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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)
X		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period (16 weeks) ended October 6, 2012

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 November 2, 2012, 12,272,155 shares of Common Stock of the Registrant were outstanding.

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PART I. – FINANCIAL INFORMATION

ITEM 1. Financial Statements

NASH-FINCH COMPANY AND SUBSIDIARIES
Consolidated Statements of Income (unaudited)
(In thousands, except per share amounts)

	16 Weeks Ended			40 Weeks Ended
	October 6,		October 8,	October 6,	October 8,
	2012		2011	2012	2011

Sales	$	1,496,343	1,471,357	3,647,775	3,670,741
Cost of sales		1,368,698	1,357,669	3,350,613	3,377,487
Gross profit		127,645	113,688	297,162	293,254

Other costs and expenses:
Selling, general and administrative		84,692	79,199	205,904	202,017
Gain on acquisition of a business		-	-	(6,639)	-
Goodwill impairment		-	-	131,991	-
Depreciation and amortization		11,924	10,738	28,510	27,688
Interest expense		8,074	7,014	18,672	17,828
Total other costs and expenses		104,690	96,951	378,438	247,533

Earnings (loss) before income taxes		22,955	16,737	(81,276)	45,721

Income tax expense (benefit)		8,351	6,644	(16,366)	18,096
Net earnings (loss)	$	14,604	10,093	(64,910)	27,625

Net earnings (loss) per share:
Basic	$	1.13	0.78	(5.01)	2.16
Diluted	$	1.12	0.77	(5.01)	2.12

Declared dividends per common share	$	0.18	0.18	0.54	0.54

Weighted average number of common shares
outstanding and common equivalent shares outstanding:
Basic		12,962	12,873	12,963	12,780
Diluted		13,040	13,105	12,963	13,056

See accompanying notes to consolidated financial statements.

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NASH-FINCH COMPANY AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (unaudited)
(In thousands, except per share amounts)

	16 Weeks				40 Weeks
	Ended				Ended
(In thousands)		October 6, 2012	October 8, 2011		October 6, 2012	October 8, 2011

Net earnings (loss)	$	14,604	10,093		(64,910)	27,625
Change in fair value of derivatives, net of tax		-	107	⁽¹⁾	-	258	⁽²⁾
Comprehensive income (loss)	$	14,604	10,200		(64,910)	27,883

⁽¹⁾Net of tax of $69.
⁽²⁾Net of tax of $165.

See accompanying notes to consolidated financial statements.

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NASH-FINCH COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except per share amounts)
	October 6,		December 31,
	2012		2011
	(unaudited)
Assets
Current assets:
Cash	$	1,196	773
Accounts and notes receivable, net		255,977	243,763
Inventories		403,127	308,621
Prepaid expenses and other		11,389	17,329
Deferred tax asset, net		7,240	6,896
Total current assets		678,929	577,382

Notes receivable, net		21,795	23,221
Property, plant and equipment:
Property, plant and equipment		732,925	686,794
Less accumulated depreciation and amortization		(428,822)	(413,695)
Net property, plant and equipment		304,103	273,099

Goodwill		57,516	170,941
Customer contracts and relationships, net		13,683	15,399
Investment in direct financing leases		2,436	2,677
Other assets		18,544	11,049
Total assets	$	1,097,006	1,073,768

Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long-term debt and capital lease obligations	$	2,177	2,932
Accounts payable		288,627	234,722
Accrued expenses		48,257	61,459
Income taxes payable		266	-
Total current liabilities		339,327	299,113

Long-term debt		371,119	278,546
Capital lease obligations		15,584	15,905
Deferred tax liability, net		8,938	40,671
Other liabilities		32,329	34,910
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 13,797 and 13,727 shares, respectively		22,995	22,878
Additional paid-in capital		114,651	118,222
Common stock held in trust		(1,285)	(1,254)
Deferred compensation obligations		1,285	1,254
Accumulated other comprehensive loss		(14,707)	(14,707)
Retained earnings		258,476	330,470
Common stock in treasury; 1,525 and 1,541 shares, respectively		(51,706)	(52,240)
Total stockholders' equity		329,709	404,623
Total liabilities and stockholders' equity	$	1,097,006	1,073,768

See accompanying notes to consolidated financial statements.

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NASH-FINCH COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows (unaudited)
(In thousands)
	40 Weeks Ended
	October 6, 2012		October 8, 2011
Operating activities:
Net earnings (loss)	$	(64,910)	27,625
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
Gain on acquisition of a business		(6,639)	-
Depreciation and amortization		28,510	27,688
Amortization of deferred financing costs		962	1,409
Non-cash convertible debt interest		4,736	4,385
Rebateable loans		3,111	2,568
Provision for (recovery of) bad debts		(274)	683
Provision for (recovery of) lease reserves		(33)	631
Deferred income tax expense (benefit)		(32,783)	3,999
Loss (gain) on sale of property, plant and equipment		(1,506)	1,316
LIFO charge		2,040	9,717
Asset impairments		62	363
Impairments of goodwill		131,991	-
Share-based compensation expense (reversal of)		(1,295)	4,292
Deferred compensation		984	646
Other		(187)	(644)
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts and notes receivable		(10,541)	(37,768)
Inventories		(70,609)	(20,973)
Prepaid expenses		(1,051)	(1,835)
Accounts payable		33,450	35,660
Accrued expenses		(14,182)	(2,637)
Income taxes payable		6,975	1,747
Other assets and liabilities		(3,542)	(3,968)
Net cash provided by operating activities		5,269	54,904
Investing activities:
Proceeds from sale of assets		8,690	3,863
Additions to property, plant and equipment		(23,736)	(47,340)
Businesses acquired, net of cash		(78,259)	(1,587)
Loans to customers		(8,715)	(7,285)
Payments from customers on loans		7,765	1,178
Corporate-owned life insurance, net		(837)	(520)
Other		(151)	-
Net cash used in investing activities		(95,243)	(51,691)
Financing activities:
Proceeds from (payments of) revolving debt		69,800	(6,000)
Dividends paid		(6,607)	(6,549)
Proceeds from long-term debt		18,702	-
Payments of long-term debt		(1,260)	(284)
Payments of capitalized lease obligations		(1,924)	(2,256)
Increase in outstanding checks		13,204	12,235
Payments of deferred financing costs		(211)	-
Tax benefit from share-based compensation		66	-
Other		(1,373)	(508)
Net cash provided by (used in) financing activities		90,397	(3,362)
Net increase (decrease) in cash		423	(149)
Cash at beginning of year		773	830
Cash at end of period	$	1,196	681

See accompanying notes to consolidated financial statements.

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Nash-Finch Company and Subsidiaries

Notes to Consolidated Financial Statements

October 6, 2012

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 December 31, 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 October 6, 2012, and December 31, 2011, the results of operations for the 16 and 40 weeks ended October 6, 2012 (“third quarter 2012”), and October 8, 2011 (“third quarter 2011”), and cash flows for the 40 weeks ended October 6, 2012 and October 8, 2011. 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 – Goodwill Impairment

During the second quarter we performed an impairment test of goodwill due to market conditions as of the end of our fifth fiscal period. The Company’s market capitalization as calculated, using the share price multiplied by the shares outstanding, had declined in the second quarter and from fiscal year end 2011, resulting in a market value significantly lower than the fair value of the business segments. We recorded a goodwill impairment charge of $132.0 million in the second quarter of fiscal 2012, of which $113.0 million related to our Food Distribution segment and $19.0 million related to our Retail segment.

Note 3 – Acquisition – No Frills

On June 25, 2012, U Save Foods, Inc., a Nash Finch wholly-owned subsidiary, completed an asset purchase from NF Foods, LLC (“No Frills”) of its eighteen supermarkets, which are located in Nebraska and western Iowa. The Company acquired the inventory, accounts receivable, equipment and certain other assets of all locations, while assuming obligations for accounts payable and certain other liabilities. The aggregate purchase price paid was $49.3 million in cash.

In accordance with the provisions of FASB Accounting Standards Codification (“ASC”) Topic 805, "Business Combinations" defines the acquirer in a business combination as the entity that obtains control of one or more businesses in a business combination and establishes the acquisition date as the date that the acquirer achieves control. ASC Topic 805 requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date. ASC Topic 805 also requires the acquirer to recognize contingent consideration at the acquisition date, measured at its fair value at that date.

The following table summarizes the fair values of the assets acquired and liabilities of No Frills assumed at the acquisition date:

(in thousands)

Cash and cash equivalents	$	441
Accounts receivable		1,893
Inventories		14,771
Prepaid expenses		209
Property, plant and equipment		8,981
Tradename		2,900
Leasehold interest		3,540
Other assets		327
Total identifiable assets acquired		33,062

Accounts payable		3,910
Accrued expenses		1,260
Other long-term liabilities		1,479
Total liabilities assumed		6,649

Net assets acquired	$	26,413

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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 Amended 2009 Incentive Award Plan (“2009 Plan”), the Amended 2000 Stock Incentive Plan (“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 December 31, 2011 under the caption “Footnote 10 – Share-based Compensation Plans” and in our Definitive Proxy Statement on Schedule 14A filed on April 4, 2012.

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

Performance units have been granted during each of fiscal years 2005 through 2012 pursuant to our LTIP. These units vest at the end of a three-year performance period upon achievement of certain performance measures. On December 31, 2011, the 90,670 units outstanding from the LTIP grants made during fiscal 2009 vested and were cancelled without conversion to shares of common stock because the Company did not achieve the performance metrics of the LTIP for the related performance period.

During year-to-date 2012, a total of 209,693 units were granted pursuant to our 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 a blend of 1) absolute return on net assets and 2) compound annual growth rate for return on net assets as compared to 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. Compensation expense equal to the grant date fair value (for shares expected to vest) is recorded over the three-year performance period.

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., certain key executives of the Company were granted a total of 267,345 SARs with a per share price of $38.44. As a result of the expiration of the vesting period of the grant on January 31, 2012, all remaining compensation expense to be recorded for this grant was expensed in the first quarter of fiscal 2012.

As of December 31, 2011, 267,345 SARs with a weighted average base/exercise price per SAR of $38.44 were outstanding and unvested. No SARs were granted or exercised during fiscal 2012; however, approximately 23,800 SARs were forfeited by a recipient due to termination of employment. The SARs did not vest because the closing price per share of Nash Finch common stock was below the minimum of $55.00 required for 90 consecutive market days before January 31, 2012. Therefore, the remaining 243,545 SARs never vested. The Company wrote-off the related deferred tax asset of approximately $0.8 million with an offsetting entry to paid-in capital during the first quarter of fiscal 2012.

The following table summarizes activity in our share-based compensation plans during year-to-date 2012:

(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 December 31, 2011	597.9	0.2	568.2	0.7
Granted	14.7		210.3
Forfeited/cancelled	-		(24.5)
Restrictions lapsed/ units settled	(132.6)		(26.7)
Shares deferred upon vesting/settlement & dividend equivalents on deferred shares⁽¹⁾	29.3		7.4
Outstanding at October 6, 2012	509.3	0.1	734.7	0.9
Exercisable/unrestricted at December 31, 2011	468.4		319.9
Exercisable/unrestricted at October 6, 2012	459.6		300.6

⁽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.

The weighted-average grant-date fair value of time vesting equity units and performance vesting units granted during year-to-date 2012 was $23.03 and $29.19, respectively.

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Note 7 – Fair Value Measurements

We account for instruments recorded at fair value under the established fair value framework. The framework also applies under other accounting pronouncements that require or permit fair value measurements.

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

Level 1: Quoted prices (unadjusted) 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.

As of October 6, 2012 and December 31, 2011, we are not a party to any financial instruments that would be subject to a fair value measurement.

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 October 6, 2012 and December 31, 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 October 6, 2012, had a carrying value and fair value of $371.1 million and $369.8 million, respectively, and at December 31, 2011, had a carrying value and fair value of $279.1 million and $276.3 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.

For year-to-date 2012 and 2011, asset impairments were $132.1 million and $0.4 million, respectively. We utilize a discounted cash flow model that incorporates unobservable level 3 inputs to test for long-lived asset impairment.

Note 8 – Long‑term Debt and Bank Credit Facilities

Total debt outstanding was comprised of the following:

(In thousands)		October 6, 2012	December 31, 2011

Asset-backed credit agreement:
Revolving credit	$	205,200	135,400
Senior subordinated convertible debt, 3.50% due in 2035		147,217	142,481
Notes payable and mortgage notes, variable rate due in various
installments through 2019		18,702	-
Industrial development bonds		-	1,260
Total debt		371,119	279,141
Less current maturities		-	(595)
Long-term debt	$	371,119	278,546

On May 18, 2012, the Company, as guarantor for U Save Foods, Inc., a Nebraska corporation and wholly-owned subsidiary of Nash Finch Company, entered into a seven year $16.9 million term loan facility (“the Agreement”) with First National Bank of Omaha. The Agreement is secured by seven corporate-owned retail locations in Nebraska.

Note 9 – Guarantees

We have guaranteed lease obligations of certain food distribution customers. In the event these retailers are unable to meet their lease payments or otherwise experience an event of default, we would be unconditionally liable for the outstanding balance of their lease obligations ($1.5 million as of October 6, 2012, as compared to $7.9 million in debt and lease obligations as of December 31, 2011), which would be due in accordance with the underlying agreements. The decrease in outstanding obligations during fiscal 2012 is primarily due to the Company’s acquisition of No Frills, which resulted in the elimination of a $4.6 million guarantee of that former customer’s lease obligations.

For guarantees issued after December 31, 2002, we are required to recognize an initial liability for the fair value of the obligation assumed under the guarantee. The maximum undiscounted payments we would be required to make in the event of default under these guarantees is $1.5 million, which is 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 it is unlikely payments will be required or losses incurred under the guarantees. A liability representing the fair value of the obligations assumed under the guarantees is included in the accompanying consolidated financial statements. The amount of this liability is no longer significant due to elimination of the $0.7 million liability associated with the guarantee of the lease obligations of No Frills.

We have also assigned various leases to other entities. If the assignees become unable to continue making payments under the assigned leases, we estimate our maximum potential obligation with respect to the assigned leases to be $8.8 million as of October 6, 2012 as compared to $11.4 million as of December 31, 2011.

Note 10 – Income Taxes

For the third quarter of 2012 and 2011, our income tax expense was $8.4 million and $6.6 million, respectively. For year-to-date 2012, our income tax benefit was $16.4 million as compared to income tax expense of $18.1 million for year-to-date 2011.

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 third quarter 2012, the Company filed reports with various taxing authorities which resulted in the refunds of tax payments. Additionally, the third quarter 2012 and 2011 Company effective tax rate was impacted by the reversal of previously unrecognized tax benefits primarily due to statute of limitations expirations. The effect of these discrete events in the third quarter 2012 and 2011 were each less than ($0.1) million. The effective tax rate for fiscal 2012 was also impacted by a $14.4 million second quarter discrete event related to the goodwill impairment and the related non-deductible portion thereof. For the third quarter of 2012, our effective tax rate was 36.4% as compared to 39.7% for the third quarter of 2011. For year-to-date 2012, our effective tax rate was 20.1% as compared to 39.6% for year-to-date 2011.

The total amount of unrecognized tax benefits as of the end of the third quarter of 2012 was $2.2 million. There was no net change in unrecognized tax benefits since June 16, 2012. The total amount of tax benefits that if recognized would impact the effective tax rate was $0.4 million at the end of the third quarter of 2012. We recognize interest and penalties accrued related to unrecognized tax benefits in income tax expense. At the end of the third quarter of 2012, 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 2008 and prior.

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Note 11 – Pension and Other Postretirement Benefits

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

16 Weeks Ended October 6, 2012 and October 8, 2011:

	Pension Benefits			Other Benefits
(In thousands)	2012		2011	2012	2011

Interest cost	$	629	653	9	11
Expected return on plan assets		(620)	(577)	-	-
Amortization of prior service cost		-	-	-	(7)
Recognized actuarial loss (gain)		262	484	(7)	(5)
Net periodic benefit cost	$	271	560	2	(1)

40 Weeks Ended October 6, 2012, and October 8, 2011:

	Pension Benefits			Other Benefits
(In thousands)	2012		2011	2012	2011

Interest cost	$	1,571	1,632	22	27
Expected return on plan assets		(1,549)	(1,444)	-	-
Amortization of prior service cost		-	-	-	(16)
Recognized actuarial loss (gain)		655	1,212	(17)	(12)
Net periodic benefit cost	$	677	1,400	5	(1)

Weighted-average assumptions used to determine net periodic benefit cost for the third quarter and year-to-date periods of 2012 and 2011 are as follows:

	Pension Benefits		Other Benefits
	2012	2011	2012	2011
Weighted-average assumptions:
Discount rate	4.35%	5.10%	4.35%	5.10%
Expected return on plan assets	6.00%	6.00%	N/A	N/A
Rate of compensation increase	N/A	N/A	N/A	N/A

Total contributions to our pension plan in fiscal 2012 are expected to be $3.1 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 2011, 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. However, if the Company were to exit certain markets or otherwise cease making contributions to the Plan, the Company could trigger a substantial withdrawal liability. 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. The Company does not believe it is likely that events requiring recognition of a withdrawal liability will occur. 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 December 31, 2011.

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Note 12 – Earnings (Loss) Per Share

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

	Third Quarter Ended			Year-to-Date Ended
	Third Quarter Ended			Year-to-Date Ended
(In thousands, except per share amounts)	October 6, 2012		October 8, 2011	October 6, 2012	October 8, 2011

Net earnings (loss)	$	14,604	10,093	(64,910)	27,625

Net earnings (loss) per share-basic:
Weighted-average shares outstanding		12,962	12,873	12,963	12,780

Net earnings (loss) per share-basic	$	1.13	0.78	(5.01)	2.16

Net earnings (loss) per share-diluted:
Weighted-average shares outstanding		12,962	12,873	12,963	12,780
Shares contingently issuable		78	232	-	276
Weighted-average shares and potential dilutive shares outstanding		13,040	13,105	12,963	13,056

Net earnings (loss) per share-diluted	$	1.12	0.77	(5.01)	2.12

In 2011, SARs were excluded from the calculation of diluted net earnings per share because the exercise price was greater than the market price of the stock and would have been anti-dilutive under the treasury stock method.

The senior subordinated convertible notes due in 2035 will be convertible at the option of the holder, only upon the occurrence of certain events, at an adjusted conversion rate of 9.7224 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 $47.94 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.

Vested shares deferred by executives and board members are included in the calculation of basic earnings per share. Other performance units and RSUs granted between 2007 and 2012 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.

Due to the net loss for the year-to-date period of 2012, the calculation of diluted earnings per share is the same as the calculation of basic earnings per share. When a separate calculation of diluted earnings per share is made, as it was for the third quarters of 2012 and 2011 and year-to-date period of 2011, 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. Therefore, the performance units were included in diluted earnings per share for the third quarters of 2012 and 2011 and year-to-date period of 2011 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 third quarter of 2012, approximately 31,000 shares related to the LTIP and 47,000 shares related to RSUs were included under “shares contingently issuable” in the calculation of diluted EPS as compared to approximately 74,000 shares related to the LTIP and 154,000 shares related to RSUs during the third quarter of 2011. For year-to-date 2011, approximately 60,000 shares related to the LTIP and 214,000 shares related to RSUs were included under “shares contingently issuable” in the calculation of diluted EPS.

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Note 13 – Segment Reporting

We sell and distribute products that are typically found in supermarkets and operate three reportable operating segments. The Military segment consists of eight distribution centers that distribute products to military commissaries and exchanges. Included in the Military distribution center total is our facility in Oklahoma City, Oklahoma, which was purchased during 2010 and became operational during the first quarter of fiscal 2012. During the third quarter of 2012, we transferred the operations of our Military distribution center in Jessup, Maryland to a larger facility in Landover, Maryland. Our Food Distribution segment consists of 14 distribution centers that sell to independently operated retail grocery stores, our corporate owned stores and other customers. As of October 6, 2012, the Retail segment consists of 74 corporate-owned stores that sell directly to the consumer.

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

	Third Quarter Ended
	October 6, 2012				October 8, 2011
(In thousands)	Sales from external customers		Inter-segment sales	Segment profit	Sales from external customers	Inter-segment sales	Segment profit

Military	$	708,059	-	10,322	709,720	-	14,666
Food Distribution		546,095	126,050	11,191	620,118	72,358	6,177
Retail		242,189	-	7,725	141,519	-	1,790
Eliminations		-	(126,050)	-	-	(72,358)	-
Total	$	1,496,343	-	29,238	1,471,357	-	22,633

	Year-to-Date Ended
	October 6, 2012				October 8, 2011
(In thousands)	Sales from external customers		Inter-segment sales	Segment profit	Sales from external customers	Inter-segment sales	Segment profit

Military	$	1,762,567	-	29,366	1,776,301	-	38,098
Food Distribution		1,403,807	249,713	19,046	1,529,890	182,593	19,731
Retail		481,401	-	10,776	364,550	-	2,934
Eliminations		-	(249,713)	-	-	(182,593)	-
Total	$	3,647,775	-	59,188	3,670,741	-	60,763

Reconciliation to Consolidated Statements of Income:

	Third Quarter Ended			Year-to-Date Ended
	October 6,		October 8,	October 6,	October 8,
(In thousands)	2012		2011	2012	2011

Total segment profit	$	29,238	22,633	59,188	60,763
Unallocated amounts:
Gain on acquisition of a business		-	-	6,639	-
Goodwill impairment		-	-	(131,991)	-
Interest		(6,283)	(5,896)	(15,112)	(15,042)
Earnings (loss) before income taxes	$	22,955	16,737	(81,276)	45,721

Note 14 – 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.

Note 15 – Subsequent Event

On November 1, 2012, the Company announced the decision to close our distribution center in Cedar Rapids, Iowa, effective December 31, 2012. This distribution center is part of our Food Distribution segment and primarily services independent retailers in the upper Midwest region of the United States. During the fourth quarter of 2012, we will transition these customers to be serviced out of our Omaha, Nebraska and St. Cloud, Minnesota distribution centers. Severance and related transition costs will be recorded during the fourth quarter of 2012.

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;

• costs related to a multi-employer pension plan which has liabilities in excess of plan assets;

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

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

• threats or potential threats to security;

• unanticipated problems with product procurement; and

• maintaining our reputation and corporate image.

A more detailed discussion of many of these factors, as well as other factors, that could affect the Company’s results is contained in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the fiscal year ended December 31, 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 SEC.

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Overview

In terms of revenue, we are the largest food distributor serving military commissaries and exchanges in the United States. Our core businesses include distributing food to military commissaries and independent grocery retailers. Our business consists of three primary operating segments: Military Food Distribution (“Military”), Food Distribution and Retail.

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 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 2012 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 and integrate acquisitions 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, Egypt and Bahrain. 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 a facility in Oklahoma City, Oklahoma for expansion of our Military business. This facility became operational during the first quarter of fiscal 2012. During the third quarter of 2012, we transferred the operations of our Military distribution center in Jessup, Maryland to a larger facility in Landover, Maryland. The new facility in Landover is approximately 367,000 square feet and is a leased facility.

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 corporate-owned retail locations and approximately 1,400 independent retail locations located in 29 states, primarily in the Midwest, Great Lakes, and Southeast regions of the United States.

Our Retail segment operated 74 corporate-owned grocery stores primarily in the Upper Midwest as of October 6, 2012. During the third quarter of 2012, we acquired eighteen No Frills® supermarkets located in Nebraska and western Iowa. During the second quarter of 2012, we acquired twelve Bag ‘N Save® supermarkets located in Omaha and York, Nebraska. This expansion of the Retail segment was offset by the sale of two stores since the end of the second quarter of 2011. We are implementing initiatives of varying scope and duration with a view toward improving our financial performance. These initiatives include designing and reformatting some of our retail stores into alternative formats to increase overall retail sales performance. During the third quarter of 2012, we converted two of our existing retail stores to our Family Fresh Market® format. 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 associated with our Retail segment, and may incur restructuring or other charges in connection with closure or sales activities. The Retail segment yields a higher gross profit percent of sales and higher selling, general and administrative (“SG&A”) expenses as a percent of sales compared to our Food Distribution and Military segments. Thus, changes in sales of the Retail segment can have a disproportionate impact on consolidated gross profit and SG&A as compared to similar changes in sales in our Food Distribution and Military segments.

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Results of Operations

Sales

The following tables summarize our sales activity for the 16 weeks ended October 6, 2012 (“third quarter 2012”) compared to the 16 weeks ended October 8, 2011 (“third quarter 2011”) and the 40 weeks ended October 6, 2012 (“year-to-date 2012”) compared to the 40 weeks ended October 8, 2011 (“year-to-date 2011”):

	Third quarter 2012			Third quarter 2011		Increase/ (Decrease)
(In thousands)	Sales		Percent of Sales	Sales	Percent of Sales	$	%
Segment Sales:
Military	$	708,059	47.3%	709,720	48.2%	(1,661)	(0.2%)
Food Distribution		546,095	36.5%	620,118	42.1%	(74,023)	(11.9%)
Retail		242,189	16.2%	141,519	9.6%	100,670	71.1%
Total Sales	$	1,496,343	100.0%	1,471,357	100.0%	24,986	1.7%

	Year-to-date 2012			Year-to-date 2011		Increase/ (Decrease)
(In thousands)	Sales		Percent of Sales	Sales	Percent of Sales	$	%
Segment Sales:
Military	$	1,762,567	48.3%	1,776,301	48.4%	(13,734)	(0.8%)
Food Distribution		1,403,807	38.5%	1,529,890	41.7%	(126,083)	(8.2%)
Retail		481,401	13.2%	364,550	9.9%	116,851	32.1%
Total Sales	$	3,647,775	100.0%	3,670,741	100.0%	(22,966)	(0.6%)

Total Company sales increased 1.7% during the third quarter of 2012 as compared to the prior year quarter. The acquisition of eighteen No Frills® supermarkets during the third quarter of 2012 and the acquisition of twelve Bag ‘N Save® supermarkets during the second quarter of 2012 resulted in a $104.3 million increase in Retail segment sales, partially offset by a $57.1 million decrease in Food Distribution segment sales due to the sales to those former Food Distribution customers now being reported in the Retail segment. After adjusting for the effect of these acquisitions and other factors impacting comparability of sales, total Company comparable sales declined 1.4% during the third quarter of 2012.

Total Company sales declined 0.6% during year-to-date 2012 as compared to the prior year period. The No Frills® and Bag ‘N Save® acquisitions resulted in a $133.4 million increase in Retail segment sales, partially offset by a $73.2 million decrease in Food Distribution segment sales. Adjusted for the effect of these acquisitions and other factors impacting comparability of sales, primarily the sale and closing of retail stores, total Company comparable sales declined 1.9% during year-to-date 2012.

Military segment sales decreased 0.2% during the third quarter of 2012 as compared to the prior year quarter. During the third quarter of 2012, a larger portion of Military sales were made on a consignment basis, which are included in our reported sales on a net basis. The year-over-year increase in consignment sales was $5.6 million in the third quarter of 2012. Including the impact of consignment sales, comparable Military sales increased 0.5% in the third quarter of 2012 as compared to the prior year quarter. Overseas sales increased by 6.9%, while domestic sales decreased by 1.8% as compared to the prior year quarter.

Military segment sales decreased 0.8% during year-to-date 2012 as compared to the prior year period. During year-to-date 2012, a larger portion of Military sales were made on a consignment basis, which are included in our reported sales on a net basis. The year-over-year increase in consignment sales was $8.2 million during year-to-date 2012. Including the impact of consignment sales, comparable Military sales decreased 0.3% during year-to-date 2012 as compared to the prior year period. Overseas sales decreased by 0.6%, while domestic sales decreased by 0.8% as compared to the prior year period.

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

	Third Quarter		Year-to-date
	2012	2011	2012	2011
Domestic	80.8%	82.1%	82.3%	82.3%
Overseas	19.2%	17.9%	17.7%	17.7%

Food Distribution sales decreased 11.9% during the third quarter of 2012 as compared to the prior year quarter. This was primarily due to the effect of our recent acquisitions, which resulted in a $57.1 million decrease in Food Distribution segment sales, since sales to those former Food Distribution customers are now reported in the Retail segment sales. Excluding the impact of these acquisitions, Food Distribution sales decreased 2.7% compared to the prior year quarter. This decrease was attributable to a reduction in sales to existing customers, as well as prior year sales to lost customers exceeding new account gains reflected in current year sales.

Food Distribution sales decreased 8.2% during year-to-date 2012 as compared to the prior year period. Our recent acquisitions were responsible for $73.2 million of the year-over-year decrease in sales. Excluding the impact of these acquisitions, Food Distribution sales decreased 3.5% compared to the prior year period. This decrease was attributable to a reduction in sales to existing customers, as well as prior year sales to lost customers exceeding new account gains reflected in current year sales.

Retail sales increased 71.1% during the third quarter of 2012 as compared to the prior year quarter. The increase in Retail sales is primarily attributable to our recent acquisitions, which were responsible for a $104.3 million increase in sales as compared to the prior year quarter. Same store sales decreased 1.3% during the third quarter of 2012. Same store sales compare retail sales for stores which were in operation for the same number of weeks in the comparative periods.

Retail sales increased 32.1% during year-to-date 2012 as compared to the prior year period. The increase in Retail sales is primarily attributable to our recent acquisitions, which were responsible for a $133.4 million increase in sales as compared to the prior year period. This was partially offset by the effect of the sale and closing of retail stores since the beginning of the first fiscal quarter of 2011. Same store sales decreased 1.0% during year-to-date 2012.

During the third quarters of 2012 and 2011, our corporate store count changed as follows:

	Third quarter 2012	Third quarter 2011
Number of stores at beginning of period	56	46
Acquired stores	18	-
Sold stores	-	-
Closed stores	-	-
Number of stores at end of period	74	46

During year-to-date 2012 and 2011, our corporate store count changed as follows:

	Year-to-date 2012	Year-to-date 2011
Number of stores at beginning of period	46	52
Acquired stores	30	-
Sold stores	(2)	(4)
Closed stores	-	(2)
Number of stores at end of period	74	46

Consolidated Gross Profit

Consolidated gross profit was 8.5% of sales for the third quarter of 2012 as compared to 7.7% of sales for the third quarter of 2011. Our gross margins were favorably impacted by 1.3% of sales in the third quarter due to a sales mix shift between our business segments between the years. This was primarily due to our recent acquisitions, which were responsible for a significant increase in Retail segment sales during the third quarter of 2012. The Retail segment has a higher gross profit margin than the Food Distribution and Military segments. Partially offsetting this was a negative impact from higher inflation in the prior year quarter, which resulted in a higher than normal prior year gross margin performance.

Consolidated gross profit was 8.1% of sales for year-to-date 2012 as compared to 8.0% of sales for year-to-date 2011. Our gross margins were favorably impacted by 0.6% of sales during year-to-date 2012 due to a sales mix shift between our business segments between the years. This was primarily due to our recent acquisitions, which were responsible for a significant increase in Retail segment sales during year-to-date 2012. Partially offsetting this was a negative impact from higher inflation in the prior year period, which resulted in a higher than normal prior year gross margin performance. In addition, declines in perishable commodity prices in the current year have also temporarily impacted gross margin performance.

Gain on Acquisition of a Business

A pre-tax gain on the acquisition of a business of $6.6 million was recognized during the second quarter 2012 related to the Bag ’N Save acquisition. The fair value of the identifiable assets acquired net of liabilities assumed of $36.3 million exceeded the purchase price paid for the business of $29.7 million. Consequently, we reassessed the recognition and measurement of identifiable assets acquired and liabilities assumed and concluded that the valuation procedures and resulting measures were appropriate. As a result, the Company recognized a pre-tax gain of $6.6 million in the second quarter 2012 associated with the acquisition of the Business. The gain is included in the line item “Gain on acquisition of a business” in the Consolidated Statement of Income.

Goodwill Impairment

During the second quarter we performed an impairment test of goodwill due to market conditions as of the end of our fifth fiscal period. The Company’s market capitalization as calculated, using the share price multiplied by the shares outstanding, had declined in the second quarter and from fiscal year end 2011 resulting in a market value significantly lower than the fair value of the business segments. We recorded a goodwill impairment charge of $132.0 million in the second quarter of fiscal 2012, of which $113.0 million related to our Food Distribution segment and $19.0 million related to our Retail segment.

Consolidated Selling, General and Administrative Expenses

Consolidated SG&A was 5.7% of sales for the third quarter of 2012 as compared to 5.4% of sales for the third quarter of 2011. Our SG&A margin was negatively impacted by 1.2% of sales in comparison to the prior year quarter due to a sales mix shift between our business segments between the years. This was primarily due to our recent acquisitions, which were responsible for a significant increase in Retail segment sales during the third quarter of 2012. The Retail segment has higher SG&A expenses as a percent of sales compared to our other business segments. Partially offsetting this, our SG&A margin was positively impacted in comparison to the prior year period due to lower incentive plan expenses.

Consolidated SG&A was 5.6% of sales for year-to-date 2012 as compared to 5.5% of sales for year-to-date 2011. Our SG&A margin was negatively impacted by 0.6% of sales in comparison to the prior year period due to a sales mix shift between our business segments between the years. This was primarily due to our recent acquisitions, which were responsible for a significant increase in Retail segment sales during year-to-date 2012. Partially offsetting this, our SG&A margin was positively impacted in comparison to the prior year period due to lower incentive plan expenses and a $2.0 million non-cash write-down of long-lived assets that occurred in the first quarter of 2011.

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Depreciation and Amortization Expense

Depreciation and amortization expense was $11.9 million for the third quarter of 2012 as compared to $10.7 million for the third quarter of 2011. Depreciation and amortization expense during the third quarter of 2012 for our Retail segment increased by $1.2 million as compared to the prior year, which was primarily the result of our recent acquisitions in 2012. Depreciation and amortization expense for our Military segment increased by $0.7 during the third quarter of 2012 as compared to the prior year, primarily due to our facility in Oklahoma City becoming operational in the first quarter of 2012. This was partially offset by a $0.8 million decrease for our Food Distribution segment as compared to the prior year.

Depreciation and amortization expense was $28.5 million for year-to-date 2012 as compared to $27.7 million for year-to-date 2011. Depreciation and amortization expense during year-to-date 2012 for our Military segment increased by $1.7 million, primarily due to our facility in Oklahoma City becoming operational in the first quarter of 2012. Depreciation and amortization expense during year-to-date 2012 for our Retail segment increased by $0.8 million as compared to the prior year, which was primarily the result of our recent acquisitions in 2012. This was partially offset by a $1.7 million decrease for our Food Distribution segment as compared to the prior year.

Interest Expense

Interest expense was $8.1 million for the third quarter of 2012 as compared to $7.0 million for the third quarter of 2011. Average borrowing levels increased to $399.9 million during the third quarter of 2012 from $321.4 million during the third quarter of 2011, primarily due to our recent acquisitions. The effective interest rate was 3.6% for the third quarter of 2012 as compared to 4.3% for the third quarter of 2011.

Interest expense was $18.7 million for year-to-date 2012 as compared to $17.8 million for year-to-date 2011. Average borrowing levels increased to $365.7 million during year-to-date 2012 from $342.5 million during year-to-date 2011, primarily due to our recent acquisitions. The effective interest rate was 3.8% for year-to-date 2012 as compared to 4.2% for year-to-date 2011. 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. Non-cash interest expense recognized was $1.9 million and $1.8 million for the third quarters of 2012 and 2011, respectively. Non-cash interest expense recognized was $4.7 million and $4.4 million for the year-to-date periods of 2012 and 2011, 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. 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 36.4% and 39.7% for the third quarters of 2012 and 2011, respectively. The effective income tax rate was 20.1% and 39.6% for year-to-date 2012 and 2011, respectively.

During the third quarter of 2012, the Company filed claims with and received refunds from various tax authorities. Accordingly, the Company reported the effect of these discrete events in the third quarter of 2012. The effective tax rate for the third quarter 2012 is reflective of the results from these refunds of less than ($0.1) million. The effective rate for the third 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 2012 will be approximately 17.6%, which excludes the potential impact of any additional discrete events.

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Net Earnings (Loss)

During the third quarter of 2012, we recorded net earnings of $14.6 million or $1.12 per diluted share as compared to net earnings of $10.1 million, or $0.77 per diluted share, during the third quarter of 2011. During year-to-date 2012, we recorded a net loss of $64.9 million or $5.01 per diluted share as compared to net earnings of $27.6 million, or $2.12 per diluted share, during year-to-date 2011. Net earnings in the periods presented in this report were affected by the items included in the discussion above.

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:

	40 Weeks Ended
( In thousands )	October 6, 2012		October 8, 2011	Increase/(Decrease)
Net cash provided by operating activities	$	5,269	54,904	(49,635)
Net cash used in investing activities		(95,243)	(51,691)	(43,552)
Net cash provided by (used in) financing activities		90,397	(3,362)	93,759
Net change in cash	$	423	(149)	572

Cash provided by operating activities decreased by $49.6 million during year-to-date 2012 as compared to the prior year. Inventories increased $70.6 million during year-to-date 2012, as compared to an increase in inventory of $21.0 million in the prior year period, which contributed $49.6 million to the year-over-year decrease in cash provided by operating activities. Also contributing to this decrease was a $19.9 million year-over-year decrease in net cash earnings and a $11.5 million year-over-year decrease in accrued expenses. This was partially offset by a $27.2 million year-over-year reduction in cash used related to our accounts and notes receivable.

Net cash used in investing activities increased by $43.6 million during year-to-date 2012 as compared to the prior year. Net cash used in investing activities during year-to-date 2012 consisted primarily of $49.3 million to purchase the eighteen No Frills® supermarkets, $29.7 million to purchase the twelve Bag ‘N Save® supermarkets and $23.7 million in other additions to property, plant and equipment. Net cash used in investing activities during year-to-date 2011 consisted primarily of $47.3 million in additions to property, plant and equipment, of which $27.6 million was related to the purchase of the real estate associated with our military distribution facility in Norfolk, Virginia, which was previously a leased location, and $10.3 million was related to construction costs for the Oklahoma City military distribution center which became operational during 2012..

Cash provided by financing activities increased by $93.8 million during year-to-date 2012 as compared to the prior year. During year-to-date 2012, cash provided by financing activities consisted primarily of proceeds of revolving debt of $69.8 million, proceeds of $18.7 million from mortgage financing related to the financing of eight retail locations, and increased outstanding checks of $13.2 million partially offset by dividend payments of $6.6 million. Cash used in financing activities during year-to-date 2011 included dividend payments of $6.5 million and payments of revolving debt of $6.0 million partially offset by an increase in outstanding checks of $12.2 million.

During the remainder of fiscal 2012, we expect that cash flows from operations will be sufficient to meet our working capital needs, 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 December 31, 2011, for a more detailed discussion of potential factors that may have an impact on our liquidity and capital resources.

Asset-backed Credit Agreement

On December 21, 2011, the Company and its subsidiaries entered into a credit agreement and related security and other agreements with Wells Fargo and the Lenders party thereto (the “Credit Agreement”), providing for a $520.0 million revolving asset-backed credit facility, which includes a $50.0 million Swing Line sub-facility and a $75.0 million letter of credit sub-facility (the “Revolving Credit Facility”). We are required by the Credit Agreement to maintain a reserve of $100.0 million with respect to the Senior Subordinated Convertible Debt, which reserve shall increase to $150.0 million on December 15, 2012. Provided no default is existing or would arise, we may from time-to-time, request that the Revolving Credit Facility be increased by an aggregate amount (for all such requests) not to exceed $250.0 million.

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Consolidated EBITDA (Non-GAAP Measurement)

The following is a reconciliation of EBITDA and Consolidated EBITDA to net earnings for the third quarters and year-to-date periods of 2012 and 2011 (amounts in thousands):

	2012	2011	2012	2011
	Third quarter	Third quarter	Year-to-Date	Year-to-Date
Net earnings (loss)	$ 14,604	10,093	$ (64,910)	27,625
Income tax expense (benefit)	8,351	6,644	(16,366)	18,096
Interest expense	8,074	7,014	18,672	17,828
Depreciation and amortization	11,924	10,738	28,510	27,688
EBITDA	42,953	34,489	(34,094)	91,237
LIFO charge	1,438	7,085	2,040	9,717
Gain on acquisition of a business	-	-	(6,639)	-
Goodwill impairment	-	-	131,991	-
Provision for (recovery of) lease reserves	-	24	(33)	631
Asset impairments	-	13	62	362
Net loss (gain) on sale of real estate and other assets	(1,119)	(106)	(1,506)	1,299
Share-based compensation expense (reversal of)	(2,935)	1,761	(1,295)	4,292
Subsequent cash payments on non-cash charges	(616)	(650)	(1,788)	(1,726)
Consolidated EBITDA	$ 39,721	42,616	$ 88,738	105,812

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.

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

During the second quarter we performed an impairment test of goodwill due to market conditions as of the end of our fifth fiscal period. The Company’s market capitalization as calculated using the share price multiplied by the shares outstanding had declined in the second quarter and from fiscal year end 2011, resulting in a market value significantly lower than the fair value of the business segments. We recorded a goodwill impairment charge of $132.0 million in the second quarter of fiscal 2012, of which $113.0 million related to our Food Distribution segment and $19.0 million related to our Retail segment. The fair value of the Military segment was higher than its carrying value and did not require any impairment.

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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 75% based on the income approach and 25% 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.

We performed the step two impairment test to calculate the implied fair value of goodwill of the food distribution and retail segments by deducting the fair value of all tangible and intangible net assets (including unrecognized intangible assets) from the fair values calculated in step one. The fair value of net assets were significantly higher than the fair values in step one which resulted in the impairment of goodwill.

Critical Accounting Policies and Estimates

Our critical accounting policies are discussed in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 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 40 weeks ended October 6, 2012.

Recently Adopted and Proposed Accounting Standards

There have been no recently adopted accounting standards that have resulted in a material impact to the Company’s financial statements.

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. (See Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 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, Chief Financial Officer, and Chief Accounting Officer/Controller, 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, Chief Financial Officer, and Chief Accounting Officer/Controller have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective.

Except as set forth below, there was no change in our internal control over financial reporting that occurred during the period covered by this quarterly report that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

On April 3, 2012, U Save Foods, Inc., a Nash Finch wholly-owned subsidiary, completed the purchase from BNS of the inventory and equipment assets related to twelve stores which are located in Nebraska, primarily in the Greater Omaha market. In addition to this acquisition, on June 25, 2012, U Save Foods, Inc. completed an asset purchase from No Frills of its eighteen supermarkets which are located in Nebraska and western Iowa. The acquisition of these businesses represents a material change in the Company’s internal control over financial reporting since management’s last assessment. We are currently integrating policies, processes, people, technology and operations in relation to these businesses. Management believes that financial information related to the acquired businesses is fairly presented in all material respects, however, for fiscal 2012, the acquired businesses are being excluded from the Company’s internal control assessment.

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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 December 31, 2011.

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

None

ITEM 3. Defaults Upon Senior Securities

None

ITEM 4. Mine Safety Disclosures

None

ITEM 5. Other Information

None

ITEM 6. Exhibits

Exhibits filed or furnished with this Form 10-Q:

Exhibit No.		Description

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

31.3		Rule 13a-14(a) Certification of the Chief Accounting Officer/Controller

32.1		Section 1350 Certification of Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer/Controller

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema

101.CAL		XBRL Taxonomy Extension calculation

101.DEF		XBRL Extension Definitions

101.LAB		XBRL Taxonomy Extension Labels

101.PRE		XBRL Taxonomy Extension Presentation

NASH FINCH COMPANY

EXHIBIT INDEX TO QUARTERLY REPORT

ON FORM 10-Q

For the Quarter Ended October 6, 2012

Exhibit No.	Item	Method of Filing

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

31.3	Rule 13a-14(a) Certification of the Chief Accounting Officer/Controller	Filed herewith

32.1	Section 1350 Certification of Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer/Controller	Filed herewith
101.INS	XBRL Instance Document	Filed herewith
101.SCH	XBRL Taxonomy Extension Schema	Filed herewith
101.CAL	XBRL Taxonomy Extension calculation	Filed herewith
101.DEF	XBRL Extension Definitions	Filed herewith
101.LAB	XBRL Taxonomy Extension Labels	Filed herewith
101.PRE	XBRL Taxonomy Extension Presentation	Filed herewith

		NASH-FINCH COMPANY
		Registrant

Date: November 15, 2012		by /s/ Alec C. Covington
		Alec C. Covington
		President and Chief Executive Officer

Date: November 15, 2012		by /s/ Robert B. Dimond
		Robert B. Dimond
		Executive Vice President and Chief Financial Officer

Date: November 15, 2012		by /s/ Peter J. O’Donnell
		Peter J. O’Donnell
		Chief Accounting Officer/Controller

Index

	Page No.

Part I – FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Statements of Income	2

Consolidated Statements of Comprehensive Income	3

Consolidated Balance Sheets	4

Consolidated Statements of Cash Flows	5

Notes to Consolidated Financial Statements	6

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

Item 3.Quantitative and Qualitative Disclosures about Market Risk	25

Item 4. Controls and Procedures	25

Part II – OTHER INFORMATION

Item 1.Legal Proceedings	26

Item 1A.Risk Factors	26

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds	26

Item 3.Defaults upon Senior Securities	26

Item 4.Mine Safety Disclosures	26

Item 5.Other Information	26

Item 6. Exhibits	26

SIGNATURES	27

(in thousands)

Inventories	$	11,165
Property, plant and equipment		25,570
Other assets		630

Total identifiable assets acquired		37,365

Accrued expenses		1,026
Total liabilities assumed		1,026

Net assets acquired	$	36,339