UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period (12 weeks) ended June 18, 2011


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

7600 France Avenue South,

P.O. Box 355

Minneapolis, Minnesota

55440-0355

(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 _X_ No ___

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

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.

Large accelerated filer_____ Accelerated filer __X__ Non-accelerated filer ____ Smaller reporting company ____

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

As of July 13, 2011, 12,136,507 shares of Common Stock of the Registrant were outstanding.

Index

Page No.

Part I – FINANCIAL INFORMATION

Item 1.

Financial Statements

Consolidated Statements of Income

Consolidated Balance Sheets

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Item 2.

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Item 4.

Controls and Procedures

Part II – OTHER INFORMATION

Item 1.

Legal Proceedings

Item 1A.

Risk Factors

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.

Defaults upon Senior Securities

Item 4.

(Removed and Reserved)

Item 5.

Other Information

Item 6.

Exhibits

SIGNATURES

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			24 Weeks Ended
				June 18,	June 19,		June 18,	June 19,
				2011	2010		2011	2010

Sales			$	1,099,575	1,154,617	$	2,199,384	2,334,310
Cost of sales				1,008,998	1,060,280		2,019,818	2,148,153
	Gross profit			90,577	94,337		179,566	186,157

Other costs and expenses:
	Selling, general and administrative			60,241	62,835		122,818	127,482
	Depreciation and amortization			8,367	8,170		16,950	16,755
	Interest expense			5,355	5,366		10,814	10,624
		Total other costs and expenses		73,963	76,371		150,582	154,861

		Earnings before income taxes		16,614	17,966		28,984	31,296

Income tax expense				6,563	7,252		11,452	12,641
Net earnings			$	10,051	10,714	$	17,532	18,655

Net earnings per share:
	Basic		$	0.79	0.83	$	1.38	1.43
	Diluted		$	0.77	0.81	$	1.35	1.40

Declared dividends per common share			$	0.18	0.18	$	0.36	0.36

Weighted average number of common shares
outstanding and common equivalent shares outstanding:
	Basic			12,744	12,904		12,731	13,015
	Diluted			13,042	13,263		13,029	13,352

See accompanying notes to consolidated financial statements.

NASH-FINCH COMPANY AND SUBSIDIARIES

Consolidated Balance Sheets

(In thousands, except per share amounts)


				June 18,	January 1,
Assets				2011	2011
Current assets:				(unaudited)
	Cash and cash equivalents		$	659	830
	Accounts and notes receivable, net			240,944	233,436
	Inventories			309,720	333,146
	Prepaid expenses and other			15,334	15,817
	Deferred tax asset, net			7,864	8,281
		Total current assets		574,521	591,510

Notes receivable, net				18,237	20,350
Property, plant and equipment:
	Property, plant and equipment			658,259	649,256
	Less accumulated depreciation and amortization			(403,700)	(409,190)
Net property, plant and equipment				254,559	240,066

Goodwill				166,856	167,166
Customer contracts and relationships, net				16,871	18,133
Investment in direct financing leases				2,831	2,948
Other assets				10,336	10,502
		Total assets	$	1,044,211	1,050,675

Liabilities and Stockholders' Equity
Current liabilities:
	Current maturities of long-term debt and capital lease obligations		$	3,001	3,159
	Accounts payable			207,694	230,082
	Accrued expenses			55,356	60,001
		Total current liabilities		266,051	293,242

Long-term debt				299,311	292,266
Capital lease obligations				17,113	18,920
Deferred tax liability, net				39,179	36,344
Other liabilities				30,212	32,899
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 13,677 shares		22,796	22,796
	Additional paid-in capital			115,992	114,799
	Common stock held in trust			(1,223)	(1,213)
	Deferred compensation obligations			1,223	1,213
	Accumulated other comprehensive loss			(10,833)	(10,984)
	Retained earnings			316,630	303,584
	Common stock in treasury; 1,541 and 1,569 shares, respectively			(52,240)	(53,191)
		Total stockholders' equity		392,345	377,004
		Total liabilities and stockholders' equity	$	1,044,211	1,050,675

See accompanying notes to consolidated financial statements.

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


						24 Weeks Ended
						June 18,	June 19,
						2011	2010
Operating activities:
	Net earnings				$	17,532	18,655
	Adjustments to reconcile net earnings to net cash provided by operating activities:
			Depreciation and amortization			16,950	16,755
			Amortization of deferred financing costs			845	846
			Non-cash convertible debt interest			2,610	2,413
			Amortization of rebateable loans			2,066	2,531
			Provision for bad debts			779	433
			Provision for (reversal of) lease reserves			607	(434)
			Deferred income tax expense			3,252	174
			Loss (gain) on sale of property, plant and equipment			1,422	(229)
			LIFO charge (credit)			2,632	(362)
			Asset impairments			349	818
			Share-based compensation			2,531	3,462
			Deferred compensation			609	463
			Other			(584)	(387)
	Changes in operating assets and liabilities:
			Accounts and notes receivable			(5,548)	17,099
			Inventories			21,279	(27,130)
			Prepaid expenses			(446)	157
			Accounts payable			(23,230)	(12,992)
			Accrued expenses			(4,493)	(804)
			Income taxes payable			929	(6,398)
			Other assets and liabilities			(2,599)	2,609
				Net cash provided by operating activities		37,492	17,679

Investing activities:
	Disposal of property, plant and equipment					3,074	347
	Additions to property, plant and equipment					(33,110)	(10,369)
	Business acquired, net of cash					(1,587)	-
	Loans to customers					(2,285)	(600)
	Payments from customers on loans					672	1,102
	Other					(902)	(297)
				Net cash used in investing activities		(34,138)	(9,817)
Financing activities:
	Proceeds of revolving debt					4,700	10,600
	Dividends paid					(4,364)	(4,549)
	Repurchase of Common Stock					-	(15,191)
	Payments of long-term debt					(251)	(233)
	Payments of capital lease obligations					(1,577)	(1,839)
	Increase (decrease) in outstanding checks					(1,526)	3,285
	Other					(507)	-
				Net cash used in financing activities		(3,525)	(7,927)
Net decrease in cash and cash equivalents						(171)	(65)
Cash and cash equivalents:
		Beginning of year				830	830
		End of period			$	659	765

See accompanying notes to consolidated financial statements.

Nash-Finch Company and Subsidiaries

Notes to Consolidated Financial Statements

June 18, 2011

Note 1 – Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP 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 January 1, 2011.

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” or “the Company”) at June 18, 2011, and January 1, 2011, the results of operations for the 12 and 24 weeks ended June 18, 2011 (“second quarter 2011”), and June 19, 2010 (“second quarter 2010”), and cash flows for the 24 weeks ended June 18, 2011, and June 19, 2010. 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 U.S. GAAP 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 $75.8 million higher on June 18, 2011 and $73.1 million higher on January 1, 2011. We recorded a LIFO charge of $2.1 million during the second quarter 2011 as compared to a LIFO credit of $0.3 million during the second quarter 2010. During year-to-date 2011, we recorded a LIFO charge of $2.6 million as compared to a LIFO credit of $0.4 million during year-to-date 2010.

Note 3 – Share-Based Compensation

We account for share-based compensation awards in accordance with the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718 – Compensation-Stock Compensation (“ASC 718”) 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 as a component of selling, general and administrative expense in our Consolidated Statements of Income in the amount of $1.4 million during the second quarter 2011 versus $1.9 million during the second quarter 2010. During year-to-date 2011, share-based compensation expense was $2.5 million as compared to $3.5 million during year-to-date 2010.

We have four equity compensation 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. These plans include the 2009 Incentive Award Plan (as Amended and Restated as of March 2, 2010) (“2009 Plan”), the 2000 Stock Incentive Plan

(as amended and restated on July 14, 2008) (“2000 Plan”), the Director Deferred Compensation Plan, and the 1997 Non-Employee Director Stock Compensation Plan. These plans are more fully described in Part II, Item 8 in our Annual Report on Form 10-K for the fiscal year ended January 1, 2011 under the caption “Footnote 10 – Share-based Compensation Plans” and in our Definitive Proxy Statement on Form DEF 14A filed on April 15, 2011.

Since 2005, awards have taken the form of performance units (including share units pursuant to our Long-Term Incentive Plan (“LTIP”)), restricted stock units (“RSUs”) and Stock Appreciation Rights (“SARs”).

Performance units have been granted during each of fiscal years 2005 through 2011 pursuant to our LTIP. These units vest at the end of a three-year performance period. All units under the 2007 plan were settled in shares of our common stock during the second quarter 2010. Under the 2008 plan, 104,111 units vested on January 1, 2011 and were settled in the second quarter 2011 for approximately 122,000 shares of common stock, of which approximately 96,000 were deferred by recipients until termination of employment as provided in the plan.

During year-to-date 2011, a total of 109,236 units were granted pursuant to our 2011 LTIP. Depending on a comparison of the Company’s three-year compound annual growth rate of Consolidated EBITDA results to the Company’s peer group and the Company’s ranking on absolute return on net assets and compound annual growth rate for return on net assets among the companies in the peer group, 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 through 2010, RSUs were awarded to certain executives of the Company. 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. In addition to the time vesting criteria, awards granted in 2008 and 2009 to two of the Company’s executives include performance vesting conditions. The Company records expense for such awards over the service vesting period if the Company anticipates the performance vesting conditions will be satisfied.

On December 17, 2008, in connection with the Company’s announcement of its planned acquisition of certain military distribution assets of GSC Enterprises, Inc., eight executives of the Company were granted a total of 267,345 SARs with a per share price of $38.44. The SARs are eligible to become vested during the 36 month period commencing on closing of the acquisition of the GSC assets which was January 31, 2009. The SARs will vest on (i) the first business day during the vesting period that follows the date on which the closing prices on NASDAQ for a share of Nash Finch common stock for the previous 90 market days is at least $55.00, (ii) a change in control occurs following the six month anniversary of the grant date or (iii) termination of the executive’s employment due to death or disability. Upon exercise, the Company will award the executive a number of shares of restricted stock equal to (a) the product of (i) the number of shares with respect to which the SAR is exercised and (ii) the excess, if any, of (x) the fair market value per share of common stock on the date of exercise over (y) the base price per share relating to such SAR, divided by (b) the fair market value of a share of common stock on the date such SAR is exercised. The restricted stock shall vest on the first anniversary of the date of exercise so long as the executive remains continuously employed with the Company.

The fair value of SARs is estimated on the date of grant using a modified binomial lattice model which factors in the market and service vesting conditions. The modified binomial lattice model used by the Company incorporates a risk-free interest rate based on the 5-year treasury rate on the date of the grant. The model uses an expected volatility calculated as the daily price variance over 60, 200 and 400 days prior to grant date using the Fair Market Value (average of daily high and low market price of Nash Finch common stock) on each day. Dividend yield utilized in the model is calculated by the Company as the average of the daily yield (as a percent of the Fair Market Value) over 60, 200 and 400 days prior to the grant date. The modified binomial lattice model calculated a fair value of $8.44 per SAR which is recorded over a derived service period of 3.55 years.

The following assumptions were used to determine the fair value of SARs granted during fiscal 2008:


Assumptions - SARs Valuation

Weighted-average risk-free interest rate		1.37%
Expected dividend yield		1.86%
Expected volatility		35%
Exercise price		$38.44
Market vesting price (90 consecutive market days at or above this price)		$55.00
Contractual term		5.1 years

The following table summarizes activity in our share-based compensation plans during the year-to-date 2011:


(in thousands, except vesting periods)	Service Based Grants (Board Units and RSUs)	Weighted Average Remaining Restriction/ Vesting Period (Years)	Performance Based Grants (LTIP & Performance RSUs)	Weighted Average Remaining Restriction/ Vesting Period (Years)

Outstanding at January 1, 2011	646.5	0.6	568.8	0.7
Granted	11.6		109.5
Forfeited/cancelled	-		(16.1)
Restrictions lapsed/ units settled	(33.2)		(104.1)
Shares deferred upon vesting/settlement & dividend equivalents on deferred shares⁽¹⁾	36.6		96.4
Outstanding at June 18, 2011	661.5	0.3	654.5	0.8

Exercisable/unrestricted at January 1, 2011	322.1		323.7
Exercisable/unrestricted at June 18,2011	358.6		316.0

⁽¹⁾

“Shares deferred upon vesting/settlement” above are net of the performance adjustment factor applied to the “units settled” for the participants that deferred shares as provided in the plan.


(in thousands, except per share amounts)	Stock Appreciation Rights		Weighted Average Base/Exercise Price Per SAR

Outstanding at January 1, 2011	267.3	$	38.44
Granted	-
Exercised/restrictions lapsed	-
Forfeited/cancelled	-
Outstanding at June 18, 2011	267.3		38.44

Exercisable/unrestricted at January 1, 2011	-
Exercisable/unrestricted at June 18, 2011	-

The weighted-average grant-date fair value of time vesting equity units and performance vesting units granted during year-to-date 2011 was $35.58 and $39.69, respectively.

Note 4 – Fair Value Measurements

ASC Topic 820 – Fair Value Measurement (“ASC 820”) defines fair value, establishes a framework for measuring fair value and expands disclosures about financial and non-financial assets and liabilities recorded at fair value. It also applies under other accounting pronouncements that require or permit fair value measurements.

The fair value hierarchy for disclosure of fair value measurements under ASC 820 is as follows:

Level 1: Quoted prices (adjusted) in active markets for identical
assets or liabilities.

Level 2: Quoted prices, other than quoted prices included in Level 1, which are

observable for the assets or liabilities, either directly or indirectly.

Level 3: Inputs that are unobservable for the assets or liabilities.

Our outstanding interest rate swap agreements are classified within level 2 of the valuation hierarchy as readily observable market parameters are available to use as the basis of the fair value measurement. As of June 18, 2011, we have recorded a fair value liability of $0.2 million in relation to our outstanding interest rate swap agreements as compared to $0.4 million as of January 1, 2011, which is included in accrued expenses on our Consolidated Balance Sheet.

Other Financial Assets and Liabilities

Financial assets with carrying values approximating fair value include cash and cash equivalents and accounts receivable. Financial liabilities with carrying values approximating fair value include accounts payable and outstanding checks. The carrying value of these financial assets and liabilities approximates fair value due to their short maturities.

The fair value of notes receivable approximates the carrying value at June 18, 2011 and January 1, 2011. Substantially all notes receivable are based on floating interest rates which adjust to changes in market rates.

Long-term debt, which includes the current maturities of long-term debt, at June 18, 2011, had a carrying value and fair value of $300.0 million and $305.6 million, respectively, and at January 1, 2011, had a carrying value and fair value of $292.9 million and $305.6 million, respectively. The fair value is based on interest rates that are currently available to us for issuance of debt with similar terms and remaining maturities.

We account for the impairment of long-lived assets in accordance with ASC Topic 360 – Property, Plant, and Equipment. During each of the second quarters 2011 and 2010, asset impairments of $0.3 million were recognized. For year-to-date 2011 and 2010, asset impairments were $0.3 million and $0.8 million, respectively. We utilize a discounted cash flow model that incorporates unobservable level 3 inputs to test for long-lived asset impairment.

Note 5 – Derivatives

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

The interest rate swap agreements are designated as cash flow hedges and are reflected at fair value in our Consolidated Balance Sheet and the related gains or losses on these contracts are deferred in stockholders’ equity as a component of other comprehensive income. As of June 18, 2011, and January 1, 2011, we had recorded a fair value liability of $0.2 million and $0.4 million, respectively, which are included in accrued expenses in our Consolidated Balance Sheet. Deferred gains and losses are amortized as an adjustment to interest expense over the same period in which the related items being hedged are recognized in income. However, to the extent that any of these contracts are not considered to be effective in accordance with ASC Topic 815 – Derivatives and Hedging (“ASC 815”) in offsetting the change in the value of the items being hedged, any changes in fair value relating to the ineffective portion of these contracts are immediately recognized in income. Our two outstanding interest rate swaps have been considered effective in accordance with ASC 815 since they began during fiscal 2008.

Our interest rate swap agreements resulted in net payments of approximately $0.1 million and $0.3 million during the second quarters of fiscal 2011 and 2010, respectively, and resulted in net payments of $0.3 million and $0.5 million during year-to-date 2011 and 2010, respectively, which are included in interest expense on our Consolidated Statement of Income.

As of June 18, 2011, we had two outstanding interest rate swap agreements with notional amounts totaling $17.5 million as compared to $35.0 million as of June 19, 2010, as follows (amounts in thousands):


Notional	Effective Date	Termination Date	Fixed Rate
$20,000	10/15/2009	10/15/2010	3.49%
10,000	10/15/2010	10/15/2011	3.49%


Notional	Effective Date	Termination Date	Fixed Rate
$15,000	10/15/2009	10/15/2010	3.38%
7,500	10/15/2010	10/15/2011	3.38%

Note 6 – Other Comprehensive Income

Other comprehensive income for the periods presented includes market value adjustments to reflect derivative instruments at fair value, pursuant to ASC 815. The components of comprehensive income are as follows:


		12 Weeks				24 Weeks
		Ended				Ended
(In thousands)		June 18, 2011		June 19, 2010		June 18, 2011		June 19, 2010

Net earnings	$	10,051		10,714		17,532		18,655
Change in fair value of derivatives, net of tax		75	⁽¹⁾	115	⁽²⁾	151	⁽³⁾	186	⁽⁴⁾
Comprehensive income	$	10,126		10,829		17,683		18,841

⁽¹⁾ Net of tax of $48.
⁽²⁾ Net of tax of $74.
⁽³⁾Net of tax of $97.
⁽⁴⁾ Net of tax of $119.

The gains reported in other comprehensive income during the second quarter and year-to-date periods of 2011 and 2010 reflect a change in fair value of our outstanding interest rate swap agreements during the respective periods. Please refer to “Note 5 - Derivatives” of this Form 10-Q for information related to our interest rate swap agreements.

Note 7 – Long-term Debt and Bank Credit Facilities

Total debt outstanding was comprised of the following:


(In thousands)		June 18, 2011	January 1, 2011

Asset-backed credit agreement:
Revolving credit	$	158,800	154,100
Senior subordinated convertible debt, 3.50% due in 2035		139,320	136,710
Industrial development bonds, 5.60% to 6.00% due in various installments through 2014		1,620	1,830
Notes payable and mortgage notes, 7.95% due in various installments through 2013		255	296
Total debt		299,995	292,936
Less current maturities		(684)	(670)
Long-term debt	$	299,311	292,266

Asset-backed Credit Agreement

Our credit agreement is an asset-backed loan consisting of a $340.0 million revolving credit facility, which includes a $50.0 million letter of credit sub-facility (the “Revolving Credit Facility”). Provided no default is then existing or would arise, 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 $110.0 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 the base rate, as defined in the credit agreement, or LIBOR plus a margin. The LIBOR interest rate margin was 2.00% as of June 18, 2011, and can vary quarterly in 0.25% increments between three pricing levels ranging from 1.75% to 2.25% based on the excess availability, which is defined in the credit agreement as (a) the lesser of (i) the borrowing base; or (ii) the aggregate commitments; minus (b) the aggregate of the outstanding credit extensions. As of June 18, 2011, $169.4 million was available under the Revolving Credit Facility after giving effect to outstanding borrowings and to $11.8 million of outstanding letters of credit primarily supporting workers’ compensation obligations.

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 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 there under 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.

We are currently in compliance with all covenants contained within the credit agreement.

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 Revolving Credit Facility. See our Annual Report on Form 10-K filed with the SEC for the fiscal year ended January 1, 2011, for additional information regarding the notes.

Note 8 – 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 ($9.0 million as of June 18, 2011, as compared to $9.4 million as of January 1, 2011), which would be due in accordance with the underlying agreements.

We have entered into debt and lease guarantees on behalf of certain food distribution customers that are accounted for under ASC Topic 460 - Guarantees (“ASC 460”). ASC 460 provides that at the time a company issues a guarantee, the company must recognize an initial liability for the fair value of the obligation it assumes under that guarantee. The maximum undiscounted payments we would be required to make in the event of default under the guarantees is $6.5 million, which is included in the $9.0 million total referenced above. These guarantees are secured by certain business assets and personal guarantees of the respective customers. We believe these customers will be able to perform under their respective agreements and that no payments will be required and no loss will be incurred under the guarantees. As required by ASC 460, a liability representing the fair value of the obligations assumed under the guarantees of $0.9 million is included in the accompanying consolidated financial statements for the guarantees accounted for under ASC 460. All of the other guarantees were issued prior to December 31, 2002 and are therefore not subject to the recognition and measurement provisions of ASC 460.

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 $10.5 million as of June 18, 2011 as compared to $8.9 million as of January 1, 2011.

Note 9 – Income Taxes

For the second quarter 2011 and 2010, our tax expense was $6.6 million and $7.3 million, respectively. During year-to-date 2011 and 2010, our tax expense was $11.5 million and $12.6 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 second quarter 2010, the Company filed reports with various taxingauthorities which resulted in the refunds of tax payments. The effect of these discrete events in the second quarter was $0.1 million. For both the second quarter and year-to-date periods of 2011, the effective tax rate was 39.5% as compared to 40.4% for each of the second quarter and year-to-date periods of 2010.

The total amount of unrecognized tax benefits as of the end of the second quarter 2011 was $1.9 million. The net increase in unrecognized tax benefits of $0.1 million since March 26, 2011 is due to the 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 $0.4 million at the end of the second quarter 2011. We recognize interest and penalties accrued related to unrecognized tax benefits in income tax expense. At the end of the second quarter 2011, we had approximately $0.1 million for the payment of interest and penalties accrued.

We do not expect our unrecognized tax benefits to change significantly over the next 12 months.

The company or its subsidiaries file 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 2006 and prior.

Note 10 – Pension and Other Postretirement Benefits

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


12 Weeks Ended June 18, 2011 and June 19, 2010:

		Pension Benefits		Other Benefits
(In thousands)		2011	2010	2011	2010

Interest cost	$	490	510	8	9
Expected return on plan assets		(433)	(428)	-	-
Amortization of prior service cost		-	-	(5)	(7)
Recognized actuarial loss (gain)		363	323	(3)	(1)
Net periodic benefit cost	$	420	405	-	1


24 Weeks Ended June 18, 2011, and June 19, 2010:

		Pension Benefits		Other Benefits
(In thousands)		2011	2010	2011	2010

Interest cost	$	979	1,020	16	18
Expected return on plan assets		(866)	(856)	-	-
Amortization of prior service cost		-	-	(10)	(14)
Recognized actuarial loss (gain)		727	647	(7)	(3)
Net periodic benefit cost	$	840	811	(1)	1

Weighted-average assumptions used to determine net periodic benefit cost for the second quarter and year-to-date periods of 2011 and 2010 are as follows:


	Pension Benefits		Other Benefits
	2011	2010	2011	2010
Weighted-average assumptions:
Discount rate	5.10%	5.60%	5.10%	5.60%
Expected return on plan assets	6.00%	6.50%	N/A	N/A
Rate of compensation increase	N/A	N/A	N/A	N/A

Total contributions to our pension plan in fiscal 2011 are expected to be $4.6 million.

Multi-employer pension plan

Certain of our unionized employees are covered by the Central States Southeast and Southwest Areas Pension Funds (“the Plan”), a multi-employer pension plan. Contributions are determined in accordance with the provisions of negotiated union contracts and are generally based on the number of hours worked. In fiscal 2010, the Company contributed $3.3 million to the Plan. Based on the most recent information available, we believe the present value of actuarial accrued liabilities of the Plan substantially exceeds the value of the assets held in trust to pay benefits. The underfunding is not a direct obligation or liability of the Company. Moreover, if the Company were to exit certain markets or otherwise cease making contributions to the Plan, the Company could trigger a substantial withdrawal liability. However, the amount of any increase in contributions will depend upon several factors, including the number of employers contributing to the Plan, results of the Company’s collective bargaining efforts, investment returns on assets held by the Plan, actions taken by the trustees of the Plan, and actions that the Federal government may take. We are currently unable to reasonably estimate a withdrawal liability. Any adjustment for withdrawal liability will be recorded when it is probable that a liability exists and can be reasonably estimated.

A more detailed discussion of the risks associated with the Plan are contained in Part I, Item 1A, “Risk Factors,” of our Annual Report filed with the SEC on Form 10-K for the fiscal year ended January 1, 2011.

Note 11– Earnings Per Share

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


		Second Quarter		Year-to-Date
		Ended		Ended
(In thousands, except per share amounts)		June 18, 2011	June 19, 2010	June 18, 2011	June 19, 2010

Net earnings	$	10,051	10,714	17,532	18,655

Net earnings per share-basic:
Weighted-average shares outstanding		12,744	12,904	12,731	13,015

Net earnings per share-basic	$	0.79	0.83	1.38	1.43

Net earnings per share-diluted:
Weighted-average shares outstanding		12,744	12,904	12,731	13,015
Shares contingently issuable		298	359	298	337
Weighted-average shares and potential dilutive shares outstanding		13,042	13,263	13,029	13,352

Net earnings per share-diluted	$	0.77	0.81	1.35	1.40

SARs are 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 in 2035 will be convertible at the option of the holder, only upon the occurrence of certain events, at an adjusted conversion rate of 9.6224 shares (initially 9.3120) of our

common stock per $1,000 principal amount at maturity of notes (equal to an adjusted conversion price of approximately $48.44 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.

During the second quarters of 2011 and 2010, performance units granted under the 2008 LTIP Plan and 2007 LTIP Plan, respectively, were settled in shares of common stock, some of which were deferred by executives as required by the plan. Vested shares deferred by executives and board members are included in the calculation of basic earnings per share. Other performance units and RSUs granted during 2007, 2008, 2009, 2010 and 2011 pursuant to the 2000 Plan and 2009 Plan will be settled in shares of Nash Finch common stock. Unvested RSUs 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 ASC Topic 260 – 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 second quarter 2011, approximately 60,000 shares related to the LTIP and 238,000 shares related to RSUs were included under “shares contingently issuable” in the calculation of diluted EPS as compared to approximately 143,000 shares related to the LTIP and 216,000 shares related to RSUs during the second quarter 2010. For year-to-date 2011, approximately 54,000 shares related to the LTIP and 244,000 shares related to RSUs were included under “shares contingently issuable” in the calculation of diluted EPS as compared to approximately 127,000 shares related to the LTIP and 210,000 shares related to RSUs during year-to-date 2010.

Note 12 – Segment Reporting

We sell and distribute products that are typically found in supermarkets and operate three reportable operating segments. The military segment consists of seven distribution centers that distribute products to military commissaries and exchanges and one shared facility which services both military and independent food distribution customers. During fiscal 2010, our military distribution centers in Columbus, Georgia and Bloomington, Indiana became operational. Excluded from the military distribution center total are two adjacent military distribution centers we purchased during the third quarter of fiscal 2010 in Oklahoma City, Oklahoma, which are scheduled to become operational during fiscal 2012. Our food distribution segment consists of 14 distribution centers that sell to independently operated retail food stores, our corporate owned stores and other customers. The retail segment consists of 46 corporate-owned stores that sell directly to the consumer. During the second quarter 2011, we closed two and sold four retail stores.

During fiscal 2009 and fiscal 2010, we acquired facilities in Columbus, Georgia, Bloomington, Indiana and Oklahoma City, Oklahoma for expansion of our military distribution business. We have historically serviced military commissaries and exchanges outside of the military segment’s distribution network through distribution centers that are included in our food distribution segment. The revenue and segment profit associated with this business had previously been reported in the food distribution segment. We are currently in the process of transitioning the military business serviced by the food distribution segment to military distribution facilities and are scheduled to have all of the business transitioned during fiscal 2012. Accordingly, we revised our segment reporting during the fourth quarter of fiscal 2010 to include this business in our military segment, which impacts quarterly amounts previously reported during fiscal 2010. This revision had no impact on our consolidated financial statements in any period presented.

Certain prior year amounts shown below have been revised to conform to the current year presentation. Quarterly periods presented after the second quarter 2011 will be revised as shown the next time those periods are presented.


				Year-to-date
		2nd Quarter 2010		2nd Quarter 2010		3rd Quarter 2010
(In thousands)		As adjusted	As reported	As adjusted	As reported	As adjusted	As reported

Segment revenue:
Military	$	515,785	456,588	1,055,419	934,585	699,655	620,822
Food Distribution		514,982	574,179	1,037,174	1,158,008	652,670	731,503
Retail		123,850	123,850	241,717	241,717	158,556	158,556
Total revenue	$	1,154,617	1,154,617	2,334,310	2,334,310	1,510,881	1,510,881


Segment profit:
Military	$	12,663	11,519	25,581	23,335	14,270	12,822
Food Distribution		7,636	8,581	12,540	14,380	11,666	12,848
Retail		2,190	2,389	2,210	2,616	2,558	2,824
Total segment profit	$	22,489	22,489	40,331	40,331	28,494	28,494

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


		Second Quarter Ended
		June 18, 2011			June 19, 2010
(In thousands)		Sales from external customers	Inter-segment sales	Segment profit	Sales from external customers	Inter-segment sales	Segment profit

Military	$	529,141	-	11,285	515,785	-	12,663
Food Distribution		459,465	55,313	7,709	514,982	61,361	7,636
Retail		110,969	-	2,128	123,850	-	2,190
Eliminations		-	(55,313)	-	-	(61,361)	-
Total	$	1,099,575	-	21,122	1,154,617	-	22,489


		Year-to-Date Ended
		June 18, 2011			June 19, 2010
(In thousands)		Sales from external customers	Inter-segment sales	Segment profit	Sales from external customers	Inter-segment sales	Segment profit

Military	$	1,066,581	-	23,432	1,055,419	-	25,581
Food Distribution		909,772	110,235	13,554	1,037,174	119,653	12,540
Retail		223,031	-	1,144	241,717	-	2,210
Eliminations		-	(110,235)	-	-	(119,653)	-
Total	$	2,199,384	-	38,130	2,334,310	-	40,331


Reconciliation to Consolidated Statements of Income:

		Second Quarter Ended		Year-to-Date Ended
		June 18,	June 19,	June 18,	June 19,
(In thousands)		2011	2010	2011	2010

Total segment profit	$	21,122	22,489	38,130	40,331
Unallocated amounts:
Interest		(4,508)	(4,523)	(9,146)	(9,035)
Earnings before income taxes	$	16,614	17,966	28,984	31,296

Note 13 – Legal Proceedings

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

ITEM 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 a statement of historical fact may be deemed a forward-looking statement. 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 food distribution, military and retail businesses;

•

general sensitivity to economic conditions, including the uncertainty related to the current state of the economy in the U.S. and worldwide economic slowdown; disruptions to the credit and financial markets in the U.S. and worldwide; changes in market interest rates; continued volatility in energy prices and food commodities;

•

macroeconomic and geopolitical events affecting commerce generally;

•

changes in consumer buying and spending patterns;

•

our ability to identify and execute plans to expand our food distribution, military and retail operations;

•

possible changes in the military commissary system, including those stemming from the redeployment of forces, congressional action and funding levels;

•

our ability to identify and execute plans to improve the competitive position of our retail operations;

•

the success or failure of strategic plans, new business ventures or initiatives;

•

our ability to successfully integrate and manage current or future businesses we acquire, including the ability to manage credit risks and retain the customers of those operations;

•

changes in credit risk from financial accommodations extended to new or existing customers;

•

significant changes in the nature of vendor promotional programs and the allocation of funds among the programs;

•

limitations on financial and operating flexibility due to debt levels and debt instrument covenants;

•

legal, governmental, legislative or administrative proceedings, disputes, or actions that result in adverse outcomes;

•

our ability to identify and remediate any material weakness in our internal controls that could affect our ability to detect and prevent fraud, expose us to litigation, or prepare financial statements and reports in a timely manner;

•

changes in accounting standards;

•

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

•

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

•

unionization of a significant portion of our workforce;

•

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

•

product liability claims, including claims concerning food and prepared food products;

•

threats or potential threats to security;

•

unanticipated problems with product procurement; and

•

maintaining our reputation and corporate image.

A more detailed discussion of many of these factors, 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 January 1, 2011. 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: military food distribution, food distribution and retail.

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

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

· Growing the Military business segment through acquisition and expansion of products and services, as well as creating warehousing and transportation cost efficiencies with a long-term distribution center strategic plan;

· Providing our independent retail customers with a high level of order fulfillment, broad product selection including leveraging the Our Family brand, support services emphasizing best-in-class offerings in marketing, advertising, merchandising, store design and construction, market research, retail store support, retail pricing and license agreement opportunities; and

· Retail formats designed to appeal to the needs of today’s consumers.

In addition to the strategic initiatives already in progress, our 2011 initiatives consist of the following:

· Continue implementation of our military distribution center network expansion;

· Execute supply chain and center store initiatives within our food distribution segment;

· Implement cost reduction and profit improvement initiatives; and

· Identify aquisitions that support our strategic plan.

Our military segment contracts with manufacturers to distribute a wide variety of food products to military commissaries and exchanges located in the United States and the District of Columbia, and in Europe, Puerto Rico, Cuba, the Azores and Egypt. We have over 30 years of experience acting as a distributor to U.S. military commissaries and exchanges. During the third quarter of fiscal 2010, we purchased facilities in Bloomington, Indiana and Oklahoma City, Oklahoma for expansion of our military business. The Bloomington, Indiana facility became operational during the fourth quarter of fiscal 2010, while Oklahoma City, Oklahoma, which consists of two adjacent facilities, is scheduled to become operational during fiscal 2012. In addition, we purchased the real estate associated with our Pensacola, Florida and Norfolk, Virginia facilities, which had previously been leased, during the third quarter of fiscal 2010 and the first quarter of fiscal 2011, respectively.

Our food distribution segment sells and distributes a wide variety of nationally branded and private label grocery products and perishable food products from 14 distribution centers to approximately 1,800 independent retail locations located in 28 states, primarily in the Midwest and Southeast regions of the United States.

Our retail segment operated 46 corporate-owned stores primarily in the Upper Midwest as of June 18, 2011. Primarily due to highly competitive conditions in which supercenters and other alternative formats compete for price conscious customers, we closed two and sold four retail stores during fiscal 2011 and closed two retail stores during fiscal 2010. We are implementing initiatives of varying scope and duration with a view toward improving our response to and performance under these highly competitive conditions. These initiatives include designing and reformatting some of our retail stores into alternative formats to increase overall retail sales performance. As we continue to assess the impact of performance improvement initiatives and the operating results of individual stores, we may need to recognize additional impairments of long-lived assets and goodwill associated with our retail segment, and may incur restructuring or other charges in connection with closure or sales activities. The retail segment yields a higher gross profit percent of sales and higher selling, general and administrative (“SG&A”) expenses as a percent of sales compared to our food distribution and military segments.

Thus, changes in sales of the retail segment can have a disproportionate impact on the consolidated gross profit and SG&A as compared to similar changes in sales in our food distribution and military segments.

Results of Operations

Sales

Sales for our military and food distribution segments for the second quarter and year-to-date periods of fiscal 2010 presented below have been revised to conform to our current year presentation. Please refer to Part I, Item 1 in this report under Note 12 – “Segment Reporting” of this Form 10-Q for additional information regarding our segment reporting revision.

The following tables summarize our sales activity for the 12 weeks ended June 18, 2011 (“second quarter 2011”) compared to the 12 weeks ended June 19, 2010 (“second quarter 2010”) and the 24 weeks ended June 18, 2011 (“year-to-date 2011”) compared to the 24 weeks ended June 19, 2010 (“year-to-date 2010”):


		Second quarter 2011		Second quarter 2010		Increase/(Decrease)
(In thousands)		Sales	Percent of Sales	Sales	Percent of Sales	$	%
Segment Sales:
Military	$	529,141	48.1%	515,785	44.7%	13,356	2.6%
Food Distribution		459,465	41.8%	514,982	44.6%	(55,517)	(10.8%)
Retail		110,969	10.1%	123,850	10.7%	(12,881)	(10.4%)
Total Sales	$	1,099,575	100.0%	1,154,617	100.0%	(55,042)	(4.8%)


		Year-to-date 2011		Year-to-date 2010		Increase/(Decrease)
(In thousands)		Sales	Percent of Sales	Sales	Percent of Sales	$	%
Segment Sales:
Military	$	1,066,581	48.5%	1,055,419	45.2%	11,162	1.1%
Food Distribution		909,772	41.4%	1,037,174	44.4%	(127,402)	(12.3%)
Retail		223,031	10.1%	241,717	10.4%	(18,686)	(7.7%)
Total Sales	$	2,199,384	100.0%	2,334,310	100.0%	(134,926)	(5.8%)

Total Company sales declined 4.8% during the second quarter 2011 as compared to the prior year period. Excluding the previously announced transition of a portion of a food distribution customer buying group to another supplier during the second quarter of fiscal 2010, which accounted for $18.1 million of sales in the prior year period, and the effect of the sale of four and closing of four corporate-owned retail stores, total Company comparable sales declined 2.5% during the second quarter 2011.

Total Company sales declined 5.8% during year-to-date 2011 as compared to the prior year period. Excluding the previously announced transition of a portion of a food distribution customer buying group to another supplier during the second quarter of fiscal 2010, which accounted for $52.6 million of sales in the prior year period, and the effect of the sale of four and closing of four corporate-owned retail stores, total Company comparable sales declined 3.1% during year-to-date 2011.

Military segment sales increased 2.6% during the second quarter 2011 as compared to the prior year. However, a larger portion of military sales were performed on consignment during the second quarter 2011, which are not included in our reported net sales. The year-over-year increase in gross consignment sales was approximately $2.5 million during the second quarter 2011. Including the impact of consignment sales, comparable military sales increased 3.0% during the second quarter 2011 as compared to the prior year. Domestic sales increased 1.2% while overseas sales increased 9.5% as compared to the comparable prior year quarter.

Military segment sales increased 1.1% during year-to-date 2011 as compared to the prior year. However, a larger portion of military sales were performed on consignment during year-to-date 2011, which are not included in our reported net sales. The year-over-year increase in gross consignment sales was approximately $8.2 million during year-to-date 2011. Including the impact of consignment sales, comparable military sales increased 1.8%

durring year-to-date 2011 as compared to the prior year. Domestic sales increased 0.6% while overseas sales increased 3.2% as compared to the comparable prior year-to-date period.

Domestic and overseas sales represented the following percentages of military segment sales:


	Second Quarter		Year-to-date
	2011	2010	2011	2010
Domestic	82.2%	83.3%	82.5%	82.8%
Overseas	17.8%	16.7%	17.5%	17.2%

The decrease in food distribution sales for the second quarter 2011 of 10.8% is partially attributable to the previously announced transition of a portion of a food distribution customer buying group to another supplier during the second quarter 2010 which accounted for $18.1 million of additional sales during the second quarter 2010. Excluding the impact of the customer transition, food distribution sales declined 7.5%, which is the result of sales volume of lost customer accounts exceeding new account gains and a decline in sales to existing customers.

The decrease in food distribution sales during year-to-date 2011 of 12.3% is partially attributable to the previously announced transition of a portion of a food distribution customer buying group to another supplier during the second quarter 2010 which accounted for $52.6 million of additional sales during year-to-date 2010. Excluding the impact of the customer transition, food distribution sales declined 7.6%, which is the result of sales volume of lost customer accounts exceeding new account gains and a decline in sales to existing customers.

Retail sales declined 10.4% during the second quarter 2011 as compared to the comparable prior year period. The decline in retail sales is primarily the result of the closure of four stores and the sale of four stores since the beginning of third fiscal quarter of 2010. In addition, same store sales were down 3.7% during the second quarter 2011. Same store sales compare retail sales for stores which were in operation for the same number of weeks in the comparative periods.

Retail sales declined 7.7% during year-to-date 2011 as compared to the comparable prior year period. The decline in retail sales is primarily the result of the closure of four stores and the sale of four stores since the beginning of the third quarter of fiscal 2010. In addition, same store sales were down 3.3% during year-to-date 2011. Same store sales compare retail sales for stores which were in operation for the same number of weeks in the comparative periods.

During the second quarters of 2011 and 2010, our corporate store count changed as follows:


	Second quarter 2011	Second quarter 2010
Number of stores at beginning of period	52	54
Sold stores	(4)	-
Closed stores	(2)	-
Number of stores at end of period	46	54

During year-to-date 2011 and 2010, our corporate store count changed as follows:


	Year-to-date 2011	Year-to-date 2010
Number of stores at beginning of period	52	54
Sold stores	(4)	-
Closed stores	(2)	-
Number of stores at end of period	46	54

The tables above exclude corporate-owned stand-alone pharmacies and convenience stores.

Consolidated Gross Profit

Consolidated gross profit was 8.2% of sales for both the second quarter 2011 and second quarter 2010. Our gross profit margin improved by 0.3% of sales during the second quarter 2011, which was driven primarily by higher gross margin performance in our food distribution segment. However, our overall gross profit margin was negatively affected by 0.2% of sales in the second quarter 2011 due to a sales mix shift between our business segments between the years. This was due to a higher percentage of 2011 sales occurring in the military segment which has a lower gross profit margin than the retail and food distribution segments.

Consolidated gross profit was 8.2% of sales for year-to-date 2011 as compared to 8.0% of sales during year-to-date 2010. Our gross profit margin improved by 0.3% of sales during year-to-date 2011, which was driven primarily by higher gross margin performance in our food distribution segment. However, our overall gross profit margin was negatively affected by 0.1% of sales during year-to-date 2011 due to a sales mix shift between our business segments between the years. This was due to a higher percentage of 2011 sales occurring in the military segment which has a lower gross profit margin than the retail and food distribution segments.

Consolidated Selling, General and Administrative Expenses

Consolidated SG&A for the second quarter 2011 was 5.5% of sales, and was relatively flat in comparison to 5.4% of sales during the second quarter 2010. Consolidated SG&A for year-to-date 2011 was 5.6% of sales, also relatively flat in comparison to 5.5% of sales during year-to-date 2010.

Depreciation and Amortization Expense

Depreciation and amortization expense was $8.4 million for the second quarter 2011 as compared to $8.2 million during the comparable prior year period. Depreciation and amortization expense for our military segment was approximately $1.0 million higher during the second quarter 2011 as compared to the prior year, which is the result of expansion activities associated with that business. The increase in military depreciation and amortization was partially offset by a decline of $0.3 million in our food distribution segment and a $0.5 million decline in the retail segment.

Depreciation and amortization expense was $17.0 million for year-to-date 2011 as compared to $16.8 million during the comparable prior year period. Depreciation and amortization expense for our military segment was approximately $2.0 million higher during year-to-date 2011 as compared to the prior year, which is the result of expansion activities associated with that business. The increase in military depreciation and amortization was partially offset by a decline of $0.8 million in our food distribution segment and a $1.0 million decline in the retail segment.

Interest Expense

Interest expense was $5.4 million for both the second quarters of 2011 and 2010. Average borrowing levels increased from $335.4 million during the second quarter 2010 to $350.5 million during the second quarter 2011. The effective interest rate was 4.1% for the second quarter 2011 as compared to 4.5% for the second quarter 2010.

Interest expense was $10.8 million for year-to-date 2011 compared to $10.6 million during the comparable prior year period. Average borrowing levels increased from $325.2 million during year-to-date 2010 to $356.6 million during year-to-date 2011. The effective interest rate was 4.1% for year-to-date 2011 as compared to 4.6% during year-to-date 2010. Certain components of our interest expense are excluded from the calculation of our effective interest rate as the costs are not directly attributable to our long-term borrowing rates.

The calculation of our effective interest rate excludes non-cash interest required to be recognized on our senior subordinated convertible notes under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 470-20 – Debt-Debt with Conversion and Other Options (“ASC 470-20”). Non-cash interest expense recognized under ASC 470-20 was $1.3 million and $1.2 million during the second quarters of 2011 and 2010, respectively. Non-cash interest expense recognized under ASC 470-20 was $2.6 million and $2.4 million during the year-to-date periods of 2011 and 2010, respectively. Additionally, the calculation of our average borrowing levels includes the unamortized equity component of our senior subordinated convertible notes that is required to be recognized under ASC 470-20. The inclusion of the unamortized equity component brings the basis in our senior subordinated convertible notes to $150.1 million for purposes of calculating our average borrowing levels, or their aggregate issue price, on which we are required to pay semi-annual cash interest at a rate of 3.50% until March 15, 2013.

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 change 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 changes in tax laws and regulations. The effective income tax rate was 39.5% and 40.4% for the second quarters of 2011 and 2010, respectively. The effective income tax rate was also 39.5% and 40.4% for year-to-date 2011 and 2010, respectively.

During the second quarter of 2011, the Company did not file any claims with or receive refunds from any of the various tax authorities. The effective rate for the second quarter differed from statutory rates due to the amount of permanent book tax differences relative to the Company’s pre-tax book income. We estimate the full year effective tax rate for 2011 will be approximately 39.5% which excludes the potential impact of discrete events.

Net Earnings

Net earnings were $10.1 million, or $0.77 per diluted share, during the second quarter 2011 as compared to net earnings of $10.7 million, or $0.81 per diluted share, during the second quarter 2010. Net earnings for year-to-date 2011 were $17.5 million, or $1.35 per diluted share, as compared to net earnings of $18.7 million, or $1.40 per diluted share, during year-to-date 2010. Net earnings in the periods presented in this report were affected by a number of events included in the discussion above that affected the comparability of results.

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:


		24 Weeks Ended
(In thousands)		June 18, 2011	June 19, 2010	Increase/ (Decrease)

Net cash provided by operating activities	$	37,492	17,679	19,813
Net cash used in investing activities		(34,138)	(9,817)	(24,321)
Net cash used in financing activities		(3,525)	(7,927)	4,402
Net decrease in cash and cash equivalents	$	(171)	(65)	(106)

Cash provided by operating activities increased $19.8 million during year-to-date 2011 as compared to the prior year. Inventories declined $21.3 million during year-to-date 2011, as compared to an increase in inventory of $27.1 million in the prior year, which contributed to a $48.4 million year-over-year increase in cash provided by operating activities. However, this impact was partially offset by a year-over-year increase in our accounts receivable of $22.6 million and year-over-year decline in our accounts payable of $10.2 million. The year-over-year increase in our accounts receivable was due primarily to a temporary timing difference related to our military accounts receivable billing cycle that accelerated collections into the last week of fiscal 2010 which caused collections in the first quarter 2011 to be lower than the prior year.

Net cash used in investing activities increased by $24.3 million during year-to-date 2011 as compared to the prior year. Net cash used in investing activities for year-to-date 2011 consisted primarily of additions to property, plant and equipment of $33.1 million. The additions to property, plant and equipment during year-to-date 2011 consisted primarily of the purchase of the real estate associated with our military distribution facility in Norfolk, Virginia, which was previously a leased location, for $27.6 million. During year-to-date 2010, net cash used in investing activities consisted primarily of additions to property, plant and equipment of $10.4 million.

Cash used in financing activities decreased by $4.4 million during year-to-date 2011 as compared to the prior year. During year-to-date 2011, cash used in financing activities consisted primarily of dividend payments of $4.4 million, payments of capital lease obligations of $1.5 million and a decrease in outstanding checks of $1.5 million, which were partially offset by proceeds of revolving debt of $4.7 million. Cash used in financing activities during year-to-date 2010 included share repurchases of $15.2 million and dividend payments of $4.5 million, which were partially offset by proceeds of revolving debt of $10.6 million.

During the remainder of fiscal 2011, 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 credit facility 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. There can be no assurance, however, that we will continue to generate cash flows at current levels as our business is sensitive to trends in consumer spending at our customer locations and our owned retail food stores, as well as certain factors outside of our control, including, but not limited to, the current and future state of the U.S. and global economy, competition, recent and potential future disruptions to the credit and financial markets in the U.S. and worldwide and continued volatility in food and energy commodities. Please see Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K filed with the SEC for the fiscal year ended January 1, 2011, for a more detailed discussion of potential factors that may have an impact on our liquidity and capital resources.

Asset-backed Credit Agreement

The Revolving Credit Facility has a 5-year term and will be due and payable in full on April 11, 2013. We can elect, at the time of borrowing, for loans to bear interest at a rate equal to the base rate, as defined in the credit agreement, or LIBOR plus a margin. The LIBOR interest rate margin was 2.00% as of June 18, 2011, and can vary quarterly in 0.25% increments between three pricing levels ranging from 1.75% to 2.25% based on the excess availability, which is defined in the credit agreement as (a) the lesser of (i) the borrowing base; or (ii) the aggregate commitments; minus (b) the aggregate of the outstanding credit extensions.

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

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

As of June 18, 2011, $169.4 million was available under the Revolving Credit Facility after giving effect to outstanding borrowings and to $11.8 million of outstanding letters of credit primarily supporting workers’ compensation obligations. We are currently in compliance with all covenants contained within the credit agreement.

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

Senior Subordinated Convertible Debt

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 Revolving Credit Facility. Cash interest at the rate of 3.50% per year is payable semi-annually on the issue price of the notes until March 15, 2013. After that date, cash interest will not be payable, unless contingent cash interest becomes payable, and original issue discount for non-tax purposes will accrue on the notes daily at a rate of 3.50% per year until the maturity date of the notes. See our Annual Report on Form 10-K filed with the SEC for the fiscal year ended January 1, 2011, for additional information.

Consolidated EBITDA (Non-GAAP Measurement)

The following is a reconciliation of EBITDA and Consolidated EBITDA to net earnings for the second quarters and year-to-date periods of 2011 and 2010 (amounts in thousands):


	2011	2010		2011	2010
	Qtr 2	Qtr 2		Year-to-Date	Year-to-Date
Net earnings	$ 10,051	10,714	$	17,532	18,655
Income tax expense	6,563	7,252		11,452	12,641
Interest expense	5,355	5,366		10,814	10,624
Depreciation and amortization	8,367	8,170		16,950	16,755
EBITDA	30,336	31,502		56,748	58,675
LIFO charge (credit)	2,131	(321)		2,632	(361)
Provision for (reversal of) lease reserves	159	(434)		607	(434)
Asset impairments	349	301		349	818
Net loss (gain) on sale of real estate and other assets	(391)	-		1,405	-
Share-based compensation	1,372	1,857		2,531	3,462
Subsequent cash payments on non-cash charges	(572)	(969)		(1,076)	(1,709)
Consolidated EBITDA	$ 33,384	31,936	$	63,196	60,451

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

Derivative Instruments

exposure to changes in interest rates and commodity prices is to reduce fluctuations in earnings and cash flows. From time-to-time we use derivative instruments, primarily interest rate and commodity swap agreements, to manage risk exposures when appropriate, based on market conditions. We do not enter into derivative agreements for trading or other speculative purposes, nor are we a party to any leveraged derivative instrument.

The interest rate swap agreements are designated as cash flow hedges and are reflected at fair value in our Consolidated Balance Sheet and the related gains or losses on these contracts are deferred in stockholders’ equity as a component of other comprehensive income. As of June 18, 2011, and January 1, 2011, we had recorded a fair value liability of $0.2 million and $0.4 million, respectively, which was included in accrued expenses in our Consolidated Balance Sheet. Deferred gains and losses are amortized as an adjustment to interest expense over the same period in which the related items being hedged are recognized in income. However, to the extent that any of these contracts are not considered to be effective in accordance with ASC Topic 815 – Derivatives and Hedging (“ASC 815”) in offsetting the change in the value of the items being hedged, any changes in fair value relating to the ineffective portion of these contracts are immediately recognized in income. Our two outstanding interest rate swaps have been considered effective in accordance with ASC 815 since they began during fiscal 2008.


Notional	Effective Date	Termination Date	Fixed Rate
$20,000	10/15/2009	10/15/2010	3.49%
10,000	10/15/2010	10/15/2011	3.49%


Notional	Effective Date	Termination Date	Fixed Rate
$15,000	10/15/2009	10/15/2010	3.38%
7,500	10/15/2010	10/15/2011	3.38%

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.

Recoverability of Goodwill

Our most recent annual impairment test of goodwill was completed during the fourth quarter of fiscal 2010 based on conditions as of the end of our third quarter of fiscal 2010 which resulted in no indication of goodwill impairment for any of our reporting units. The fair value of the military segment was approximately 54% higher than its carrying value, while food distribution’s fair value exceeded its carrying value by approximately 17% and retail’s fair value was approximately 13% higher than its carrying value. During the first quarter of 2011, the Company entered into a binding agreement to sell four retail stores which resulted in approximately a $0.3 million reduction in goodwill.

The fair value for each reporting unit is determined based on an income approach which incorporates a discounted cash flow analysis which uses significant unobservable inputs, or level 3 inputs, as defined by the fair value hierarchy, and a market approach that utilizes current earnings multiples of comparable publicly-traded companies. The Company has weighted the valuation of its reporting units at 70% based on the income approach and 30% based on the market approach. The Company believes that this weighting is appropriate since it is often

difficult to find other comparable publicly-traded companies that are similar to our reporting units and it is our view that future discounted cash flows are more reflective of the value of the reporting units.

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 January 1, 2011, “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 24 weeks ended June 18, 2011.

Recently Adopted and Proposed Accounting Standards

There have been no developments to recently issued accounting standards from those disclosed in our Annual Report on Form 10-K for the fiscal year ended January 1, 2011.

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 Annual Report on Form 10-K for the fiscal year ended January 1, 2011 and Part I, Item 2 of this report under the caption “Liquidity and Capital Resources”).

ITEM 4. Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective.

There were no changes in our internal control over financial reporting that occurred during the period covered by this quarterly report that materially affected our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. Legal Proceedings

ITEM 1A. Risk Factors

There have been no material changes to our risk factors contained in Part I, Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for the fiscal year ended January 1, 2011.

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

None

ITEM 3. Defaults Upon Senior Securities

None

ITEM 4. (Removed and Reserved).

ITEM 5. Other Information

None

ITEM 6. Exhibits

Exhibits filed or furnished with this Form 10-Q:


Exhibit No.	Description
3.1	Fifth Restated Certificate of Incorporation of Nash-Finch Company

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

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 21, 2011

by /s/ Alec C. Covington

Alec C. Covington

President and Chief Executive Officer

Date: July 21, 2011

by /s/ Robert B. Dimond

Robert B. Dimond

Executive Vice President and Chief Financial Officer

NASH FINCH COMPANY

EXHIBIT INDEX TO QUARTERLY REPORT

ON FORM 10-Q

For the Quarter Ended June 18, 2011


Exhibit No.	Item	Method of Filing
3.1	Fifth Restated Certificate of Incorporation of Nash-Finch Company	Filed herewith

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	Filed herewith