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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

NASH-FINCH COMPANY

(Exact name of Registrant as specified in its charter)

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:

Common Stock, par value $1.66²/3 per share
Common Stock Purchase Rights

        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 X    No     

        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

        As of March 4, 2002, 11,893,551 shares of Common Stock of the Registrant were outstanding. The aggregate market value of the Common Stock of the Registrant as of that date (based upon the last reported sale price of the Common Stock at that date by the Nasdaq National Market), excluding outstanding shares deemed beneficially owned by directors and officers, was approximately $301,668,957.

DOCUMENTS INCORPORATED BY REFERENCE

        Part III of this Annual Report on Form 10-K incorporates by reference information (to the extent specific sections are referred to herein) from the Registrant's Proxy Statement for its Annual Meeting to be held on May 14, 2002 (the "2002 Proxy Statement").

        THIS REPORT AND THE DOCUMENTS THAT ARE OR WILL BE INCORPORATED BY REFERENCE INTO THIS REPORT CONTAIN FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. THE WORDS "MAY," "WILL," "BELIEVE," "EXPECT," "ANTICIPATE," "INTEND," AND OTHER SIMILAR EXPRESSIONS GENERALLY IDENTIFY FORWARD-LOOKING STATEMENTS. THESE FORWARD-LOOKING STATEMENTS ARE BASED LARGELY ON OUR CURRENT EXPECTATIONS AND ARE SUBJECT TO A NUMBER OF RISKS AND UNCERTAINTIES, INCLUDING, WITHOUT LIMITATION:

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RISKS RELATED TO OUR INDUSTRY AS A WHOLE, INCLUDING THE EMERGENCE OF NEW OR GROWING COMPETITORS AND THE COMPETITIVE PRACTICES IN OUR INDUSTRY, CHANGES IN OUR ECONOMIC AND BUSINESS OPERATING ENVIRONMENTS AND CHANGES IN THE FOOD DISTRIBUTION AND RETAIL INDUSTRY IN WHICH WE OPERATE;



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RISKS RELATED TO OUR BUSINESS AND STRATEGY, INCLUDING OUR ABILITY TO ACQUIRE, AND SUCCESSFULLY INTEGRATE, TRADITIONAL GROCERY STORES, SUCCESSFULLY ROLL OUT OUR NEW STORE FORMATS AND RETAIN OUR CUSTOMERS OR ACQUIRE NEW CUSTOMERS, THE RISK OF CREDIT LOSSES, OUR ABILITY TO ATTRACT AND RETAIN QUALIFIED PERSONNEL AND THE RISK OF ISSUES WITH THE QUALITY, SAFETY OR INTEGRITY OF THE FOOD PRODUCTS WE SELL; AND



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RISKS RELATED TO OUR INDEBTEDNESS, INCLUDING THE ADVERSE IMPACT OF OUTSTANDING DEBT ON OUR OPERATING RESULTS OR OF CERTAIN TERMS OF OUR OUTSTANDING DEBT THAT COULD MATERIALLY RESTRICT OUR BUSINESS AND OPERATING FLEXIBILITY.

        ADDITIONAL INFORMATION REGARDING THESE AND OTHER RISKS IS INCLUDED IN EXHIBIT 99.1, "RISK FACTORS," FILED WITH THIS REPORT.

        IN LIGHT OF THESE RISKS AND UNCERTAINTIES, THERE CAN BE NO ASSURANCE THAT THE MATTERS REFERRED TO IN THE FORWARD-LOOKING STATEMENTS WILL IN FACT OCCUR. THE FORWARD-LOOKING STATEMENTS ARE BASED ON OUR PREDICTIONS OF FUTURE PERFORMANCE AND ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE EXPRESSED IN THE FORWARD-LOOKING STATEMENTS. AS A RESULT, YOU SHOULD NOT PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS. WE DO NOT UNDERTAKE TO UPDATE OUR FORWARD-LOOKING STATEMENTS TO REFLECT FUTURE EVENTS OR CIRCUMSTANCES.

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PART I

ITEM 1. BUSINESS

A. GENERAL DEVELOPMENT OF BUSINESS.

        Originally established in 1885 and incorporated in 1921, today we are one of the leading food distribution and retail companies in the United States, with approximately $4.1 billion in annual sales. Our business consists of three primary operating segments: food retailing, food distribution and military food distribution.

        Our food retailing segment is made up of 110 corporate-owned stores concentrated in the Upper Midwest region of the United States, consisting primarily of the states of Iowa, Minnesota, Nebraska, North Dakota, South Dakota and Wisconsin. We believe that approximately two-thirds of our traditional grocery stores are #1 or #2 in their respective markets. We are focused on becoming the leading grocery store chain in the Upper Midwest, as there are currently no national or multi-regional grocery store chains that have a significant presence in this market. Our corporate-owned stores principally operate as traditional grocery stores under three store banners: Econofoods®, Sun Mart® and Family Thrift Center™. Our corporate-owned grocery stores have undergone a substantial transformation during the past three years. We have opened 14 new stores, remodeled 23 existing stores and acquired 53 stores in separate transactions primarily from three regional grocery store chains in Minnesota, Wisconsin and Nebraska.

        Over the past three years, we have also developed, and are currently expanding, two new store formats, which target what we believe to be under-served demographic segments of our market area. The financial results for each of these store formats have exceeded our expectations. Our three Wholesale Food Outlet™ grocery stores serve the rapidly growing Hispanic population. These stores will operate under the AVANZA™ banner as we begin to expand this format. Our four Buy•n•Save® stores are extreme value stores, which serve the large segment of low-income, value conscious consumers.

        On August 13, 2001, we completed the acquisition of U Save Foods, Inc., a grocery store chain headquartered in Omaha, Nebraska, with annual sales of approximately $145 million. U Save's 14 stores are located in Nebraska, Kansas and Colorado. With this acquisition, we are now the largest grocery store chain in Nebraska, with 30 stores in that state. The stores have been integrated and converted to our primary banners.

        Our food distribution segment sells and distributes a wide variety of nationally branded and private label grocery products from 15 distribution centers to more than 1,500 grocery stores and institutional customers located in 24 states across the United States. Since 1998, we have implemented operating initiatives that have enhanced productivity and expanded profitability while providing a higher level of service to our distribution customers. We believe that in order to continue to grow our food distribution operations we must provide our customers with low prices, exceptional customer service and successful marketing and merchandising programs.

        Our military food distribution segment sells and distributes a wide variety of grocery products to approximately 100 domestic and European-based U.S. military commissaries. We primarily conduct our military distribution operations in the Mid-Atlantic region of the United States, consisting of the states along the border of the Atlantic Ocean from New York to North Carolina. We have two distribution centers in this region that exclusively provide products to U.S. military commissaries.

        Since June 1998, when Ron Marshall joined us as our President and Chief Executive Officer, we have assembled a superior management team with extensive experience in retail and food distribution. Through the execution of a 1998 revitalization plan, our new management team has streamlined food distribution operations, expanded retail operations in the Upper Midwest, lowered costs, enhanced

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operating efficiencies and strengthened our appeal to new customers. We have become a performance driven, service-oriented organization, focused on managing all aspects of our business through several performance metrics such as on-time deliveries, product fill rates, cost per case of handling and shipping goods and equipment utilization, encompassing sales, productivity, service levels and working capital efficiency. As a result, we seek to continue to grow our revenues while expanding our operating margins.

B. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS.

        Financial information about our business segments for the most recent three fiscal years is contained on pages 43-46, of this Annual Report on Form 10-K (Note (13) of Notes to Consolidated Financial Statements). For segment financial reporting purposes, a portion of the operational profits of wholesale distribution centers are allocated to retail operations to the extent that merchandise is purchased by these distribution centers and transferred to retail stores directly operated by Nash Finch. For fiscal 2001, 34% of such warehouse operational profits were allocated to retail operations.

C. NARRATIVE DESCRIPTION OF THE BUSINESS.

Retail Segment

Overview

        Our food retailing segment is made up of our corporate-owned stores, which operate principally as traditional grocery stores under three store banners: Econofoods, Sun Mart and Family Thrift Center. Our stores are typically located close to our distribution centers in order to create certain operating and logistical efficiencies. As of December 29, 2001, we operated 110 corporate-owned stores, primarily in the Upper Midwest, including 102 traditional grocery stores, 3 Wholesale Food Outlet grocery stores, 4 Buy•n•Save stores and 1 other retail store. We believe the operating and customer service initiatives implemented since 1998 have resulted in significant improvements in the financial performance of our retail stores. As a result of acquisitions, new stores, and store remodels, our food retailing revenues have grown from approximately $736.5 million in fiscal 1998 to approximately $1.0 billion for fiscal 2001, and our EBITDA margin for our retail segment has expanded from 2.5% to 5.3% over the same period.

Traditional Grocery Stores

        Our traditional grocery stores offer a wide variety of high quality grocery products and services. Many have specialty departments such as delicatessens, bakeries, eat-in cafes, pharmacies, photo centers, dry cleaners, banks, floral and video rental departments. We emphasize outstanding customer service in our traditional grocery stores, as well as our other retail stores. We have created our G.R.E.A.T. (Greet, React, Escort, Anticipate, Thank) Customer Service Program in order to train every associate on the core elements of providing exceptional customer service. A mystery shopper visits each store every two weeks to measure performance, and we distribute the results to management and store personnel.

        In early 1999, we began redesigning our traditional grocery stores to incorporate our new "Fresh Place"® concept. "Fresh Place" is an umbrella banner that emphasizes our traditional grocery stores' high-quality perishable products, such as fresh produce, deli, meats, seafood and baked goods, and takeout foods for today's busy consumer. Of our 102 traditional grocery stores, 29 carry the Fresh Place banner along with one of our other banners, and we intend to further expand this concept.

        We also offer other services for the convenience of shoppers such as Kids Korner ™. Kids Korner, which is offered in 15 store locations, is a secure, complimentary in-store supervised play area for children. Upon entering the play area, each child is given a wristband, which will trigger an alarm if the

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child leaves the area, and the parents are given a pager so that they can be immediately contacted if there are any problems with their child. Video monitors are also placed throughout the store so that parents can monitor their children.

        All of our new traditional grocery stores are planned to be approximately 55,000 square feet in size and will emphasize the "perimeter" sales in every store. Perimeter sales are generally of higher margin items like perishables and service departments. We will continue to update our corporate-owned stores to maintain modern shopping facilities that compete in today's market.

Hispanic Stores

        Our Hispanic stores currently operate under the Wholesale Food Outlet banner and offer products geared to meet the specific tastes and needs of Hispanic shoppers, with a focus on the higher profit products most frequently purchased by Hispanic shoppers such as produce, meats, baked goods and imported products from Mexico. In addition to a vast selection of familiar Hispanic products, these stores have bilingual signs and product packaging, national magazines in both English and Spanish and Spanish-speaking personnel in a clean and festive environment. These stores also provide services such as check cashing, fax services, money wiring and phone cards.

        Our Wholesale Food Outlet stores are located in Greeley, Colorado; Muscatine, Iowa; and Omaha, Nebraska. We plan to open additional Hispanic stores in 2002, under a new banner called AVANZA which means "advance" Our three Wholesale Food Outlet stores will convert to this new banner as we roll out this store format. Our new store plan assumes a 30,000 square-foot store that will generate approximately $480 of annual sales per square foot. We estimate that our average investment in this type of store will be approximately $2.5 million, including inventory.

Extreme Value Stores

        In addition to responding to the changing demographics in the United States, we have also responded to the shift in income inequality with our extreme value grocery stores operating under the Buy•n•Save banner. Buy•n•Save stores were designed to attract value-conscious shoppers, typically with household incomes under $35,000, for whom low prices are a critical factor in selecting a grocery store. These stores provide a limited assortment of Grade A quality products, consisting of approximately 20% national brands and 80% private label products, including our own proprietary labels, with savings up to 40% off comparable nationally branded items. A typical Buy•n•Save store is approximately 12,000 square feet in size and offers approximately 1,100 stock keeping units, or "SKUs," mostly in pallet displays. In contrast, a typical traditional grocery store may be approximately 40,000 square feet in size and offer between 30,000 and 45,000 SKUs, of which 15% to 20% are private label products.

        These stores cost less to build, maintain and operate than our traditional grocery stores. We make a significantly lower capital investment in these stores because the format is small and uses minimal signage and store fixtures. The size of a Buy•n•Save store and the limited number of products offered make it easier to train associates and less expensive to operate, which allows us to increase productivity and pass on the savings to our customers.

        As of December 29, 2001, we operated four Buy•n•Save stores in Minnesota and plan to open additional stores in 2002. Our new store plan assumes a 12,000 square-foot store that will generate approximately $275 of annual sales per square foot. We estimate that our average investment in a Buy•n•Save store will be approximately $800,000, including inventory.

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Food Distribution Segment

Overview

        Our food distribution segment sells and distributes a wide variety of grocery products to more than 1,500 grocery stores and institutional customers located in 24 states across the United States. Our customers are relatively diverse with the largest customer representing approximately 9.8%, and two others representing approximately 4.4% and 3.4%, of our food distribution revenues, based on 2001 revenues. No other customer represents more than 3% of our food distribution business. Approximately 60% of our food distribution volume is generated through our corporate-owned stores and customers with whom we have long-term sales and service agreements. The operating efficiencies gained since 1998 have resulted in significant improvement in the financial performance of our food distribution business. Our EBITDA margin for the food distribution segment has expanded from 2.6% in 1998 to 3.5% in 2001.

Products

        We primarily sell and distribute nationally advertised branded products and a number of unbranded products, principally meats and produce, which we purchase directly from various manufacturers, processors and suppliers or through manufacturers' representatives and brokers. We also distribute and sell private label products that are branded primarily under the proprietary trademarks Our Family®, a long-standing private label of Nash Finch, and Fame®. Under our private label line of products, we offer a wide variety of competitively priced, high quality grocery products. We offer approximately 2,200 SKUs under the Our Family and Fame labels, which compete with national branded products and other value brand products, respectively.

Services

        To further enhance our reputation and strengthen our relationships with our food distribution customers, we offer a wide variety of support services to help them develop and operate stores, as well as compete more effectively. Some of these services include:

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promotional, advertising and merchandising programs;



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installation of computerized ordering, receiving and scanning systems;



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establishment and supervision of computerized retail accounting, budgeting and payroll systems;



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personnel management assistance and employee training;



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accounting services;



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consumer and market research;



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remodeling and store development services;



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negotiating real estate transactions; and



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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.

        We also provide financial assistance to our food distribution customers in connection with new store development or the upgrading and expansion of existing stores. As of December 29, 2001, we had approximately $46.8 million of loans outstanding to 95 of our food distribution customers. We typically enter into long-term supply agreements with these customers, ranging from two to 15 years, representing more than 40% of food distribution revenues. These agreements may also contain provisions that give us the opportunity to purchase customers' independent retail businesses before any

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third party. In addition, we may assist food distribution customers by guaranteeing their loan and lease obligations

        We also distribute products to independent stores that carry our proprietary Food Pride® banner and the IGA 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 larger 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 December 29, 2001, we served approximately 86 retail stores under our Food Pride banner and 189 stores under the IGA banner.

        Our distribution centers are strategically located to efficiently serve our corporate-owned stores, our independent customer stores and other institutional customers. The distribution centers are equipped with modern materials handling equipment for receiving, storing and shipping goods and merchandise and are designed for high-volume operations at low-unit costs. Our distribution centers are profitable, yet we believe that we have substantial capacity to serve additional customers without materially increasing our costs.

        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, private label and perishable products. Non-food items and specialty grocery products are distributed from a dedicated area of the distribution center located in Bellefontaine, Ohio, and from the distribution centers located in Sioux Falls, South Dakota. We currently have a modern fleet of 413 tractors and 888 semi-trailers, which deliver the vast majority of our product to our customers.

        Our retailers order their inventory at regular intervals through direct linkage with our information systems. Virtually all of 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 promptly adjust our selling prices based on the latest market information, and our freight policy contains a fuel surcharge clause which allows us to partially mitigate the impact of rising fuel costs.

Military Food Distribution Segment

        Our military food segment distributes grocery products to U.S. military commissaries located predominately in the Mid-Atlantic region of the United States. We also distribute grocery products for use on U.S. military ships afloat and U.S. military bases located in Europe. We have two distribution centers near the largest concentration of military bases in the United States exclusively dedicated to supplying products to commissaries. These distribution centers are located in Norfolk, Virginia and Baltimore, Maryland. We have consistently received the highest available service ratings from the Defense Commissary Agency, which performs monthly assessments of service to military commissaries. The ratings are based on service metrics which include fill rate, on-time delivery and handling of order adjustments. We have an outstanding reputation as a supplier to U.S. military commissaries, with fill rates among the highest in the industry.

Competition

        We believe the two most comparable competitors of Nash Finch Company are Fleming Companies, Inc. and SuperValu Inc., both of whom are larger than Nash Finch Company.

Food Retailing Segment

        We compete on the retail grocery level in a fragmented market with many organizations of various sizes, ranging from national and regional grocery store chains to local chains and privately owned unaffiliated stores. Although our target retail market has a very low presence of national and multi-

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regional grocery store chains, we compete with other independent grocery stores, wholesale club stores and supercenters. Depending upon the product and location involved, we compete based on price, quality and assortment, store appeal, including store location and format, sales promotions, advertising and convenience. We believe that by focusing on convenience, outstanding perishable execution and exceptional customer service, we can successfully compete with our competitors.

        Our Wholesale Food Outlet stores compete primarily with small independent retailers, which we believe lack the scale to have a meaningful impact on our targeted markets. Our primary competitors for our Buy•n•Save stores are Aldi and Save A Lot, neither of which currently has a significant presence in the Upper Midwest.

Food Distribution Segment

        Competition among the top distributors in the food distribution segment is intense, both because of current trends toward consolidation and because of the low margin nature of the business. Success of competitors in this segment will be measured by their ability to leverage scale in order to gain pricing advantages, providing superior merchandising programs and services to the independent customer base and their ability to utilize technology to decrease distribution inefficiencies. We compete with local, regional and national food distributors, including Fleming Companies and Super Valu, as well as grocery store chains that purchase from suppliers and distribute products themselves to their stores for sale to consumers. We face competition from these companies on the basis of price, quality, variety and availability of products, strength of private label brands, schedules and reliability of deliveries, and the range and quality of services.

Military Food Distribution Segment

        We face competition in our military food distribution business from large food distributors. We believe we compete effectively based on customer service, cost operating efficiencies and the location of our military distribution centers.

Employees

        As of December 29, 2001, we employed 12,755 persons, of whom 7,149 were employed on a full-time basis and 5,606 were employed on a part-time basis. We consider our employee relations to be good. Only 558 of our employees are represented by unions. These union employees consist primarily of the distribution center personnel and drivers in our Ohio and Michigan distribution centers. During 2002, a collective bargaining agreement covering delivery drivers in Cincinnati, Ohio comes up for renewal.

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ITEM 2. PROPERTIES

        Our principal executive offices are located in Edina, Minnesota, and consist of approximately 104,496 square feet of office space in a building that we own.

Food Retailing Segment

        The table below sets forth, as of December 29, 2001, selected information regarding our 110 corporate-owned stores. We own 36 and lease 74 of these stores.

        As of December 29, 2001, the aggregate square footage of our 110 retail grocery stores totaled 3,837,343 square feet.

Food Distribution Segment

        The table below lists, as of December 29, 2001, the locations and sizes of our distribution centers primarily used in our food distribution operations. Various of these distribution centers, however, also distribute products to military commissaries located in their geographic areas. Unless otherwise indicated, we own all of these distribution centers. The distribution center facilities that are leased have varying terms, all with remaining terms of less than 20 years.

(1)

Includes 48,000 square feet that we lease.

(2)

Includes 29,752 square feet that we lease.

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(3)

Leased facility.

(4)

Includes 8,000 square feet that we lease.

(5)

Includes 107,300 square feet that we lease. The Sioux Falls facility represents two distinct distribution centers, one that distributes limited variety and slow moving products, and the other that distributes general merchandise and health and beauty care products.

(6)

Includes 230,520 square feet that we lease.

(7)

Includes 40,400 square feet that we lease. This facility includes two separate distribution operations, one that distributes dry groceries, frozen foods, fresh and processed meat products, and a variety of non-food products, and the other that distributes health and beauty care products, general merchandise and specialty grocery products. The general merchandise services distribution center uses approximately 254,000 square feet of the total owned and leased space.

Military Distribution Segment

        The table below lists, as of December 29, 2001, the locations and sizes of our distribution centers exclusively used in our military distribution business. Unless otherwise indicated, we lease each of these distribution centers. The leases have varying terms, each with a remaining term of less than 20 years.

(1)

Includes 59,250 square feet that we own.

ITEM 3. LEGAL PROCEEDINGS

        The Company is engaged from time to time in routine legal proceedings incidental to our business. We do not believe that any pending legal proceedings will have a material impact on the business or financial condition of Nash Finch Company and its subsidiaries, taken as a whole.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        No matter was submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this Report.

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ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT

        The following table sets forth information about our executive officers as of March 1, 2002:

        There are no family relationships between or among any of our executive officers or directors. Our executive officers are elected by the Board of Directors for one-year terms, commencing with their election at the first meeting of the Board of Directors immediately following the annual meeting of stockholders and continuing until the next such meeting of the Board of Directors.

        Ron Marshall has served as our President and Chief Executive Officer and a director since June 1998. Mr. Marshall previously served as Executive Vice President and Chief Financial Officer of Pathmark Stores, Inc., a grocery store chain, from September 1994 to May 1998.

        Christopher A. Brown has served as Executive Vice President, Merchandising since October 1999. Prior to joining us, Mr. Brown was employed for over five years by Richfood Holdings, Inc., a food wholesaler and retailer. At Richfood Holdings, Inc., he served in various executive positions, including Executive Vice President, Procuring and Merchandising of the Farm Fresh Division from October 1998 to October 1999, Executive Vice President, Procurement for Richfood Holdings, Inc. from April 1997 to October 1998, Senior Executive Vice President of Super Rite Foods division from March 1996 to April 1997 and President and Chief Operating Officer of Rotelle, Inc., a subsidiary, from August 1994 to March 1996.

        Jerry L. Nelson has served as our Executive Vice President, President—Food Distribution since October 2000. He previously served as our operating Senior Vice President, Midwest Region, from April 2000 to October 2000, and as operating Vice President, Midwest Region, from November 1999 to April 2000. Prior to joining us, he served as Executive Vice President of Hagemeyer N.A., a specialty food distributor, from March 1997 to June 1999. From March 1995 to August 1996, he served as Operating Group President of Fleming Companies Inc., a food wholesaler and retailer.

        Bruce A. Cross has served as our Senior Vice President, Business Transformation since May 2000. He served as Senior Vice President and Chief Information Officer from September 1998 to May 2000. Mr. Cross previously served as Senior Project Executive for IBM Global Services, a strategic technical outsourcing and business consulting firm, from January 1995 to September 1998.

        Robert B. Dimond has served as our Senior Vice President and Chief Financial Officer since October 2000 and as Treasurer since May 2001. Mr. Dimond previously served as Group Vice President and Chief Financial Officer for the western region of Kroger Co., a grocery store chain, from

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March 1999 to September 2000. From February 1992 until March 1999, he served as Group Vice President, Administration and Controller, for Smith's Food & Drug Centers, Inc., a grocery store chain.

        James R. Dorcy has served as our Senior Vice President, Corporate Retail since November 2001. He previously served as Vice President, Marketing and Advertising from February 2000 to November 2001. From December 1998 to November 1999, Mr. Dorcy served as Vice President, Advertising and Marketing for Farm Fresh Inc., a grocery store chain. From November 1994 to December 1998, he served as Vice President, Advertising and Marketing for Bozzuto's, Inc., a food wholesaler and retailer.

        Norman R. Soland has served as our Senior Vice President since July 1998, and has served as Secretary and General Counsel since January 1986. He served as our Vice President, Secretary and General Counsel from May 1988 to July 1998.

        Rose M. Bailey has served as our Vice President, Human Resources since February 2001. She previously served as Director of Human Resource Programs for Arcadia Financial, a buyer and servicer of automobile loans, from February 1998 to January 2001. From March 1979 to January 1997, she served as Vice President of Human Resources for County Seat Stores, Inc., a retailer of specialty clothing.

        Jeffrey E. Poore has served as our Vice President, Distribution and Logistics since May 2001. Since 1996 Mr. Poore served in various positions with SuperValu Inc., a food wholesaler and retailer, most recently as Vice President, Logistics from January 1999 to April 2001. Before joining SuperValu, Mr. Poore served as the Director of Logistics for SUN TV & Appliance, Inc. from December 1995 to September 1996.

        LeAnne M. Stewart has served as our Vice President since July 1999, as Controller since April 2000, and served as Treasurer from May 2000 to May 2001. Prior to her election as Controller, Ms. Stewart served as our Vice President, Financial Planning and Analysis. Prior to joining us, she served as Manager, Corporate Finance for Enron Europe Limited, an international energy company, from August 1997 to March 1999. From December 1987 to July 1995, she served in various positions ranging from staff accountant to senior manager at Ernst & Young LLP.

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PART II

ITEM 5.  MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

        Our common stock is listed on the Nasdaq National Market and 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 the common stock as reported by the Nasdaq National Market, and the quarterly cash dividends paid per share of common stock. Prices do not include adjustments for retail mark-ups, mark-downs or commissions. At December 29, 2001 there were 2,710 stockholders of record.

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Item 6. Selected Financial Data

Nash Finch Company and Subsidiaries
Consolidated Summary of Operations
Ten years ended December 29, 2001 (not covered by Independent Auditors' Report)

(1)    Based on average outstanding shares at year-end.

(2)    High and low closing sales price.

(3)    Return based on continuing operations.

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

Results of Operations

1. Fiscal 2001 vs. 2000

Revenues

        Total revenues for 2001 were $4.107 billion compared to $3.956 billion for 2000, an increase of 3.8%. The increase is attributed to new food distribution and military business Nash Finch Company (the "Company") has been able to capture during the year. The distribution of total revenues by operating segment is as follows:

        Food distribution segment revenues for the year were $2.077 billion compared to $1.958 billion in 2000, an increase of 6.1%. The increase is primarily attributed to new food distribution customers as the Company continues to improve service to new and existing customers. In addition, food distribution revenues were improved by the transfer of revenues from the retail segment as a result of the sale of 18 corporate-owned retail stores, in North and South Carolina to existing food distribution customers during 2001.

        Retail segment revenues were $1.035 billion for the year, compared to $1.029 billion last year, an increase of .6%. The improvement is largely due to the acquisition of 14 stores from U Save Foods, Inc. ("U Save"), on August 13, 2001, offset by the sale of stores in the Southeast. U Save, a privately held company, operated stores primarily in Nebraska. All of the stores acquired have been converted to the Company's primary banners. The sale of the Southeast stores allows the Company to focus its retail strategy on store operations in the upper Midwest.

        The Company has developed two specialty store formats. The first is designed to service a rapidly growing Hispanic market, which the Company believes has not been adequately served by traditional grocery stores. The Company currently operates three Hispanic oriented stores in the Midwest, and has announced a new banner for this format called AVANZA. The first AVANZA store will open in the second quarter of 2002 in Denver, Colorado. A second format, under the name Buy•n•Save is targeted to service the value conscious consumer. At December 29, 2001, four Buy•n•Save stores were in operation, with a plan to roll out three additional stores in the first quarter of 2002.

        Same store sales for 2001 declined by 1%, a direct result of reductions in promotional activity compared to last year and competitive pressures in certain markets. During 2001, the Company's corporate store count changed as follows:

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        Military segment revenues were $996 million for the year compared to $969 million last year, an increase of 2.8%. The improvement reflects an addition of new business in Europe and North Carolina, awarded to the Company late last year by a major manufacturer. The deployment of military forces in response to the September 11 terrorist attacks has had some impact, though not significant, on the military business.

Gross Margins

        Gross margins were 11.3% in 2001, compared to 11.1% last year. The margin improvements are attributed to increased productivity, efficient utilization of distribution facilities, improved sales mix of private label and value-added products in retail stores and increased procurement efficiencies. In 2001, gross margins were decreased by a LIFO charge of $2.7 million, or .07% as a percent of sales, compared to a LIFO credit of $1.1 million, or .03% as a percent of sales, which increased gross margins in 2000. The charge in 2001 is due to food price inflation and increased inventory levels to accommodate new business.

Selling, General and Administrative Expense

        Selling, general and administrative expenses as a percent of total revenues were 8.4% in both 2001 and 2000. Selling, general and administrative expenses in 2001 include retail store impairments of $1.9 million. The write-down of long-lived assets results from the Company's intention to close two stores, as well as changes in circumstances in three other stores indicating the carrying value of the assets may not be recoverable. There were no impairment charges recorded in 2000. In addition, selling, general and administrative expense for 2001 and 2000 includes gains from the sale of real estate in the amounts of $2.6 million and $3.0 million, respectively. Substantially all of the gain in 2001 relates to the sale of real estate associated with a distribution center closed as part of the 1998 revitalization plan. Lease related costs associated with stores closed in 2001 and 2000 were $1.1 million and $2.7 million, respectively.

Depreciation and Amortization Expense

        Depreciation and amortization expense for the year was $46.6 million compared to $45.3 million in 2000, an increase of 2.8%. The increase primarily reflects the addition of several new stores in 2000 and 2001 and the acquisition of U Save, partially offset by the sale of the Southeast stores. Goodwill, in the amount of $27.9 million, recorded as a result of the U Save acquisition is not subject to amortization in accordance with new accounting pronouncements, but must be tested at least annually for impairment. Refer to New Accounting Standards in Note (1) of Notes to Consolidated Financial Statements. Amortization of goodwill and other intangibles for the year was $8.0 million compared to $8.4 million in 2000.

Interest Expense

        Interest expense for the year was relatively flat at $34.3 million compared to $34.4 million in 2000. Higher interest costs under the revolving credit facility resulted from the Company fixing a rate under a swap agreement which expired on December 6, 2001. The average borrowing rate under the revolving credit facility including the impact of the interest swap was 8.48% in 2001 compared to 7.97% in 2000. The rate difference was offset by an average revolving debt level that was $23.4 million lower compared to 2000. The acquisition of U Save was funded through the revolving credit facility.

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Income Taxes

        The effective income tax rate for 2001 was 41.4% compared to 42.4% in 2000. The rate reduction is attributed to a decrease in the ratio of nondeductible goodwill to pretax income. Refer to the tax rate tables in Note (6) of Notes to Consolidated Financial Statements for the comparative components of these rates.

Net Earnings

        Net earnings for the year increased to $21.3 million, or $1.78 per diluted share, compared to $15.8 million, or $1.38 per diluted share in 2000, before an extraordinary charge related to the refinancing of the Company's revolving credit facility in December 2000. The improvement over last year is attributable to the increased performance in each business segment. Food distribution pretax profitability increased 27% to $60.7 million from $47.8 million in 2000, due to the new business added during the year and continuing operational improvements. Retail segment pretax profit increased 17% to $38.8 million compared to $33.3 million in 2000, due to improvements in gross margins and planned reductions in promotional activities. Military segment pretax profit increased 6.9% to $23.1 million compared to $21.6 million last year. The addition of new business late last year contributed to the year over year profit increase. Segment pretax profitability was partially offset by an increase of $7.3 million in unallocated corporate expenses primarily related to performance based compensation and a LIFO charge of $2.7 million.

1998 Special Charges

        During the fourth quarter of 1998, the Company recorded special charges totaling $71.4 million (offset by $2.9 million of 1997 charge adjustments) as a result of the Company's revitalization plan designed to redirect its technology efforts, optimize warehouse capacity through consolidation, and to close, sell or reassess under-performing businesses and investments.

        In conjunction with the implementation of the Company's 1998 revitalization plan, the Company designated five warehouses and 12 under-performing stores for closure. During 1999, adjustments to the plan involved decisions to close four additional stores and to indefinitely defer the closure of two distribution centers and one retail store. Accordingly, during the fourth quarter of 1999, the Company reversed $7.0 million of expected costs associated with these decisions. All actions contemplated by the original 1998 plan and subsequent revisions have been implemented. The Company does not expect any future adverse impact on earnings to result from any of the continuing issues under the 1998 special charges.

        During fiscal 2001, the activity recorded through the remaining special charge accrual included $.7 million of pension benefits related to the distribution segment and $.8 million in continuing lease and exit costs related to closed retail stores. As of December 29, 2001, the food distribution portion of the special charge liability consisted of $.9 million related to certain pension and post-employment benefits. Also, liabilities in the amount of $5.1 million remain related to continuing lease commitments and occupancy costs associated with retail stores closed under the 1998 special charge. The Company is actively seeking to sublease these properties.

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2. Fiscal 2000 vs. 1999

Revenues

        Total revenues for 2000 were $3.956 billion compared to $4.061 billion for 1999, a decrease of 2.6%. The revenue decline was primarily due to the consolidation of distribution centers in 1999 which were part of the Company's strategic plan to close underutilized facilities and concentrate sales volume into existing distribution centers, thereby improving efficiency, service and distribution costs to the retailer. In 2000, this strategy was a factor in the Company attracting new food distribution and military business. The distribution of revenues by operating segment is as follows:

        Food distribution segment revenues for the year were $1.958 billion compared to $2.248 billion in 1999, a decrease of 12.9%. The decline was largely attributed to two factors: the closure of five distribution centers in 1999, resulting in a loss of volume and the acquisitions of two previous food distribution customers, Hinky Dinky Supermarkets, Inc. ("Hinky Dinky") in January 2000 and Erickson's Diversified Corporation ("Erickson's") in June 1999, which resulted in the reporting of 2000 revenues in the retail segment instead of the food distribution segment. During the last half of 2000, the Company successfully gained the food distribution business of Food Farm, Inc., a consortium of 63 Piggly Wiggly stores in the Southeast, representing more than $200 million in annualized revenues.

        Retail segment revenues were $1.029 billion for the year, compared to $853.1 million last year, an increase of 20.6%. The improvement was largely the result of the acquisition of the 12-store Hinky Dinky chain in Nebraska in January 2000, the opening of new replacement stores in Marshalltown and Cedar Rapids, Iowa, an additional store in Rochester, Minnesota and the acquisition of three conventional stores in the Midwest. In addition, the acquisition of 18 stores operated by Erickson's in June 1999 also contributed to the favorable year over year comparison.

        Same store sales for the year were relatively flat compared to last year. During the year the Company's corporate store count changed as follows:

        Military segment revenues for the year were $969 million compared to $960 million 1999, an increase of 1.0%. The improvement for the year partially reflected the addition of new distribution business in Europe and North Carolina, awarded to the Company in the third quarter by a major manufacturer.

Gross Margins

        Gross margins were 11.1% in 2000, compared to 9.8% in 1999. The increase in 2000 over the last year reflects the growth in the proportion of higher margin retail revenues. In addition, efficiencies in

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warehousing and transportation resulting from facility consolidations, operational and system improvements favorably impacted gross margins. The Company implemented processes to continuously monitor costs by analyzing key measures of operating performance such as delivery equipment utilization, on-time deliveries, product fill rates and the cost per case of handling and shipping goods, against predetermined standards. Improvements in product procurement resulted from leveraging the Company's buying power through three regional procurement offices and partnering with vendors to implement more effective merchandising programs also contributed to improved gross margins.

        In 2000, the Company recorded a LIFO credit of $1.1 million compared to a credit of $.9 million in 1999. Although the Company believes that there was inflation in product pricing, it has experienced deflation in costs of products due to efficiencies and economies brought about by leveraging volume and improvements in its procurement processes.

Selling, General and Administrative Expense

        Selling, general and administrative expenses as a percent of total revenues were 8.4% in 2000 compared to 7.5% in 1999. The increase in 2000 over 1999 was substantially due to the increasing proportion of corporate-owned retail business, which typically operates at higher expense levels as a percent of revenues than does the food distribution segment. During 2000, the Company recorded an additional provision for bad debts of $7.4 million, compared to $4.4 million last year. The increase relates primarily to certain accounts within the Michigan and Ohio market areas, where the Company has focused efforts to minimize credit risks.

Depreciation and Amortization Expense

        Depreciation and amortization expense for the year was $45.3 million compared to $41.6 million in 1999, an increase of 8.9%. The increase primarily reflected a full year's depreciation and goodwill amortization expense related to the acquisitions of Erickson's and Hinky Dinky. In addition, an expansion of the Lumberton, North Carolina distribution center and the construction of seven new stores and 43 remodeled stores during the year also contributed to the increased expense.

Interest Expense

        Interest expense for 2000 was $34.4 million compared to $29.9 in 1999, an increase of 15.1%. The higher interest costs are attributed to higher average borrowing rates which were 7.97% in 2000 compared to 7.04% in 1999. In addition, average revolving debt levels increased in 2000, resulting from the acquisition of Hinky Dinky and various major capital expansion projects, which also contributed to the higher interest costs.

Net Earnings

        Net earnings for 2000 increased to $15.8 million, or $1.38 per diluted share, excluding non-recurring items compared to $9.4 million, or $.82 per diluted share, in 1999, excluding non-recurring items. The improvement over 1999 can be attributed to a number of factors: the successful integration of the Hinky Dinky stores; the continued strong performance by the Erickson's stores; efficiency gains and new business in the food distribution segment. Including the reversal of restructuring charges, non-recurring gains on the 1999 sales of the Company's produce growing and marketing subsidiary, Nash-DeCamp, and majority investments in two dairy operations as well as the write off of unamortized financing costs in 2000, net earnings were $15.5 million or $1.35 per diluted

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share compared to $19.8 million or $1.74 per diluted share last year. The following table illustrates the comparative results (in thousands):

Income Taxes

        The effective income tax rate for 2000 was unchanged from the 42.4% rate reported in 1999. Refer to the tax rate tables in Note (6) of Notes to Consolidated Financial Statements for the comparative components of these rates.

Extraordinary Charge

        In December 2000, the Company completed the refinancing of its revolving credit facility. The transaction resulted in the write-off of unamortized financing costs associated with the previous facility, which has been classified as an extraordinary charge of $.4 million, or $.03 per share, net of income tax benefit.

EBITDA

        The Company's new revolving credit facility contains various restrictive covenants. Several of these covenants are based on earnings from operations before interest, taxes, depreciation, amortization and non-recurring items (EBITDA). The ability to generate EBITDA sufficient to satisfy the requirements of the credit facility is an important measure of the Company's financial strategy. This information is not intended as an alternative to performance measures under generally accepted accounting principles, but rather as a presentation important for understanding the Company's performance relative to its debt covenants.

        As of December 29, 2001, the Company is in compliance with all EBITDA based debt covenants. The following is a summary of the calculation of EBITDA (in thousands) for 2001, 2000 and 1999.

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Critical Accounting Policies

        The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions in applying certain critical accounting policies. Critical accounting policies are those that require the most subjective and complex judgments. The following are considered by the Company to be critical and could result in materially different amounts being reported under different conditions or using different assumptions:

Allowance for Doubtful Accounts—Methodology

        We evaluate the collectibility 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. If circumstances change (i.e., further evidence of material adverse credit worthiness, 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.

Guarantees of Debt and Lease Obligations of Others

        We have guaranteed the debt and lease obligations of certain of our 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 ($26.0 million as of December 29, 2001), which would be due in accordance with the underlying agreements. Triggering the guarantee would not however, result in cross default of the Company debt, but could restrict resources available for general business initiatives.

Debt Covenants

        Our debt agreements require us to maintain certain financial ratios and a minimum level of net worth as discussed in Note (5) of Notes to Consolidated Financial Statements. We have complied with these covenants as of December 29, 2001. We believe maintaining our current level of operating results makes the likelihood of defaulting on our debt covenants unlikely absent any material negative event affecting the U.S. economy as a whole. We also believe our lenders would provide us waivers if necessary. However, our expectations of future operating results and continued compliance with our debt covenants cannot be assured and our lender's actions are not controllable by us. If our projections of future operating performance are not achieved and our debt is placed in default, we would experience a material adverse impact on our reported financial position and results of operations.

Lease Commitments

        The Company has historically leased store sites for sublease to qualified independent retailers, at rates that are at least as high as the rent paid by the Company. The Company also leases store sites for its retail segment. Under terms of the original lease agreements, the Company remains primarily liable for any commitments a retailer may no longer be financially able to satisfy as well as those of its own stores. Should a retailer be unable to perform under the sublease or should the Company close underperforming corporate stores, the Company records a charge to earnings for costs of the remaining term of the lease, less any anticipated sublease income. More often than not, the Company has been able to re-sublease such locations to other qualified retailers with minimal interruption of sublease recoveries and cost to the Company. Should the number of defaults by sublessees or corporate store closures increase, the remaining lease commitments the Company must record could have a material adverse effect on operating results and cash flows. Refer to Note (9) of Notes to Consolidated Financial Statements for a discussion of lease commitments.

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Impairment of Long-lived Assets

        Impairment losses are recognized whenever events or changes in circumstances indicate the carrying amount of an asset is not recoverable. The Company considers historical performance and estimated future results in its evaluation of potential impairment. 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. No assurance can be given that these assessments and implementation of any resulting initiatives will result in profit margins sufficient to recover the carrying value of long lived assets.

Deferred Tax Assets

        As of December 29, 2001, we have approximately $18.3 million of net deferred tax assets related principally to obligations to be settled in future periods for which no valuation allowance has been recorded. The realization of these net assets is based primarily upon estimates of future taxable income. Current operating results are sufficient to sustain realization of these net assets. However, should significant reductions in taxable income occur, realization of net tax assets may be prevented.

LIQUIDITY AND CAPITAL RESOURCES

        Historically, the Company has financed capital needs through a combination of internal and external sources. These sources include cash flow from operations, short-term bank borrowings, various types of long-term debt and lease and equity financing.

        Operating cash flows were $89.5 million during 2001 compared to $85.5 million in 2000 and $52.1 million in 1999. The changes in operating cash flows in 2001 were primarily due to changes in operating assets and liabilities. Accounts receivable increased due to the discontinuance of a receivables securitization program. The lower cash flows in 1999 were primarily due to cash commitments under the 1998 special charges offset by reductions in accounts receivable and inventories. Working capital was $95.7 million at the end of 2001 compared to $108.8 at the end of 2000, a decrease of $13.1 million, reflecting management's efforts to minimize its investment in operating assets.

        Cash used for investing activities for the year were $93.3 million compared to $85.7 million in 2000, and $54.0 million in 1999. Investing activities in 2001 consisted primarily of the following: business acquisitions of $47.7 million, primarily attributed to U-Save; and capital expenditures of $43.9 million. Investing activities for 2000 included: capital expenditures of $54.1 million; business acquisitions of $20.0 million, which consisted of Hinky Dinky and three stores in the Midwest; and loans to customers, net of payments received, totaling $14.9 million. In 1999, investing activities included: capital expenditures of $52.3 million; business acquisitions of $67.1 million consisting of Erickson's and two stores each in South Carolina and Wyoming, offset by cash proceeds of $30.0 million from the sale of Nash DeCamp and two dairy operations. The Company has funded investing activities from both cash generated from operations and its revolving credit facilities. It expects to continue to use these as its principle sources of future funding.

        The Company has certain contractual obligations that extend beyond 2002. These commitments include long-term debt and capital and operating lease obligations, primarily related to store locations

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for the Company's retail segment, as well as store locations subleased to independent food distribution customers. The following summarizes these contractual cash obligations as of December 29, 2001:

(1)

The $143,460 shown as scheduled for payment in years 4-5 includes repayment of the revolving credit facility based on the current outstanding balance of $140,000. Typically, the Company is able to refinance the credit facility with a new agreement either before or upon maturity of the current agreement. Refer to Note (5) in Notes to Consolidated Financial Statements, the discussion of covenant compliance under "EBITDA," above, and "Debt Covenants" under "Critical Accounting Policies," above, for additional information regarding long term debt.

(2)

A discussion of lease commitments can be found in Note (9) of Notes to Consolidated Financial Statements and "Lease Commitments" under "Critical Accounting Policies," above.

(3)

Includes amounts classified as imputed interest.

        The Company also has made certain commercial commitments that extend beyond 2002. 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 December 29, 2001:

(1)

Letters of credit relate primarily to supporting workers' compensation obligations and are renewable annually.

(2)

Refer to Note (10) of Notes to Consolidated Financial Statements and "Guarantees of Debt and Lease Obligation" under "Critical Accounting Policies," above, for additional information regarding debt and lease guarantees.

        In December, 2000 the Company completed the refinancing of a revolving credit facility. The agreement has a five year term and provides a $100 million term loan and $150 million in revolving credit. Borrowings under the term loan bear interest at the Eurodollar rate plus a margin increase and a commitment commission on the unused portion of the revolver. The margin increase and the commitment commission are reset quarterly based on movement of a leverage ratio defined by the agreement. At December 29, 2001 the margin and commitment commission were 1.75% and .375%, respectively, compared to 2.0% and .5% at the end of 2000. The new agreement contains financial covenants which among other matters requires the Company to maintain predetermined ratio levels related to interest coverage, fixed charges, leverage and working capital.

        In December, 2001 the Company entered into three swap agreements to manage interest rates on a portion of its long-term debt. The agreements which expire in six, twelve and eighteen month intervals, are each based on notional amounts of $35.0 million and fix interest rates at 2.35%, 2.58% and 2.97% for the respective time intervals. The following table provides information about the

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Company's derivative financial instruments and other financial instruments 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.

        Three swap agreements each with a notional amount of $35.0 million commenced on December 6, 2001 and expire in six month intervals through June, 2003. Notional amounts are used to calculate the contractual cash flows to be exchanged under the contract. Agreements outstanding at year end (in thousands):

        The Company believes that borrowing under the revolving credit facility, sale of subordinated notes, other credit agreements, cash flows from operating activities and lease financing will be adequate to meet the Company's working capital needs, planned capital expenditures and debt service obligations for the foreseeable future.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        See disclosure set forth under Item 7 under the caption "Liquidity and Capital Resources."

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Nash Finch Company
Report of Internal Control

        The consolidated financial statements have been prepared by management in conformity with generally accepted accounting principles and include, where required, amounts based on management's best estimates and judgments. Financial information appearing throughout this Annual Report is consistent with that in the consolidated financial statements. In order to meet its responsibility, management maintains a system of internal controls designed to provide reasonable assurance that assets are safeguarded and that financial records properly reflect all transactions. The concept of reasonable assurance recognizes that the relative cost of a control procedure should not exceed the expected benefits. Management believes the selection and development of qualified personnel, the establishment and communication of accounting and administrative policies and procedures (including a code of conduct), and a program of internal audit are important elements of these control systems. The report of Ernst & Young LLP, the Company's independent accountants, covering their audit of the financial statements, is included in this Annual Report. Their independent audit of the company's financial statements includes a review of the system of internal accounting controls to the extent they consider necessary to evaluate the system as required by auditing standards generally accepted in the United States. The Audit Committee of the Board of Directors, composed entirely of outside directors, meets regularly with financial management, the independent auditors, and the director of internal audit to review accounting control, auditing and financial reporting matters. The internal and independent auditors have unrestricted access to the Audit Committee.

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INDEPENDENT AUDITOR'S REPORT

The Board of Directors and Stockholders
Nash Finch Company:

        We have audited the accompanying consolidated balance sheets of Nash Finch Company and subsidiaries as of December 29, 2001 and December 30, 2000, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 29, 2001. Our audits also included the financial statement schedule listed in the Index at Item 14(b). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

        We conducted our audits in accordance with auditing standards generally accepted in the 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 December 29, 2001 and December 30, 2000, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 29, 2001, in conformity with accounting principles generally accepted in the United States. 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.

Ernst & Young LLP
Minneapolis, Minnesota
February 18, 2002

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NASH FINCH COMPANY AND SUBSIDIARIES

Consolidated Statements of Income

See accompanying notes to consolidated financial statements.

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NASH FINCH COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except per share amounts)

See accompanying notes to consolidated financial statements.

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NASH FINCH COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)