4, 2010 except as to Note 18 as to which the date is March 3, 2011

NASH FINCH COMPANY AND SUBSIDIARIES

Fiscal years ended January 1, 2011,
January 2, 2010 and January 3, 2009		2010				2009				2008
Sales		$	4,991,979			$	5,212,655			$	4,633,494
Cost of sales			4,591,191				4,793,967				4,226,545
Gross profit			400,788				418,688				406,949
Other costs and expenses:
Selling, general and administrative			269,140				287,328				288,263
Special charges			—				6,020				—
Gain on acquisition of a business			—				(6,682	)			—
Gain on litigation settlement			—				(7,630	)			—
Goodwill impairment			—				50,927				—
Depreciation and amortization			36,119				40,603				38,429
Interest expense			23,403				24,372				26,466
Total other costs and expenses			328,662				394,938				353,158
Earnings before income taxes			72,126				23,750				53,791
Income tax expense			21,185				20,972				20,646
Net earnings		$	50,941			$	2,778			$	33,145
Net earnings per share:
Basic		$	3.97			$	0.21			$	2.57
Diluted			3.86				0.21				2.52
Declared dividends per common share		$	0.72			$	0.72			$	0.72
Weighted average number of common shares outstanding and common equivalent shares outstanding:
Basic			12,819				13,007				12,886
Diluted			13,186				13,378				13,161

See accompanying notes to consolidated financial statements.

NASH FINCH COMPANY AND SUBSIDIARIES

		January 1, 2011				January 2, 2010
Assets
Current Assets:
Cash		$	830			$	830
Accounts and notes receivable, net			233,436				250,767
Inventories			333,146				285,443
Prepaid expenses and other			15,817				11,410
Deferred tax assets			8,281				9,366
Total current assets			591,510				557,816
Notes receivable, net			20,350				23,343
Property, plant and equipment:
Property, plant and equipment			649,256				637,167
Less accumulated depreciation and amortization			(409,190	)			(422,529	)
Net property, plant and equipment			240,066				214,638
Goodwill			167,166				166,545
Customer contracts & relationships, net			18,133				21,062
Investment in direct financing leases			2,948				3,185
Other assets			10,502				12,947
Total assets		$	1,050,675			$	999,536
Liabilities and Stockholders’ Equity
Current liabilities:
Current maturities of long-term debt and capitalized lease obligations		$	3,159			$	4,438
Accounts payable			230,082				240,483
Accrued expenses			60,001				60,524
Income taxes payable			—				3,064
Total current liabilities			293,242				308,509
Long-term debt			292,266				257,590
Capital lease obligations			18,920				21,442
Deferred tax liability, net			36,344				19,323
Other liabilities			32,899				42,113
Commitments and contingencies			—				—
Stockholders’ equity:
Preferred stock — no par value
Authorized 500 shares; none issued			—				—
Common stock of $1.66 2/3 par value
Authorized 50,000 shares, issued 13,677 and 13,675 shares, respectively			22,796				22,792
Additional paid-in capital			114,799				106,705
Common stock held in trust			(1,213	)			(2,342	)
Deferred compensation obligations			1,213				2,342
Accumulated other comprehensive loss			(10,984	)			(10,756	)
Retained earnings			303,584				261,821
Common stock in treasury, 1,569 and 863 shares, respectively			(53,191	)			(30,003	)
Total stockholders’ equity			377,004				350,559
Total liabilities and stockholders’ equity		$	1,050,675			$	999,536