e10vq

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the 12 weeks ended March 22, 2008


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

For the transition period from ___ to ___

Commission File No. 0-785

NASH-FINCH COMPANY

(Exact Name of Registrant as Specified in its Charter)


DELAWARE (State or other jurisdiction of incorporation or organization)		41-0431960 (IRS Employer Identification No.)

7600 France Avenue South, P.O. Box 355 Minneapolis, Minnesota (Address of principal executive offices)		55440-0355 (Zip Code)

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

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 (or for such shorter period that the registrant was required to file such reports), 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 is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


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

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

As of April 21, 2008, 12,734,938 shares of Common Stock of the Registrant were outstanding.

PART I. — FINANCIAL INFORMATION

ITEM 1. Financial Statements

NASH FINCH COMPANY AND SUBSIDIARIES

Consolidated Statements of Income (unaudited)
(In thousands, except per share amounts)


	12 Weeks Ended
	March 22,		March 24,
	2008		2007
Sales	$	1,021,910		1,032,243
Cost of sales		929,296		941,522

Gross profit		92,614		90,721


Other costs and expenses:
Selling, general and administrative		61,184		66,559
Depreciation and amortization		9,032		9,082
Interest expense		5,034		5,595

Total other costs and expenses		75,250		81,236


Earnings before income taxes		17,364		9,485

Income tax expense		6,087		4,197


Net earnings	$	11,277		5,288


Net earnings per share:
Basic	$	0.87		0.39
Diluted	$	0.85		0.39

Declared dividends per common share	$	0.180		0.180

Weighted average number of common shares outstanding and common equivalent shares outstanding:
Basic		13,007		13,437
Diluted		13,295		13,496

See accompanying notes to consolidated financial statements.

NASH FINCH COMPANY AND SUBSIDIARIES

Consolidated Balance Sheets
(In thousands, except per share amounts)


	March 22,			December 29,
	2008			2007
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	1,153			862
Accounts and notes receivable, net		200,018			197,807
Inventories		269,458			246,762
Prepaid expenses and other		23,271			27,882
Deferred tax asset, net		2,623			4,621

Total current assets		496,523			477,934

Notes receivable, net		16,047			12,429
Property, plant and equipment:
Property, plant and equipment		597,624			617,241
Less accumulated depreciation and amortization		(400,656	)		(414,704	)

Net property, plant and equipment		196,968			202,537

Goodwill		215,174			215,174
Customer contracts and relationships, net		27,536			28,368
Investment in direct financing leases		3,524			4,969
Other assets		10,003			9,971

Total assets	$	965,775			951,382


Liabilities and Stockholders’ Equity
Current liabilities:
Current maturities of long-term debt and capitalized lease obligations	$	3,832			3,842
Accounts payable		216,839			209,402
Accrued expenses		58,741			69,113

Total current liabilities		279,412			282,357

Long-term debt		301,522			278,443
Capitalized lease obligations		27,857			29,885
Deferred tax liability, net		9,776			7,227
Other liabilities		29,322			37,854
Commitments and contingencies		—			—
Stockholders’ equity:
Preferred stock — no par value. Authorized 500 shares; none issued		—			—
Common stock — $1.66 2/3 par value. Authorized 50,000 shares, issued 13,569 and 13,559 shares, respectively		22,615			22,599
Additional paid-in capital		66,853			61,446
Common stock held in trust		(2,146	)		(2,122	)
Deferred compensation obligations		2,146			2,122
Accumulated other comprehensive income (loss)		(5,092	)		(5,092	)
Retained earnings		261,007			252,142
Common stock in treasury, 791 and 434 shares, respectively		(27,497	)		(15,479	)

Total stockholders’ equity		317,886			315,616

Total liabilities and stockholders’ equity	$	965,775			951,382

See accompanying notes to consolidated financial statements.

NASH FINCH COMPANY AND SUBSIDIARIES

Consolidated Statements of Cash Flows (unaudited)
(In thousands)


	12 Weeks Ended
	March 22,			March 24,
	2008			2007
Operating activities:
Net earnings	$	11,277			5,288
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		9,032			9,082
Amortization of deferred financing costs		188			189
Amortization of rebatable loans		710			794
Provision for bad debts		(1,336	)		566
Provision for lease reserves		(2,094	)		(888	)
Deferred income tax expense		4,547			153
Gain on sale of real estate and other		(70	)		(138	)
LIFO charge		1,134			808
Asset impairments		395			866
Share-based compensation		1,943			956
Deferred compensation		84			92
Other		470			(52	)
Changes in operating assets and liabilities:
Accounts and notes receivable		(8	)		(2,759	)
Inventories		(23,829	)		(17,579	)
Prepaid expenses		687			1,810
Accounts payable		5,822			20,419
Accrued expenses		(10,623	)		(3,249	)
Income taxes payable		3,923			5,906
Other assets and liabilities		(2,953	)		(49	)

Net cash (used) provided by operating activities		(701	)		22,215


Investing activities:
Disposal of property, plant and equipment		102			612
Additions to property, plant and equipment		(2,774	)		(1,748	)
Loans to customers		(5,102	)		(292	)
Payments from customers on loans		259			456
Other		(113	)		(10	)

Net cash used in investing activities		(7,628	)		(982	)

Financing activities:
Proceeds (payments) of revolving debt		23,100			(14,500	)
Dividends paid		(2,324	)		—
Purchase of Common Stock		(11,860	)		—
Payments of long-term debt		(19	)		(73	)
Payments of capitalized lease obligations		(1,188	)		(726	)
Increase (decrease) in bank overdraft		672			(6,297	)
Other		239			268

Net cash provided (used) by financing activities		8,620			(21,328	)

Net increase (decrease) in cash and cash equivalents		291			(95	)
Cash and cash equivalents:
Beginning of year		862			958

End of period	$	1,153			863

See accompanying notes to consolidated financial statements.

Nash Finch Company and Subsidiaries

Notes to Consolidated Financial Statements

March 22, 2008

Note 1 – Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes included in our Annual Report on Form 10-K for the year ended December 29, 2007.

The accompanying unaudited consolidated financial statements include all adjustments which are, in the opinion of management, necessary to present fairly the financial position of Nash-Finch Company and our subsidiaries (Nash Finch) at March 22, 2008 and December 29, 2007, and the results of operations and changes in cash flows for the 12 weeks ended March 22, 2008 (first quarter 2008) and March 24, 2007 (first quarter 2007). Adjustments consist only of normal recurring items, except for any items discussed in the notes below. All material intercompany accounts and transactions have been eliminated in the unaudited consolidated financial statements. Results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Note 2 – Inventories

We use the LIFO method for valuation of a substantial portion of inventories. An actual valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations are based on management’s estimates of expected year-end inventory levels and costs. Because these estimates are subject to many factors beyond management’s control, interim results are subject to the final year-end LIFO inventory valuation. If the FIFO method had been used, inventories would have been approximately $57.5 million and $56.4 million higher at March 22, 2008 and December 29, 2007, respectively. In the first quarter 2008 we recorded LIFO charges of $1.1 million compared to $0.8 million for the first quarter 2007.

Note 3 – Share-Based Compensation

We account for share-based compensation awards in accordance with the provisions of Statement of Financial Accounting Standards (SFAS) No. 123(R), “Share-Based Payment – Revised,” which requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The value of the portion of the awards ultimately expected to vest is recognized as expense over the requisite service period. We recognized share-based compensation expense in our Consolidated Statements of Income of $1.9 million for first quarter 2008, versus expense of $1.0 million for the first quarter 2007.

We have three stock incentive plans under which incentive stock options, non-qualified stock options and other forms of share-based compensation have been, or may be, granted primarily to key employees and non-employee members of the Board of Directors. The 1995 Director Stock Option Plan was terminated as of December 27, 2004, and participation in the 1997 Non-Employee Director Stock Compensation Plan (“1997 Director Plan”) was frozen as of December 31, 2004.

Under the 2000 Stock Incentive Plan (“2000 Plan”), employees, non-employee directors, consultants and independent contractors may be awarded incentive or non-qualified stock options, shares of restricted stock, stock appreciation rights, performance units or stock bonuses.

Awards to non-employee directors under the 2000 Plan began in 2004 and have taken the form of restricted stock units that are granted annually to each non-employee director as part of his or her annual compensation for service as a director. The number of such units awarded to each director in 2007 was determined by dividing $45,000 by the fair market value of a share of our common stock on the date of grant. Each of these units vest six months after issuance and will entitle a director to receive one share of our common stock six months after the director’s service on our Board ends. The awards are expensed over the six month vesting period.

Prior to fiscal 2008, we maintained the 1999 Employee Stock Purchase Plan under which our employees could purchase shares of our common stock at the end of each six-month offering period at a price equal to 85% of the lesser of the fair market value of a share of our common stock at the beginning or end of such offering period. Effective January 1, 2008, this plan was terminated.

No options have been granted since fiscal 2004. Option awards granted to employees prior to 2005 had commonly been non-qualified stock options, each with an exercise price equal to the fair market value of a share of our common stock on the date of grant and a term of 5 years, becoming exercisable in 20% increments 6, 12, 24, 36 and 48 months after the date of the grant.

The following table summarizes information concerning outstanding and exercisable options under the 1997 Director Plan and 2000 Plan as of March 22, 2008 (number of shares in thousands):

Options Outstanding

Options Exercisable

Number of

Weighted

Number of

Weighted

Range of Exercise

Options

Average

Options

Average

Prices

Outstanding

Exercise Price

Exercisable

Exercise Price

$17.35 – 17.95

9.1

24.55 – 35.36

26.0

19.0

35.1

25.86

28.1

25.42

Since 2005, awards have taken the form of performance units (including share units pursuant to our LTIP) and restricted stock units.

Performance units were granted during 2005, 2006 and 2007 under the 2000 Stock Incentive Plan pursuant to our Long-Term Incentive Plan. These units vest at the end of a three-year performance period. The payout, if any, for units granted in 2005 will be determined by comparing our growth in “Consolidated EBITDA” (defined as net income, adjusted by (i) adding thereto interest expense, provision for income taxes, depreciation and amortization expense, and other non-cash charges that were deducted in computing net income for the period; (ii) excluding the amount of any extraordinary gains or losses and gains or losses from sales of assets other than inventory in the ordinary course of business; and (iii) subtracting cash payments made during the period with respect to non-cash charges incurred in a previous period) and return on net assets (defined as net income divided by the sum of net fixed assets plus the difference between current assets and current liabilities) during the performance period to the growth in those measures over the same period experienced by the companies in a peer group selected by us. The performance units will pay out in shares of our common stock or cash, or a combination of both, at the election of the participant. Depending on our ranking among the companies in the peer group for the 2005 awards, a participant could receive a number of shares (or the cash value thereof) ranging from zero to 200% of the number of performance units granted. Because these units can be settled in cash or stock, compensation expense is recorded over the three year period and adjusted to market value each period. No recipients notified the Company by the required notification date for the 2005 awards that they wished to be paid in cash. Therefore, all units under the 2005 plan will be settled in shares of common stock. In February 2008, the Compensation and Management Development Committee (the “Committee”) of the Board of Directors amended the 2006 and 2007 LTIP plans to take into account the Company’s decision in the fall of 2007 to invest strategic capital in support of its strategic plan. To ensure the interests of management and shareholders remained aligned after the decision to invest strategic capital, the Committee decided in February 2008 to revise the 2006 and 2007 LTIP plans by, among other things, amending the definitions of Net Assets, RONA and Free Cash Flow. The 2006 and 2007 LTIP Plans were amended as follows:

	•		2007 LTIP Plan: The Committee amended the definition of “net assets” consistent with the change to the 2006 LTIP Plan to allow for the impact on net assets resulting from the Company’s decision to expend strategic capital. Net Assets is defined in the amended Plan as: “Net Assets” means total assets minus current liabilities, excluding current maturities of long-term debt and capitalized lease obligations and further adjusted by (x) subtracting the additions of Strategic Project PP&E and Strategic Project Working Capital. If a Strategic Project generates positive Consolidated EBITDA through July 1 of the year placed in service, then the adjustment for (x) above will not be made. If a Strategic Project first generates positive Consolidated EBITDA after July 1 of the year placed in service, then the adjustment for (x) above will be made during that fiscal year only. Net Assets will be further adjusted upward by the amount of any impairment of goodwill that the Company records beginning with the affected year during the Measurement Period. In addition, the Committee amended the definition of “Free Cash Flow” to provide as follows: “Free Cash Flow” means cash provided by operating activities minus additions of property, plant and equipment (“PP&E); and (i) adding back the additions of Strategic Project PP&E; (ii) adding back Strategic Project Working Capital; and (iii) subtracting projected Strategic Project Consolidated EBITDA, offset by the associated cash interest and income taxes. If a Strategic Project generates positive Consolidated EBITDA through July 1 of the year placed in service, the adjustment for (iii) above will only be made through July 1 of that year. If a Strategic Project first generates positive Consolidated EBITDA after July 1 of the year placed in service, then the adjustment for (iii) above will be made through the first anniversary date of the Strategic Project being placed in service.

	•		2006 LTIP Plan: The Committee amended the definition of RONA in the 2006 LTIP as follows: “RONA” means the weighted average of the return on Net Assets for the fiscal years during a Measurement Period. This is the quotient of (i) the sum of net income for each fiscal year (or portion thereof) during the Measurement Period divided by (ii) the sum of Average Net Assets for each fiscal year (or portion thereof) during the measurement period. Each of the measures in (i) and (ii) shall be as reported by the entity for the applicable fiscal periods in periodic reports filed with the SEC under the Exchange Act. Net Income will be adjusted by (x) subtracting projected Strategic Project Consolidated EBITDA, offset by the associated interest, depreciation and income taxes. If a Strategic Project generates positive Consolidated EBITDA through July 1 of the year placed in service, the adjustment for (x) above will only be made through July 1 of that year. If a Strategic Project first generates positive Consolidated EBITDA after July 1 of the year placed in service, then the adjustment for (x) above will be made through the first anniversary date of the Strategic Project being placed in service. Weighting of the return on Net Assets for the fiscal years during the Measurement Period shall be based upon the Average Net Assets for each fiscal year. The Committee amended the definition of Net Assets in the same manner as it amended the 2007 LTIP, and included the same definition of Strategic Projects as it added to the 2007 LTIP.

The Committee made the following additional amendments to those plans; (1) removing the plan participant’s option to receive payout of the award in cash; instead requiring that all awards be paid in stock; and (2) requiring all senior vice presidents, executive vice presidents and the CEO to defer their receipt of the stock until six months after termination of their employment. The above modifications resulted in replacement of the previously outstanding liability awards with equity awards as defined by SFAS 123(R). Therefore, the total expense recognized over the remaining service (vesting) period of the awards will equal the grant date fair value times number of shares that ultimately vest. The Company estimates expected forfeitures in determining the compensation expense recorded each period.

In the first quarter 2008, units were granted pursuant to our 2008 Long-Term Incentive Plan. Depending on our ranking on compound annual growth rate for Consolidated EBITDA among the companies in the peer group and our free cash flow return on net assets performance against targets established by the Board of Directors for the 2008 awards, a participant could receive a number of shares ranging from zero to 200% of the number of performance units granted. Because these units can only be settled in stock, compensation expense (for shares expected to vest) is recorded over the three-year period for the grant date fair value.

During fiscal 2006 and the three quarters ended October 6, 2007, restricted stock units (“RSUs”) were awarded to 12 of our executives, including Alec C. Covington, our President and Chief Executive Officer. Awards vest in increments over the term of the grant or cliff vest on the fifth anniversary of the grant date, as designated in the award documents.

The following table summarizes activity in our share-based compensation plans during the first quarter 2008:


								Weighted
								Average
			Weighted		Restricted			Remaining
			Average		Stock Awards/			Restriction/
(In thousands, except per share	Stock Option		Option Price		Performance			Vesting Period
amounts)	Shares		Per Share		Units			(Years)

Outstanding at December 29, 2007		35.1	$	25.85		907.0			1.9
Granted		—				352.0
Exercised/restrictions Lapsed		—				(17.0	)
Forfeited/cancelled		—				(233.0	)

Outstanding at March 22, 2008		35.1	$	25.86		1,009.0			1.9

Exercisable/unrestricted at December 29, 2007		28.1	$	25.40		168.3

Exercisable/unrestricted at March 22, 2008		28.1	$	25.42		151.0


*		The “exercised/restrictions lapsed” amount above excludes 12,806 restricted stock units held by Robert Dimond that vested during the first quarter 2008 but were deferred until after his employment with the Company ends.

The weighted-average grant-date fair value of equity based restricted stock/performance units granted was $37.12 during the first quarter 2008, versus $29.61 during the first quarter 2007.

Note 4 – Other Comprehensive Income

Other comprehensive income consists of market value adjustments to reflect derivative instruments at fair value, pursuant to SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.”

During the first quarter 2007 all interest rate swap agreements were designated as cash flow hedges and were reflected at fair value in our Consolidated Balance Sheet with the related gains or losses on these contracts deferred in stockholders’ equity as a component of other comprehensive income. During the first quarter 2008 our only outstanding commodity swap agreement did not qualify for hedge accounting in accordance with SFAS No. 133, and the corresponding changes in fair value of the commodity swap agreement were recognized in earnings. The components of comprehensive income are as follows:


	12 Weeks
	Ended
	March 22,		March 24,
(In thousands)	2008		2007

Net Earnings	$	11,277		5,288
Change in fair value of derivatives, net of tax		—		(120	)

Comprehensive income	$	11,277		5,168

We offer deferred compensation arrangements, which allow certain employees, officers, and directors to defer a portion of their earnings. The amounts deferred are held in a rabbi trust. The assets of the rabbi trust include life insurance policies to fund our obligations under deferred compensation arrangements for certain employees, officers and directors. The cash surrender value of these policies is included in other assets on the Consolidated Balance Sheets. The assets of the rabbi trust also include shares of Nash Finch common stock. These shares are included in stockholders’ equity on the Consolidated Balance Sheets.

Note 5 – Long-term Debt and Bank Credit Facilities

Total debt outstanding was comprised of the following:


	March 22,			December 29,
(In thousands)	2008			2007

Senior secured credit facility:
Revolving credit	$	29,400			6,300
Term Loan B		118,700			118,700
Senior subordinated convertible debt, 3.50% due in 2035		150,087			150,087
Industrial development bonds, 5.60% to 5.75% due in various installments through 2014		3,345			3,345
Notes payable and mortgage notes, 7.95% due in various installments through 2013		540			559

Total debt		302,072			278,991
Less current maturities		(550	)		(548	)

Long-term debt	$	301,522			278,443

Senior Secured Credit Facility

As of March 22, 2008, our senior secured credit facility consisted of $125.0 million in revolving credit, all of which was available to be utilized for loans and up to $40.0 million for letters of credit, and a $118.7 million Term Loan B. The facility was secured by a security interest in substantially all of our assets that are not pledged under other debt agreements. The revolving credit portion of the facility had a five year term and the Term Loan B had a six year term. Borrowings under the facility bear interest at the Eurodollar rate or the prime rate, plus, in either case, a margin increase that is dependent on our total leverage ratio and a commitment commission on the unused portion of the revolver. The margin spread and the commitment commission is reset quarterly based on movement of a leverage ratio defined by the agreement. At March 22, 2008, the margin spreads for the revolver and Term Loan B maintained as Eurodollar loans were 1.75% and 2.25%, respectively, and the unused commitment commission was 0.375%. The margin spread for the revolver maintained at the prime rate was 0.75%. At March 22, 2008, $79.8 million was available under the revolving line of credit after giving effect to outstanding borrowings and to $15.8 million of outstanding letters of credit primarily supporting workers’ compensation obligations.

Effective April 11, 2008, we refinanced our senior secured credit facility. For additional information refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the caption “Liquidity and Capital Resources.”

Senior Subordinated Convertible Debt

To finance a portion of the acquisition of distribution centers in 2005, we sold $150.1 million in aggregate issue price (or $322.0 million aggregate principal amount at maturity) of senior subordinated convertible notes due in 2035. The notes are our unsecured senior subordinated obligations and rank junior to our existing and future senior indebtedness, including borrowings under our senior secured credit facility. See our Annual Report on Form 10-K for the fiscal year ended December 29, 2007 for additional information regarding the notes.

Note 6 – Guarantees

We have guaranteed 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 ($6.9 million as of March 22, 2008), which would be due in accordance with the underlying agreements.

We entered into a new debt guarantee in the first quarter 2007 with a food distribution customer that is accounted for under Financial Accounting Standards Board (FASB) Interpretation No. 45, “Guarantor’s Accounting and Disclosures Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” (FIN 45) which 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 guarantee is $3.0 million, which is included in the $6.9 million total referenced above. The maximum amount of the guarantee is reduced annually during the approximate five-year term of the agreement, and is secured by a personal guarantee from the affiliated customer. The initial liability was recorded at fair value, and is immaterial to 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 FIN 45.

We have also assigned various leases to other entities. 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 to be $10.6 million as of March 22, 2008.

Note 7 – Income Taxes

For the first quarter 2008 and 2007, our tax expense was $6.1 million and $4.2 million, respectively.

The provision for income taxes reflects the Company’s estimate of the effective rate expected to be applicable for the full fiscal year, adjusted for any discrete events, which are reported in the period that they occur. This estimate is re-evaluated each quarter based on the Company’s estimated tax expense for the full fiscal year. During the first quarter 2008 the Company filed reports with various taxing authorities which resulted in the settlement of uncertain tax positions. Accordingly, the Company reported the effect of these discrete events in the first quarter as a decrease in tax expense of $1.1 million. The lower effective tax rate for the quarter of 35.1% is the result of the release of certain income tax contingency reserves related to these discrete events. The effective rate for the first quarter 2007 was 44.2%.

The total amount of unrecognized tax benefits as of end of the first quarter 2008 was $7.4 million. The net reduction in unrecognized tax benefits of $1.9 million since December 29, 2007 is from a $2.6 million decrease in the unrecognized tax benefits relating to settlements with taxing authorities. This was offset by a $0.7 million increase in unrecognized tax benefits as a result of tax positions taken in prior periods. The total amount of tax benefits that if recognized would impact the effective tax rate was $2.6 million at the end of the first quarter 2008. We recognize interest and penalties accrued related to unrecognized tax benefits in income tax expense. We had approximately $1.3 million for the payment of interest and penalties accrued at the end of the first quarter 2008.

During the next 12 months, the Company expects various state and local statutes of limitation to expire. Due to the uncertain response of the taxing authorities, an estimate of the range of possible outcomes cannot be reasonably estimated at this time. Audit outcomes and the timing of audit settlements are subject to significant uncertainty. We do not expect our unrecognized tax benefits to change significantly over the next 12 months.

The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various state and local jurisdictions. With few exceptions, we are no longer subject to U.S. federal, state or local examinations by tax authorities for years 2003 and prior.

Note 8 – Pension and Other Postretirement Benefits

The following tables present the components of our pension and postretirement net periodic benefit cost:

12 Weeks Ended March 22, 2008 and March 24, 2007


	Pension Benefits						Other Benefits
(In thousands)	2008			2007			2008			2007

Interest cost	$	520			585			11			14
Expected return on plan assets		(556	)		(576	)		—			—
Amortization of prior service cost		(1	)		(4	)		(149	)		(161	)
Recognized actuarial loss (gain)		124			59			(1	)		(2	)

Net periodic benefit cost	$	87			64			(139	)		(149	)

Weighted-average assumptions used to determine net periodic benefit cost for the first quarter 2008 and first quarter 2007 were as follows:


	Pension Benefits						Other Benefits
	2008			2007			2008			2007

Weighted-average assumptions:
Discount rate		6.00	%		6.00	%		6.00	%		6.00	%
Expected return on plan assets		7.00	%		7.00	%		N/A			N/A
Rate of compensation increase		N/A			N/A			N/A			N/A

Total contributions to our pension plan in 2008 are expected to be $1.2 million.

Note 9 – Earnings Per Share

The following table reflects the calculation of basic and diluted earnings per share:


	First Quarter
	Ended
	March 22,		March 24,
(In thousands, except per share amounts)	2008		2007

Net earnings	$	11,277		5,288


Net earnings per share-basic:
Weighted-average shares outstanding		13,007		13,437

Net earnings per share-basic	$	0.87		0.39


Net earnings per share-diluted:
Weighted-average shares outstanding		13,007		13,437
Dilutive impact of options		—		2
Shares contingently issuable		288		57

Weighted-average shares and potential dilutive shares outstanding		13,295		13,496


Net earnings per share-diluted	$	0.85		0.39


Anti-dilutive options excluded from calculation (weighted-average amount for period)		5		63

Certain options were excluded from the calculation of diluted net earnings per share because the exercise price was greater than the market price of the stock and would have been anti-dilutive under the treasury stock method.

The senior subordinated convertible notes due 2035 will be convertible at the option of the holder, only upon the occurrence of certain events, at an adjusted conversion rate of 9.4164 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 $49.50 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 both, at our option. The notes are only dilutive above their accreted value and for all periods presented the weighted average market price of the Company’s stock did not exceed the accreted value. Therefore, the notes are not dilutive to earnings per share for any of the periods presented.

Performance units granted during 2005 under the 2000 Plan for the LTIP will pay out in shares of Nash Finch common stock or cash, or a combination of both, at the election of the participant. No recipients notified the Company by the required notification date for the 2005 awards that they wished to be paid in cash. Therefore, all units under the 2005 plan will be settled in shares of common stock. Other performance and restricted stock units granted during 2006, 2007 and 2008 pursuant to the 2000 Plan will pay out in shares of Nash Finch common stock. Unvested restricted units are not included in basic earnings per share until vested. All shares of time-restricted stock are included in diluted earnings per share using the treasury stock method, if dilutive. Performance units granted for the LTIP are only issuable if certain performance criteria are met, making these shares contingently issuable under SFAS No. 128, “Earnings per Share.” Therefore, the performance units are included in diluted earnings per share at the payout percentage based on performance criteria results as of the end of the respective reporting period and then accounted for using the treasury stock method, if dilutive. For the first quarter 2008, approximately 129,000 shares related to the LTIP and 159,000 shares related to RSUs were included under “shares contingently issuable” in the calculation of diluted EPS above.

Note 10 – Segment Reporting

We sell and distribute products that are typically found in supermarkets and operate three reportable operating segments. Our food distribution segment consists of 16 distribution centers that sell to independently operated retail food stores, our corporate owned stores and other customers. The military segment consists primarily of two distribution centers that distribute products exclusively to military commissaries and exchanges. The retail segment consists of corporate-owned stores that sell directly to the consumer.

A summary of the major segments of the business is as follows:


	First Quarter Ended
	March 22, 2008							March 24, 2007
	Sales from							Sales from		Inter-
	external		Inter-			Segment		external		segment			Segment
(In thousands)	customers		segment sales			profit		customers		sales			profit

Food Distribution	$	594,154		66,375			22,940		614,786		66,919			18,180
Military		297,323		—			10,762		281,807		—			9,472
Retail		130,433		—			4,543		135,650		—			4,821
Eliminations		—		(66,375	)		—		—		(66,919	)		—

Total	$	1,021,910		—			38,245		1,032,243		—			32,473

Reconciliation to Consolidated Statements of Income:


	First Quarter
	Ended
	March 22,			March 24,
(In thousands)	2008			2007

Total segment profit	$	38,245			32,473
Unallocated amounts:
Adjustment of inventory to LIFO		(1,134	)		(808	)
Unallocated corporate overhead		(19,747	)		(22,180	)

Earnings before income taxes and cumulative effect of a change in accounting principle	$	17,364			9,485

Note 11 – Share Repurchase Program

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. The program took effect on November 19, 2007 and will continue until the earlier of (1) the close of trading on January 3, 2009 or (2) the date that the aggregate purchases under the repurchase program reaches 1,000,000 shares of our common stock. During the first quarter 2008, we repurchased 357,508 shares at an average price per share of $33.61 (including commissions). Since the program took effect, we have repurchased a total of 770,464 shares of our common stock at an average price per share of $35.04 (including commissions). As of March 22, 2008, there were 229,536 shares remaining on the Board-approved share repurchase authorization.

Note 12 – Legal Proceedings

Shareholder Litigation

On March 11, 2008, Nash-Finch Company (the “Company”) entered into a Stipulation of Settlement (the “Settlement Agreement”) with respect to a putative securities fraud class action filed against the Company and certain of its now former executive officers (together with the Company, the “Defendants”). The Settlement Agreement was filed in the United States District Court for the District of Minnesota (the “Court”) on March 11, 2008.

The complaint in this class action (the “Complaint”) alleges that the Defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by making misleading statements regarding, among other things, the integration of the two distribution divisions acquired from Roundy’s Supermarkets, Inc. on March 31, 2005, the performance of the Company’s retail segment and the Company’s financial projections.

The Defendants denied, and continue to deny, in their entirety any and all allegations of fraud or any wrongdoing in the Complaint. Neither the Settlement Agreement nor any of its terms or conditions, nor the Company’s decision to settle the lawsuit, should be construed as an admission or concession of any kind of the merit or truth of any of the allegations of fraud or wrongdoing in the Complaint, or of any fault, liability or wrongdoing whatsoever on the part of any and all of the Defendants. Nonetheless, the Company has concluded that it is desirable to settle the lawsuit to avoid the costs, risks and uncertainty of further litigation and trial, and to avoid the distraction of protracted litigation.

The Settlement Agreement provides for Court certification of a settlement class, a full release of all claims in the Complaint by the lead plaintiff and the settlement class and a dismissal with prejudice of all claims in the Complaint, in consideration for payment of $6.75 million into a settlement fund. Such payment has been funded in full by the Company’s insurance coverage.

On April 10, 2008, the Court preliminarily approved the settlement and directed notice to the settlement class of the proposed settlement. The Court will conduct a hearing on July 14, 2008 to determine whether to approve the settlement. If final approval of the Settlement Agreement is granted, the Court will enter an order certifying the settlement class and dismissing all of the claims in the lawsuit with prejudice. If the Settlement Agreement becomes effective, the settlement fund, less various costs of administration and plaintiffs’ costs and attorneys’ fees, will be distributed to the settlement class members that have filed a valid and approved claim.

Senior Subordinated Convertible Notes Litigation

On September 10, 2007, Nash Finch received a purported notice of default from certain hedge funds which are beneficial owners purporting to hold at least 25% of the aggregate principal amount of the Senior Subordinated Convertible Notes due 2035 (the “Notes”). The hedge funds alleged in the notice that Nash Finch was in breach of Section 4.08(a)(5) of the Indenture governing the Notes (the “Indenture”) which provides for an adjustment of the conversion rate in the event of an increase in the amount of certain cash dividends to holders of Nash Finch’s common stock.

We believe that we made all required adjustments to the conversion rate on the Notes after we increased the quarterly dividends paid to shareholders from $0.135 to $0.18 per share. However, to avoid any uncertainty, we asked the Trustee to execute a Supplemental Indenture clarifying the Company’s obligations with respect to increases in quarterly dividends. The Indenture Trustee filed an action in the Hennepin County District Court, in Minneapolis, Minnesota asking the Court to determine whether it should execute the Supplemental Indenture. In coordination with the Trustee, we filed a petition asking the Court to determine that we properly adjusted the conversion rate on the Notes after we increased the amount of the dividends we paid to shareholders.

The Court granted our request for a temporary restraining order, thus preventing the hedge funds from declaring a default while the litigation is pending. The temporary restraining order also tolls the 30 day cure period during which we can cure the alleged default should the Court determine a default has occurred. The temporary restraining order will remain in effect until 10 days after the Court reaches a decision on the underlying dispute.

On February 8, 2008, the Court heard arguments on the Company and the Trustee’s petitions, following which the motions were taken under advisement. We anticipate the Court will enter its ruling within 90 days of the hearing date.

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 Roundy’s claims is 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 demand damages from Roundy’s in excess of $18.0 million.

On or about March 25, 2008, Roundy’s filed a motion to dismiss certain of our counterclaims. No hearing date on that motion has been set. We intend to vigorously defend against Roundy’s complaint and to vigorously prosecute our claims against Roundy’s.

Securities and Exchange Commission Inquiry

In early 2006, we voluntarily contacted the SEC to discuss the results of an internal review that focused on trading in our common stock by certain of our officers and directors. The Board of Directors conducted the internal review with the assistance of outside counsel following an informal inquiry from the SEC in November 2005 regarding such trading. We offered to provide certain documents, and the SEC accepted the offer. We will continue to fully cooperate with the SEC.

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.

Note 13 – Subsequent Events – Debt Refinancing

On April 11, 2008, the Company refinanced its existing senior secured credit facility maturing in 2009 and prepaid the outstanding balance under this facility. The Company incurred pre-tax charges of $1.0 million for the write-off of unamortized finance costs related to the current credit facility. The Company believes the refinancing and redemption will enable it to further reduce its cost of capital going forward.

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

Forward Looking Information and Cautionary Factors

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements relate to trends and events that may affect our future financial position and operating results. Any statement contained in this report that is not statements of historical fact may be deemed forward-looking statements. For example, words such as “may,” “will,” “should,” “likely,” “expect,” “anticipate,” “estimate,” “believe,” “intend, ” “potential” or “plan,” or comparable terminology, are intended to identify forward-looking statements. Such statements are based upon current expectations, estimates 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 or contribute to material differences include, but are not limited to the following:

	•		the effect of competition on our distribution, military and retail businesses;

	•		general sensitivity to economic conditions, including volatility in energy prices, food commodities and changes in market interest rates;

	•		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;

	•		changes in consumer buying and spending patterns;

	•		risks entailed by future acquisitions, including the ability to successfully integrate acquired operations 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, such as adverse determinations or developments with respect to the litigation or SEC inquiry discussed in Part I, Item 3 of our Annual Report on Form 10-K for the fiscal year ended December 29, 2007;

	•		technology failures that may have a material adverse effect on our business;

	•		severe weather and natural disasters that may impact our supply chain;

	•		changes in health care, pension and wage costs and labor relations issues;

	•		threats or potential threats to security or food safety; and

	•		unanticipated problems with product procurement.

A more detailed discussion of many of these factors, as well as other factors, that could affect the Company’s results is contained in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the fiscal year ended December 29, 2007. You should carefully consider each of these factors and all of the other information in this report. We believe that all forward-looking statements are based upon reasonable assumptions when made. However, we caution that it is impossible to predict actual results or outcomes and that accordingly you should not place undue reliance on these statements. Forward-looking statements speak only as of the date when made and we undertake no obligation to revise or update these statements in light of subsequent events or developments. Actual results and outcomes may differ materially from anticipated results or outcomes discussed in 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”).

Overview

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

In November 2006, we announced the launch of a new strategic plan, Operation Fresh Start, designed to sharpen our focus and provide a strong platform to support growth initiatives. Built upon extensive knowledge of current industry, consumer and market trends, and formulated to differentiate the Company, the new strategy focuses activities on specific retail formats, businesses and support services designed to delight consumers. The strategic plan encompasses several important elements:

	•		Emphasis on a suite of retail formats designed to appeal to the needs of today’s consumers including an initial focus on everyday value, Hispanic and extreme value formats, as well as military commissaries and exchanges;

	•		Strong, passionate businesses in key areas including perishables, health and wellness, center store, pharmacy and military supply, driven by the needs of each format;

	•		Supply chain services focused on supporting our businesses with warehouse management, inbound and outbound transportation management and customized solutions for each business;

	•		Retail support services emphasizing best-in-class offerings in marketing, advertising, merchandising, store design and construction, store brands, market research, retail store support, retail pricing and license agreement opportunities;

	•		Store brand management dedicated to leveraging the strength of the Our Family brand as a regional brand through exceptional product development coupled with pricing and marketing support; and

	•		Integrated shared services company-wide, including IT support and infrastructure, accounting, finance, human resources and legal.

In addition to the strategic initiatives already in progress, our 2008 initiatives consist of the following:

	•		Invest in our retail formats, logistics capabilities and center store systems.

	•		Pursue acquisitions that support our strategic plan.

	•		Continue share repurchase program.

Our food distribution segment sells and distributes a wide variety of nationally branded and private label products to independent grocery stores and other customers primarily in the Midwest and Southeast regions of the United States.

Our military segment contracts with manufacturers to distribute a wide variety of grocery products to military commissaries and exchanges located primarily in the Mid-Atlantic region of the United States, and in Europe, Puerto Rico, Cuba, the Azores and Egypt. We are the largest distributor of grocery products to U.S. military commissaries and exchanges, with over 30 years of experience acting as a distributor to U.S. military commissaries and exchanges.

Our retail segment operated 58 corporate-owned stores primarily in the Upper Midwest as of March 22, 2008. Primarily due to highly competitive conditions in which supercenters and other alternative formats compete for price conscious customers, we closed or sold three retail stores in 2007 and one store in the first quarter 2008. We are implementing initiatives of varying scope and duration with a view toward improving our response to and performance under these highly competitive conditions. Our strategic initiatives are designed to create value within our organization. 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 additional goodwill impairment associated with our retail segment, and may incur restructuring or other charges in connection with closure or sales activities.

Results of Operations

Sales

The following tables summarize our sales activity for the 12 weeks ended March 22, 2008 (first quarter 2008) compared to the 12 weeks ended March 24, 2007 (first quarter 2007):


	First quarter 2008					First quarter 2007					Increase/(Decrease)
			Percent of					Percent of
(In thousands)	Sales		Sales			Sales		Sales			$			%

Segment Sales:
Food Distribution	$	594,154		58.1	%		614,786		59.6	%		(20,632	)		(3.4	%)
Military		297,323		29.1	%		281,807		27.3	%		15,516			5.5	%
Retail		130,433		12.8	%		135,650		13.1	%		(5,217	)		(3.8	%)

Total Sales	$	1,021,910		100.0	%		1,032,243		100.0	%		(10,333	)		(1.0	%)

The decrease in food distribution sales for the first quarter 2008 versus the first quarter 2007 is attributable to the loss of a significant customer which accounted for $36.2 million of additional sales in the first quarter 2007. However, excluding the impact of this customer, food distribution sales increased 2.7% in the first quarter 2008 compared to the comparable prior year period, due primarily to new account gains and increased comparable sales. The shift of the Easter holiday to the first quarter 2008 versus the second quarter 2007 created a favorable variance in the first quarter sales of $6.6 million, or 1.1% of sales compared to last year.

Military segment sales were up 5.5% during the first quarter 2008 versus the first quarter 2007 which is attributable to increased volume of 2.4% and overall increases in commodity prices of 3.1%. The sales increases in the first quarter 2008 reflected 5.3% stronger sales domestically and 6.1% stronger sales overseas. Domestic and overseas sales represented the following percentages of military segment sales:


	First quarter
	2008			2007

Domestic		70.4	%		70.5	%
Overseas		29.6	%		29.5	%

The decrease in retail sales for the first quarter 2008 is attributable to the closure of four stores since the end of the first quarter 2007. Same store sales, which compare retail sales for stores which were in operation for the same number of weeks in the comparative periods, decreased 0.3% in the first quarter 2008 when compared to the first quarter 2007. The shift of the Easter holiday to the first quarter 2008 versus the second quarter 2007 created a favorable variance in the first quarter sales of $1.3 million, or 1.1% of sales compared to last year.

During the first quarters of 2008 and 2007, our corporate store count changed as follows:


	First quarter			First quarter
	2008			2007
Number of stores at beginning of period		59			62
Closed or sold stores		(1	)		—

Number of stores at end of period		58			62

Gross Profit

Gross profit was 9.1% of sales for the first quarter 2008 compared to 8.8% of sales for the first quarter 2007. Our gross profit margin increased by 0.4% of sales in the first quarter 2008 relative to the comparable prior year period as a result of initiatives that focused on better management of inventories and vendor relationships and higher levels of inflation in inventory. However, our overall gross profit margin was negatively affected by 0.1% of sales in the first quarter 2008 due to a sales mix shift between our business segments between the years. This was due to a higher percentage of 2008 sales occurring in the military segment and a lower percentage in the retail and food distribution segments which have a higher gross profit margin.

Selling, General and Administrative Expenses

Selling, general and administrative expenses (SG&A) for the first quarter 2008 were $61.2 million, or 6.0% of sales, as compared to $66.6 million, or 6.4%, for the comparable prior year period. The decrease in SG&A is primarily attributable to decreased bad debt reserves due to improved receivable collection and the change in circumstances related to a lease obligation that had previously been reserved.


	First quarter
(In thousands)	2008			2007			Variance

Asset Impairments	$	395			866			(471	)
Lease Reserves		(2,094	)		(888	)		(1,206	)
Bad Debt Reserves		(1,336	)		566			(1,902	)

Total	$	(3,035	)		544			(3,579	)

% of Sales		(0.3	%)		0.1	%		(0.4	%)

Depreciation and Amortization Expense

Depreciation and amortization expense was $9.0 million for the first quarter 2008 compared to $9.1 million for the comparable prior year period.

Interest Expense

Interest expense was $5.0 million for the first quarter 2008 compared to $5.6 million for the comparable prior year period. Average borrowing levels decreased from $361.8 million during the first quarter 2007 to $334.6 million during the first quarter 2008. The effective interest rate was 5.7% for the first quarter 2008 compared to 6.2% effective interest rate in the first quarter 2007.

Income Taxes

Income tax expense is provided on an interim basis using management’s estimate of the annual effective rate. Our effective tax rate for the full fiscal year is subject to changes and may be impacted by changes to nondeductible items and tax reserve requirements in relation to our forecasts of operations, sales mix by taxing jurisdictions, or to changes in tax laws and regulations. The effective income tax rate was 35.1% and 44.2% for the first quarter 2008 and first quarter 2007, respectively.

During the first quarter 2008, the Company filed various reports to settle potential tax liabilities. Accordingly, the Company reported the effect of these discrete events in the first quarter 2008. The lower effective tax rate for the quarter is the result of the release of certain income tax contingency reserves related to these discrete events. The effective rate for the first quarter 2007 differed from statutory rates due to anticipated pre-tax income relative to certain nondeductible expenses. The Company estimates the full year effective tax rate will be approximately 39.6%.

Net Earnings

Net earnings in the first quarter 2008 were $11.3 million, or $0.85 per diluted share, as compared to net earnings of $5.3 million, or $0.39 per diluted share, in the first quarter 2007.

Liquidity and Capital Resources

The following table summarizes our cash flow activity and should be read in conjunction with the Consolidated Statements of Cash Flows:


	First Quarter Ended
	March 22,			March 24,			Increase/
(In thousands)	2008			2007			(Decrease)

Net cash (used) provided by operating activities	$	(701	)		22,215			(22,916	)
Net cash used in investing activities		(7,628	)		(982	)		(6,646	)
Net cash provided (used) by financing activities		8,620			(21,328	)		29,948

Net change in cash and cash equivalents	$	291			(95	)		386

Cash flows from operating activities decreased $22.9 million in the first quarter 2008 as compared to the first quarter 2007, primarily due to increased investment in inventory. Decreased cash provided by operating activities included the effect of increased inventory levels of approximately $23.8 million in the first quarter 2008 compared to $17.6 million in the first quarter 2007. The cash flow impact of those increased inventory levels were partially offset by increases in accounts payable of $5.8 million and $20.4 million in the first quarters of 2008 and 2007, respectively.

Net cash used in investing activities increased by $6.6 million in the first quarter 2008 as compared to the first quarter 2007. The most significant factor for the quarter-over-quarter variance was increased loans to customers of $5.1 million in the first quarter 2008 compared to $0.3 million in the first quarter 2007. In addition, additions to property, plant and equipment increased to $2.8 million for the first quarter 2008 compared to $1.7 million for the first quarter 2007.

Cash provided by financing activities increased by $29.9 million in the first quarter 2008 as compared to the first quarter 2007. The increase in cash provided by financing activities included $23.1 million in revolving debt proceeds for the first quarter 2008 compared to payments of $14.5 million for the first quarter 2007, offset by $11.9 million used to repurchase shares of its common stock in the first quarter 2008.

During the remainder of fiscal 2008, we expect that cash flows 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 during the year to build inventories for certain holidays. Longer term, we believe that cash flows from operations, short-term bank borrowing, 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.

Senior Secured Credit Facility

As of March 22, 2008, our senior secured credit facility consisted of $125.0 million in revolving credit, all of which was available to be utilized for loans and up to $40.0 million for letters of credit, and a $118.7 million Term Loan B. Borrowings under the facility beared interest at either the Eurodollar rate or the prime rate, plus in either case a margin spread that was dependent on our total leverage ratio. We were required to pay a commitment commission on the unused portion of the revolver. The margin spreads and the commitment commission was reset quarterly based on changes to our total leverage ratio defined by the applicable credit agreement. At March 22, 2008, the margin spreads for the revolver and Term Loan B maintained as Eurodollar loans were 1.75% and 2.25%, respectively, and the unused commitment commission was 0.375%. The margin spread for the revolver maintained at the prime rate was 0.75%. The credit facility required us to hedge a certain portion of such borrowings through the use of interest rate swaps, as we have done historically. At March 22, 2008, credit availability under the senior secured credit facility was $79.8 million.

As of March 22, 2008, our senior secured credit facility represented one of our primary sources of liquidity, both short-term and long-term, and the continued availability of credit under that facility was of material importance to our ability to fund our capital and working capital needs. The credit agreement governing the credit facility contained various restrictive covenants, compliance with which was essential to continued credit availability. Among the most significant of these restrictive covenants were financial covenants which required us to maintain predetermined ratio levels related to interest coverage and leverage. These ratios were based on EBITDA, on a rolling four quarter basis, with some adjustments (“Consolidated EBITDA”). Consolidated EBITDA is a non-GAAP financial measure that was defined in our bank credit agreement as earnings before interest, income taxes, depreciation and amortization, adjusted to exclude extraordinary gains or losses, gains or losses from sales of assets other than inventory in the ordinary course of business, upfront fees and expenses incurred in connection with the execution and delivery of the credit agreement, and non-cash charges (such as LIFO charges, closed store lease costs, asset impairments and share-based compensation), less cash payments made during the current period on certain non-cash charges recorded in prior periods. In addition, for purposes of determining compliance with prescribed leverage ratios and adjustments in the credit facility’s margin spread and commitment commission, Consolidated EBITDA was calculated on a pro forma basis that took into account all permitted acquisitions, such as the acquisition of the Lima and Westville divisions, that had occurred since the beginning of the relevant four quarter computation period. Consolidated EBITDA should not be considered an alternative measure of our net income, operating performance, cash flow or liquidity. It is provided as additional information relative to compliance with our debt covenants. In addition, the credit agreement required us to maintain predetermined ratio levels related to working capital coverage (the ratio of the sum of net trade accounts receivable plus inventory to the sum of loans and letters of credit outstanding under the credit agreement plus up to $60 million of additional secured indebtedness permitted to be issued under the credit agreement).

The financial covenants specified in the credit agreement, as amended, varied over the term of the credit agreement and can be summarized as follows:


	For the Fiscal Periods
Financial Covenants	Ending Closest to	Required Ratio

Interest Coverage Ratio	12/31/04 through 9/30/07	3.50:1.00	(minimum)
	12/31/07 thereafter	4.00:1.00

Total Leverage Ratio	12/31/06 through 3/31/07	3.75:1.00	(maximum)
	6/30/07 through 9/30/07	3.50:1.00
	12/31/07 thereafter	3.00:1.00

Senior Secured Leverage Ratio	12/31/06 through 9/30/07	2.50:1.00	(maximum)
	12/31/07 thereafter	2.25:1.00

Working Capital Ratio	12/31/05 through 9/30/08	1.75:1.00	(minimum)
	Thereafter	2.00:1.00

As of March 22, 2008, we were in compliance with all financial covenants as defined in our credit agreement which are summarized as follows:


Financial Covenant	Required Ratio	Actual Ratio

Interest Coverage Ratio (1)	4.00:1.00 (minimum)	6.00:1.00
Total Leverage Ratio (2)	3.00:1.00 (maximum)	2.48:1.00
Senior Secured Leverage Ratio (3)	2.25:1.00 (maximum)	1.10:1.00
Working Capital Ratio (4)	1.75:1.00 (minimum)	3.21:1.00


(1)		Ratio of Consolidated EBITDA for the trailing four quarters to interest expense less deferred financing costs on the current agreement for such period.

(2)		Total outstanding debt to Consolidated EBITDA for the trailing four quarters.

(3)		Total outstanding senior secured debt to Consolidated EBITDA for the trailing four quarters.

(4)		Ratio of net trade accounts receivable plus inventory to the sum of loans and letters of credit outstanding under the new credit agreement plus certain additional secured debt.

Any failure to comply with any of these financial covenants would have constituted an event of default under the bank credit agreement, entitling a majority of the bank lenders to, among other things, terminate future credit availability under the agreement and accelerate the maturity of outstanding obligations under that agreement.

The following is a summary of the calculation of Consolidated EBITDA for the trailing four quarters ended March 22, 2008 and March 24, 2007 (amounts in thousands):


	2007			2007			2007			2008			Trailing
Trailing four quarters ended March 22, 2008:	Qtr 2			Qtr 3			Qtr 4			Qtr 1			4 Qtrs

Earnings before income taxes	$	17,304			18,237			12,496			17,364			65,401
Interest expense		5,671			6,948			5,367			5,034			23,020
Depreciation and amortization		8,901			11,902			8,997			9,032			38,832
LIFO charge		807			1,077			2,399			1,134			5,417
Lease reserves		825			614			—			(2,094	)		(655	)
Asset impairments		275			640			87			395			1,397
Losses (gains) on sale of real estate		(147	)		—			(1,720	)		—			(1,867	)
Share-based compensation		1,584			1,632			3,614			1,943			8,773
Subsequent cash payments on non-cash charges		(663	)		(918	)		(1,011	)		(2,184	)		(4,776	)
Special Charges		(1,282	)		—			—			—			(1,282	)

Total Consolidated EBITDA	$	33,275			40,132			30,229			30,624			134,260


	2006			2006			2006			2007			Trailing
Trailing four quarters ended March 24, 2007:	Qtr 2			Qtr 3			Qtr 4			Qtr 1			4 Qtrs

Earnings (loss) before income taxes	$	7,733			(6,287	)		(25,253	)		9,485			(14,322	)
Interest expense		6,120			7,906			6,551			5,595			26,172
Depreciation and amortization		9,617			12,685			9,447			9,082			40,831
LIFO charge		461			1,590			117			808			2,976
Lease reserves		1,327			4,455			2,675			(888	)		7,569
Goodwill impairment		—			—			26,419			—			26,419
Asset impairments		3,247			2,522			4,127			866			10,762
Losses (gains) on sale of real estate		(1,225	)		25			37			—			(1,163	)
Share-based compensation		634			233			486			956			2,309
Subsequent cash payments on non-cash charges		(656	)		(1,862	)		(686	)		(700	)		(3,904	)
Special Charges		—			6,253			—			—			6,253

Total Consolidated EBITDA	$	27,258			27,520			23,920			25,204			103,902

The credit agreement also contained covenants that limited our ability to incur debt (including guaranteeing the debt of others) and liens, acquire or dispose of assets, pay dividends on and repurchase our stock, make capital expenditures and make loans or advances to others, including customers.

Our contractual obligations and commercial commitments are discussed in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 29, 2007, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the caption “Contractual Obligations and Commercial Commitments.”

New Bank Credit Facility

On April 11, 2008, we concluded the refinancing of our senior secured bank credit facility which had been scheduled to mature on November 21, 2009 with an outstanding $118.7 million term loan and a $125 million revolving line of credit.

The new bank credit facility, as was the case with its predecessor, 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.

The new credit facility is an asset-backed loan consisting of a $300 million revolving credit facility, which includes a $35 million swingline sub-facility and a $50 million letter of credit sub-facility (the “Revolving Credit Facility”). Provided no event of default is then existing or would arise, the Company may from time-to-time, request that the Revolving Credit Facility be increased by an aggregate amount (for all such requests) not to exceed $150.0 million.

The Revolving Credit Facility has a 5 year term and will be due and payable in full on April 11, 2013. The Company can elect, at the time of borrowing, for loans to bear interest at a rate equal to either base rate or LIBOR plus a margin. The LIBOR interest rate margin currently is 2.00%, but the LIBOR interest rate margin will become adjustable after October 4, 2008. Once the margin becomes adjustable, it 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 the Company 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, the Company 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 the Company and its subsidiaries, 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.

Senior Subordinated Convertible Debt

We also have outstanding $150.1 million in aggregate issue price (or $322.0 million in aggregate principal amount at maturity) of senior subordinated convertible notes due in 2035. The notes are unsecured senior subordinated obligations and rank junior to our existing and future senior indebtedness, including borrowings under our senior secured 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 daily at a rate of 3.50% per year until the maturity date of the notes. See our Annual Report on Form 10-K for the fiscal year ended December 29, 2007 for additional information.

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.

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. Pre-tax gains of $0.3 million were recorded as a reduction to cost of sales during the first quarter 2007. The Company’s remaining commodity swap agreement expired during the first quarter 2008 and was settled for fair market value.

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 and Estimates

Our critical accounting policies are discussed in Part II, Item 7 of our annual report on Form 10-K for the fiscal year ended December 29, 2007, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the caption “Critical Accounting Policies.” There have been no material changes to these policies or the estimates used in connection therewith during the 12 weeks ended March 22, 2008.

Recently Adopted and Proposed Accounting Standards

In July 2007, the FASB released a proposed FASB Staff Position (FSP) APB 14-a, “Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants” (FSP APB 14-a) that would alter the accounting treatment for convertible debt instruments that allow for either mandatory or optional cash settlements, which would impact the accounting associated with the Company’s existing $150.1 million senior convertible notes. If adopted, as currently proposed, this proposal would require the Company to recognize non-cash interest expense based on the market rate for similar debt instruments without the conversion feature. Furthermore, it would require recognizing interest expense in prior periods pursuant to retrospective accounting treatment. The FASB began its re-deliberations of the guidance in FSP APB 14-a in the first quarter 2008 and it is anticipated that the final FSP will be issued in the second calendar quarter of 2008 and is expected to be effective for fiscal years beginning after December 15, 2008.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (SFAS 157). SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about instruments recorded at fair value. SFAS 157 does not require any new fair value measurements, but applies under other accounting pronouncements that require or permit fair value measurements. The effective date of SFAS 157 for non-financial assets and liabilities that are not recognized or disclosed on a recurring basis has been delayed to fiscal years beginning after November 15, 2008. Effective January 1, 2008, the Company adopted the provisions of SFAS 157 related to financial assets and liabilities recognized or disclosed on a recurring basis. The adoption of the effective portion of SFAS 157 had no impact on the Company’s financial statements as the Company does not have any financial assets or liabilities required to be recognized or disclosed on a recurring basis.

In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109” (FIN 48). This interpretation prescribes a minimum recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This interpretation also provides guidance on recognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. On December 31, 2006 we adopted the recognition and disclosure provisions of FIN 48. Please refer to “Note 8 – Income Taxes” in the accompanying financial statements for additional information regarding the impact of our adoption of FIN 48.

ITEM 3. 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. (See Part II, Item 7 of our December 29, 2007 Form 10-K and Part I, Item 2 of this report under the caption “Liquidity and Capital Resources”).

ITEM 4. Controls and Procedures

Management of Nash Finch, with the participation and under the supervision of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this quarterly report. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective as of the end of the period covered by this quarterly report to provide reasonable assurance that material information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms. A controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

There was no change in our internal control over financial reporting that occurred during our most recently completed fiscal quarter that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 1. Legal Proceedings

Shareholder Litigation

Senior Subordinated Convertible Notes Litigation

Roundy’s Supermarkets, Inc. v. Nash Finch

Securities and Exchange Commission Inquiry

Other

ITEM 1A. Risk Factors

There have been no material changes in our risk factors contained in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the fiscal year ended December 29, 2007.

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

The following table provides information about shares of common stock the Company acquired during the first quarter 2008:

Issuer Purchases of Equity Securities

(c) Total number

(d) Maximum

of shares

number of

(a) Total

purchased as

shares that may

number of

(b) Average

part of publicly

yet be purchased

shares

price paid per

announced plans

under plans or

Period

purchased (1) (2)

share (1) (2)

or programs (1)

programs (1)

Period 1 (December 30, 2007 to January 26, 2008)

206,246

33.55

206,215

380,829

Period 3 (February 24 to March 22, 2008)

151,293

33.70

151,293

229,536

Total

357,539

33.61

357,508

229,536


(1)		On November 13, 2007, the Company 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. The program took effect on November 19, 2007, and will continue until the earlier of (1) the close of trading on January 3, 2009, or (2) the date that the aggregate purchases under the repurchase program reaches 1,000,000 shares of our common stock.

(2)		Includes 31 forfeited restricted stock awards.

ITEM 3. Defaults upon Senior Securities

None

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

None

ITEM 5. Other Information

None


	Page No.
Part I — FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Statements of Income		2

Consolidated Balance Sheets		3

Consolidated Statements of Cash Flows		4

Notes to Consolidated Financial Statements		5

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		16

Item 3. Quantitative and Qualitative Disclosures about Market Risk		25

Item 4. Controls and Procedures		25

Part II — OTHER INFORMATION

Item 1. Legal Proceedings		25

Item 1A. Risk Factors		27

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		27

Item 3. Defaults upon Senior Securities		27

Item 4. Submission of Matters to a Vote of Security Holders		27

Item 5. Other Information		27

Item 6. Exhibits		28

SIGNATURES		29
Calculation of Ratio of Earnings to Fixed Charges
Rule 13a-14(a) Certification of the Chief Executive Officer
Rule 13a-14(a) Certification of the Chief Financial Officer
Section 1350 Certification of Chief Executive Officer and Chief Financial Officer


Exhibit
No.		Description
	10.1	Credit Agreement, dated as of April 11, 2008, among Nash Finch Company, Various Lenders and Bank of America, N.A. as Administrative Agent

	10.2	Change in Control Agreement entered into by Nash Finch Company and Alec C. Covington dated February 26, 2008

	12.1	Calculation of Ratio of Earnings to Fixed Charges

	31.1	Rule 13a-14(a) Certification of the Chief Executive Officer.

	31.2	Rule 13a-14(a) Certification of the Chief Financial Officer.

	32.1	Section 1350 Certification of Chief Executive Officer and Chief Financial Officer (furnished herewith).


Exhibit No.		Item	Method of Filing
	10.1	Credit Agreement, dated as of April 11, 2008, among Nash Finch Company, Various Lenders and Bank of America, N.A. as Administrative Agent	Incorporated by reference

	10.2	Change in Control Agreement entered into by Nash Finch Company and Alec C. Covington dated February 26, 2008	Incorporated by reference

	12.1	Calculation of Ratio of Earnings to Fixed Charges	Filed herewith

	31.1	Rule 13a-14(a) Certification of the Chief Executive Officer.	Filed herewith

	31.2	Rule 13a-14(a) Certification of the Chief Financial Officer	Filed herewith

	32.1	Section 1350 Certification of Chief Executive Officer and Chief Financial Officer

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		NASH-FINCH COMPANY
		Registrant

Date: April 24, 2008	by	/s/ Alec C. Covington Alec C. Covington
		President and Chief Executive Officer

Date: April 24, 2008	by	/s/ Robert B. Dimond Robert B. Dimond
		Executive Vice President and Chief Financial Officer