UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q/A

(Mark One)

	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
ý	OF THE SECURITIES EXCHANGE ACT OF 1934
	For the twelve weeks ended June 15, 2002

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

Commission File No. 0-785

NASH-FINCH COMPANY

(Exact Name of Registrant as Specified in its Charter)

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

7600 France Ave. South, Edina, Minnesota		55435
(Address of principal executive offices)		(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 ý	NO o

As of July 22, 2001, 11,923,942 shares of Common Stock of the Registrant were outstanding.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Revenues

Total revenues for the twelve-week second quarter were $937.1 million compared to $949.6 million last year, a decrease of 1.3%. For the twenty-four weeks, total revenues increased .2% from $1.854 billion to $1.858 billion.

Food distribution revenues for the twelve and twenty-four weeks ended June 15, 2002, were $456.7 million and $908.9 million respectively, compared to $478.4 million and $932.7 million for the same periods last year reflecting a decrease of 4.5%, and 2.6% for the twelve and twenty-four weeks, respectively. The revenue decline is attributed to soft sales experienced by independent retailers because of new competition in certain markets, as well as the loss of marginal accounts the Company chose to no longer service.

Retail segment revenues for the twelve and twenty-four weeks ended June 15, 2002, were $245.1 million and $482.9 million compared to $237.1 million and $466.6 million for the same periods last year, reflecting increases of 3.4% and 3.5% for the twelve and twenty-four weeks, respectively. The increase is primarily attributed to the Company’s acquisition, in August 2001, of U Save Foods, Inc. (“U Save”), a privately held company operating 14 stores primarily in the state of Nebraska, offset by the sale of 20 stores in the Southeast region in 2001. All U Save stores acquired have been converted to the Company’s primary banners. Same store sales declined 3.6% compared to the twelve week second quarter last year and declined 2.2% compared to the twenty-four week period last year. The decline is attributed to new store openings and increased competitive activity experienced system wide. During the quarter the Company closed one under-performing conventional retail store that had reached the end of its lease. In the first quarter of 2002 the Company acquired one conventional retail store and closed an additional under-performing store. At the end of the quarter, the Company operated 112 stores compared to 105 stores at the end of the second quarter last year and 110 stores at the end of 2001.

The Company has developed two specialty store formats, one designed to service the Hispanic market, which the Company believes is under-served by traditional grocery stores, and a second format under the Buy n Save® name to service low income, value conscious consumers. During the quarter, the Company opened one new Buy n Save location. In the first quarter, the Company opened one new Buy n Save store and converted two other existing stores to the Buy n Save format. The Company currently operates a total of eight Buy n Save stores and expects to further expand this format in the Upper Midwest in 2002. The Company currently operates three Hispanic format stores under the name Wholesale Food Outlet and has announced a new banner for the Hispanic stores called AVANZA™. The first AVANZA store opened in the second quarter in Denver, Colorado, with expectation of opening additional stores during 2002.

Military segment revenues for the quarter were $235.3 million compared to $234.1 million last year, an increase of .5%. For the twenty-four weeks, revenues were $466.1 million compared to $455.1 million last year, an increase of 2.4%. The increase resulted primarily from higher year-over-year exports to bases overseas. We expect overall sales to remain stable for the year.

Gross Margin

Gross margin for the quarter was 11.6% compared to 11.3% last year. The improvement is attributed to increased productivity and efficient utilization of distribution facilities, improved retail store sales mix in higher margin departments and to a lesser degree the higher proportion of retail segment revenues. For the twenty-four week period gross margin was an 11.4% in fiscal 2002 compared to 11.3% last year.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the quarter, as a percent of total revenues, were 8.5% compared to 8.4% a year ago. The increase is largely due to a higher percentage of retail segment revenues that operate at higher expense levels than does food distribution or military offset by overhead cost reductions attained through implementation of many process improvements. For the twenty-four week period selling, general and administration expenses were 8.5% for the current and prior year.

Depreciation and Amortization Expense

Depreciation and amortization expense for the quarter was $9.2 million compared to $10.6 million last year, a decrease of 13.2%. For the twenty-four weeks, depreciation and amortization expense decreased from $21.3 million last year to $18.5 million in 2002, a decrease of 13.1%. The decrease primarily reflects the elimination of goodwill amortization of $1.4 million and $2.7 million for the twelve and twenty-four weeks, respectively, resulting from a new accounting standard (see Note 5 — Recently Adopted Accounting Standards) which was effective at the beginning of this year.

Interest Expense

Interest expense for the quarter was $6.7 million compared to $8.1 million last year, a decrease of 17.3%. For the twenty-four week period interest expense was $13.3 million compared to $16.3 million, a decrease of 18.4%. The decreased costs are attributed to lower borrowing rates this year, under the revolving credit facility, partially offset by an average borrowing level that was higher than last year. The average borrowing rate under the revolving credit facility, which consists of a $100 million term loan and $150 million in revolving credit, including the impact of the swap agreements, was 4.39% this year compared to 9.30% last year. Higher average borrowing levels under the revolving credit facility were a result of the termination of the receivable securitization agreement in December 2001. The receivable securitization facility provided approximately $35 million in off balance sheet financing.

Income Taxes

Income tax expense is provided on an interim basis using management’s estimate of the annual effective tax rate. The effective income tax rate for 2002 decreased to 39.9% from 41.4% in fiscal 2001. The reduction in the effective rate is primarily attributed to changes in accounting rules relating to elimination of goodwill amortization for financial reporting (see Note 5 — Recently Adopted Accounting Standards).

Net Earnings

Net earnings for the quarter were $8.1 million compared to $6.4 million last year, excluding goodwill amortization, an increase of 26.6%. For the twenty-four weeks, net earnings increased 31.1% to $13.9 million from $10.6 million, excluding goodwill amortization. The increase was driven by a combination of gross margin improvements, overhead cost reductions and lower interest rates. All segments continue to contribute to the improvement over prior year performance through operational efficiencies, cost containment efforts and leveraging of procurement opportunities. Corporate overhead, which is not allocated back to business segments, generally decreased on a pretax basis by $2.7 million due to the elimination of goodwill amortization compared to last year.

EBITDA

The Company’s 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). At the end of the second quarter the Company is in compliance with all its debt convenants. This information is not intended to be 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 (in thousands):

	Twelve Weeks				Twenty-four Weeks
	June 15,			June 16,	June 15,	June 16,
	2002			2001	2002	2001
Earnings before income taxes Add (Deduct):	$	13,415		9,016	23,164	14,570
LIFO effect	300			662	1,223	862
Depreciation and amortization	9,165			10,631	18,472	21,278
Interest expense	6,651			8,085	13,298	16,287
Other	(5		)	154	—	436
Total EBITDA	$	29,526		28,548	56,145	53,433

LIQUIDITY AND CAPITAL RESOURCES

Historically, the Company has financed its 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 financing.

Cash provided by operating activities was $49.4 million for the first twenty-four weeks of 2002 compared to $101.8 million last year. The change in cash flows from operating activities is primarily the result of changes in operating assets and liabilities as compared to the same period last year.

Cash used in investing activities decreased from $34.9 million last year to $11.1 million for the twenty-four week period this year. Investing activities in 2002 consisted primarily of $14.4 million in capital expenditures, offset by $4.4 million in net loan payments from customers. The Company’s capital plan for the year is approximately $50 million with most initiatives scheduled during the remainder of the year. Also, during the twenty-four week period, the Company acquired a store in Wisconsin from an existing customer. Investing activities are funded by cash flows from operations and the revolving credit facility. Prior year investing activities primarily included $20.4 million for capital expenditures, $6.3 million of loans to customers, net of payments received, and the repurchase of $4.0 million in receivables under a revolving securitization agreement that was terminated in December 2001.

Cash used in financing activities decreased from $60.0 million in 2001 to $47.2 million in 2002. This change is primarily due to payments on the revolving credit facility in the prior year of $17.3 million.

Working capital increased to $116.5 million from $95.7 million at year-end and $91.7 million last year. The change from year-end is primarily attributed to a seasonal reduction in inventory and accounts payable including outstanding checks. The increase compared to last year results primarily from an increase in accounts receivable largely due to the termination of the securitization agreement in December 2001.

At June 15, 2002 total debt was $374.6 million compared to $374.2 million at the end of 2001 and $347.9 million last year. Amounts outstanding under the revolving credit facility were $40 million at the end of the quarter and at the end of last year as compared to $10 million at the end of the second quarter last year. Changes in total debt largely reflect utilization of the revolving credit facility as a supplement to operating cash flows to fund transactions such as the U Save acquisition in August 2001 and the termination of the securitization agreement. In December 2001, the Company entered into three swap agreements converting floating rate debt to fixed. The agreements, each with notional amounts of $35 million, provide fixed interest rates of 2.35%, 2.58% and 2.97% expiring in six, twelve and eighteen month intervals, respectively. The two remaining agreements were each extended through October 6, 2004 at rates of 3.50% and 3.97% subsequent to quarter end. In addition the Company executed an additional swap agreement with a notional amount of $50 million at a rate of 2.75%. The agreement begins on July 26, 2002 and expires on September 25, 2004.

The Company believes that borrowing under the revolving credit facility, proceeds from its 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.

FORWARD-LOOKING STATEMENTS

This Form 10-Q and the documents that may 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 the Company’s current expectations and are subject to a number of risks and uncertainties, including, without limitation:

• risks related to the Company’s industry as a whole, including the emergence of new or growing competitors and the competitive practices in the Company’s industry, changes in the Company’s economic and business operating environments and changes in the food distribution and retail industry in which the Company operate;

• risks related to the Company’s business and strategy, including the Company’s ability to acquire, and successfully integrate, traditional grocery stores, successfully roll out the Company’s new store formats and retain the Company’s customers or acquire new customers, the risk of credit losses, the Company’s ability to attract and retain qualified personnel and the risk of issues with the quality, safety or integrity of the food products the Company sells; and

• risks related to the Company’s indebtedness, including the adverse impact of outstanding debt on the Company’s operating results or of certain terms of the Company’s outstanding debt that could materially restrict the Company’s business and operating flexibility.

Additional information regarding these and other risks is included in Exhibit 99.1, “Risk Factors,” filed with the Company’s Form 10-K for the fiscal year ended December 29, 2001.

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 the Company’s 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. The Company does not undertake to update the Company’s forward-looking statements to reflect future events or circumstances.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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 in 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. 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. The Company uses interest rate swap agreements to manage its exposure to variable rate debt.

The Company is also subject to commodity price risk associated with the purchase of diesel fuel. The Company uses a commodity swap agreement to hedge this risk (See Note 4 — Derivative Instruments and Note 9 — Subsequent Events).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

NASH-FINCH COMPANY

Registrant


Date: July 25, 2002							By /s/ Ron Marshall
							Ron Marshall
							President and Chief Executive Officer


							By /s/ Robert B. Dimond
							Robert B. Dimond
							Executive Vice President and Chief Financial Officer