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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-K

|ý | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

For the fiscal year ended: December 28, 2002

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

For the Transition Period  to
.

Commission file number: 0-785

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NASH-FINCH COMPANY(Exact name of Registrant as specified in its charter)

|Delaware                                                                                             |  | 41-0431960                          
|---------------------------------------------------------------------------------------------------- |  | ------------------------------------
|(State of Incorporation)                                                                             |  | (I.R.S. Employer Identification No.)
|7600 France Avenue South
P.O. Box 355
Minneapolis, Minnesota(Address of principal executive offices) |  | 55440-0355(Zip Code)                

Registrant's telephone number, including area code:(952) 832-0534

Securities registered pursuant to Section 12(b) of the Act:None

Securities registered pursuant to Section 12(g) of the Act:

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

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Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past
90 days. Yes     No X

Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best
of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. o

Indicate
by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the
Act). Yes X    No

The
aggregate market value of the voting stock held by non-affiliates of the Registrant as of June 15, 2002 (the last business day of the Registrant's most recently
completed second fiscal quarter) was $342,655,096, based on the last reported sale price of $29.50 on the NASDAQ National Market on the last trading day prior to such date.

As
of April 30, 2003, 11,943,217 shares of Common Stock of the Registrant were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE: None.

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Nash Finch Company        Index

|           |  |                                                                                                |  | Page No.
|---------- |  | ---------------------------------------------------------------------------------------------- |  | --------
|Part I     |  |                                                                                                |  |         
|Item 1.    |  | Business                                                                                       |  | 3       
|Item 2.    |  | Properties                                                                                     |  | 11      
|Item 3.    |  | Legal Proceedings                                                                              |  | 12      
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                            |  | 13      
|Part II    |  |                                                                                                |  |         
|Item 5.    |  | Market for Company's Common Equity and Related Stockholder Matters                             |  | 14      
|Item 6.    |  | Selected Financial Data                                                                        |  | 15      
|Item 7.    |  | Management's Discussion and Analysis of Financial Condition and Results of Operations          |  | 16      
|Item 7A.   |  | Quantitative and Qualitative Disclosures about Market Risk                                     |  | 32      
|Item 8.    |  | Financial Statements and Supplementary Data                                                    |  | 33      
|Item 9.    |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure           |  | 66      
|Part III   |  |                                                                                                |  |         
|Item 10.   |  | Directors and Executive Officers of the Registrant                                             |  | 66      
|Item 11.   |  | Executive Compensation                                                                         |  | 70      
|Item 12.   |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |  | 76      
|Item 13.   |  | Certain Relationships and Related Transactions                                                 |  | 80      
|Item 14.   |  | Controls and Procedures                                                                        |  | 80      
|Part IV    |  |                                                                                                |  |         
|Item 15.   |  | Exhibits, Financial Statement Schedules, and reports on Form 8-K                               |  | 82      
|SIGNATURES |  | 89                                                                                            

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Nash Finch Company

PART I

Throughout this report, we refer to Nash Finch Company, together with its subsidiaries, as "we," "us," "Nash Finch" or "the
Company."

This report, including the information that is or will be incorporated by reference into this report, contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. The statements regarding the Company contained in this report that are not historical in nature, particularly those that utilize terminology such
as "may," "will," "should," "likely," "expects," "anticipates," "estimates," "believes" or "plans," or comparable terminology, are forward-looking statements based on current expectations 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 material differences are identified and discussed in this report, particularly in Part II, Item 7 under the caption "Cautionary Factors". You should carefully consider each
cautionary factor and all of the other information in this report. We undertake no obligation to revise or update publicly any 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 (the "SEC" or the "Commission").

We
own or have the rights to various trademarks, trade names and service marks, including the following referred to in this report: AVANZA,BuynSave®, Econofoods®,Sun Mart®,Family Thrift
Center,Our Family®, Fame®, Value Choice, Food Pride®, Fresh
Place®,Kids KornerPerformance Driven® and
logo. The trademarkIGA®, referred to in this report, is the registered trademark of another.

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Explanatory Note

On November 18, 2002, we announced a delay in the filing of our Quarterly Report on Form 10-Q for the quarter ended October 5,
2002 because of a previously disclosed internal review of our practices and procedures with respect to certain promotional allowances provided to us that reduce the cost of sales. The review was
focused on how we assess "count-recount" charges (see Item 1 of this report under the caption "Vendor Allowances and Credits"), which was also the subject of a previously disclosed informal inquiry
then being conducted by the staff of the Division of Enforcement of the SEC (see Item 3 of this report under the caption "SEC Investigation").

As
a result of this delay, we received a Nasdaq Staff Determination on November 26, 2002 indicating that our failure to timely file that Form 10-Q violated
Nasdaq Marketplace Rules and caused our securities to be subject to delisting by Nasdaq. We requested and received a hearing before the Nasdaq Listing Qualifications Panel ("Nasdaq Panel"), which
continued the listing of our securities subject to our filing the third quarter 2002 Form 10-Q by March 19, 2003, and this Annual Report on Form 10-K by
March 28, 2003 (see Item 5 of this report). The delay in filing the Form 10-Q also resulted in a breach of a reporting covenant under the indenture for our 81/2%
Senior Subordinated Notes due 2008 which, if unremedied, would have resulted in an event of default under both that indenture and our bank credit facility. We obtained amendments to both the indenture
and the bank credit facility to extend the deadlines for us to file the third quarter 2002 Form 10-Q, this Annual Report, and our first quarter 2003 Form 10-Q
(see Item 7 of this report under the caption "Liquidity and Capital Resources").

Effective
January 28, 2003, Deloitte & Touche LLP resigned as our independent auditors (see Item 9 of this report and Exhibit 99.2). On February 4, 2003 we
received a formal order of investigation from the SEC. After providing a written communication detailing the basis for the manner in which we assess and account for count-recount charges, and after
meeting with members of the staff of the SEC's Office of the Chief Accountant and Division of Corporation Finance, we were informed by a letter dated March 7, 2003 that, based on our oral and
written representations, the staffs of the SEC's Office of the Chief Accountant and Division of Corporation Finance would not object at that time to our accounting for the count-recount charges. The
investigation by the SEC's Division of Enforcement is ongoing.

Effective
March 11, 2003, our Audit Committee engaged Ernst & Young LLP as our independent auditors, and we sought a further extension of the filing deadlines from the
Nasdaq Panel. On March 24, 2003, we were notified that the Nasdaq Panel had agreed to extend the filing deadlines for our third quarter 2002 Form 10-Q to May 15, 2003,
for this Annual Report to May 30, 2003, and for our first quarter 2003 Form 10-Q to June 9, 2003. These filing deadlines are the same as or earlier than those
established in the amendments to the indenture and the bank credit facility.

The
third quarter 2002 Form 10-Q was filed with the SEC on May 15, 2003, and this Annual Report is being filed on May 15, 2003. We expect to file our
first quarter 2003 Form 10-Q on or before the June 9, 2003 deadline.

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ITEM 1. BUSINESS

A. GENERAL DEVELOPMENT OF BUSINESS.

Originally established in 1885 and incorporated in 1921, today we are one of the leading food distribution and retail companies in the United States, with
approximately $3.9 billion in annual sales. Our business consists of three primary operating segments: food distribution, food retailing and military food distribution.

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

Our
food retailing segment is made up of 109 corporate-owned stores located primarily in the Upper Midwest states of Colorado, Illinois, Iowa, Kansas, Minnesota, Nebraska, North Dakota,
South Dakota and Wisconsin. We believe that approximately 62% of our conventional grocery stores are #1 or #2 in their respective local markets, which includes all stores within the respective city
limits in which our stores are located, based on sales. We are focused on becoming the leading grocery store chain in the Upper Midwest, as there are currently few national or multi-regional grocery
store chains that have a significant presence in this market. Our corporate-owned stores, which range from conventional stores in rural trade areas to modern supermarkets in growing urban areas,
principally operate under the following six banners:AVANZA,BuynSave,
Econofoods,Sun Mart,Family Thrift Centerand Wholesale Food Outlet. During
2002, we opened our first two prototype Hispanic supermarkets in Denver, Colorado under theAVANZAtrade name. Our AVANZAand existing Wholesale Food
Outlet stores are designed to meet the specific tastes and needs of Hispanic shoppers which we believe are
under-served by conventional grocery stores. We also opened three BuynSavelocations, converted two other existing stores to the BuynSaveformat and closed an underperforming existing location to bring the total number ofBuynSavestores in operation to eight. These stores are designed to service low income, value conscious consumers.

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

B. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS.

Financial information about our business segments for the most recent three fiscal years is contained in Part II, Item 8 of this report under
Note (20)"Segment Information" of Notes to Consolidated Financial Statements.

C. NARRATIVE DESCRIPTION OF THE BUSINESS.

Food Distribution Segment



Our food distribution segment, which operates 15 distribution centers, sells and distributes a wide variety of grocery products to approximately 1,500 grocery
stores and institutional customers across the United States. Our customers are relatively diverse, with the largest customer consisting of a

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consortium
of stores representing approximately 11.8%, and three others representing approximately 3.8%, 3.6% and 3.1% of our fiscal 2002 food distribution sales. No other customer represents more
than 3% of our food distribution business. Approximately 54% of our food distribution sales are generated through customers with whom we have long-term sales and service agreements.
Several of our distribution centers also distribute products to military commissaries located in their geographic areas.

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

Depending
upon the size of the distribution center and the profile of the customers served, our distribution centers typically carry a full line of national brand, private label and
perishable products. Non-food items and specialty grocery products are distributed from a dedicated area of the distribution center located in Bellefontaine, Ohio, and from the
distribution centers located in Sioux Falls, South Dakota. We currently have a modern fleet of 283 tractors and 709 semi-trailers, which deliver the vast majority of our products to our
customers.

Our
retailers order their inventory at regular intervals through direct linkage with our information systems. Our food distribution sales are made on a market
price-plus-fee and freight basis, with the fee based on the type of commodity and quantity purchased. We promptly adjust our selling prices based on the latest market
information, and our freight policy contains a fuel surcharge clause which allows us to partially mitigate the impact of rising fuel costs.



We primarily sell and distribute nationally advertised branded products and a number of unbranded products, principally meat and produce, which we purchase
directly from various manufacturers, processors and suppliers or through manufacturers' representatives and brokers. We also sell and distribute first quality private label products under the
proprietary trademarkOur Family, a long-standing private label of Nash Finch. During the year, we introduced AVANZA, a first quality private label, to
address the tastes of our Hispanic customers. In addition, we sell and distribute a second label price brands
program under theFameand a newValue Choiceline. Under our private label line of products, we offer
over 2,500 SKUs of competitively priced high quality grocery products, which compete with national branded products and other value brand products.



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



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We
also provide financial assistance to our food distribution customers primarily in connection with new store development or the upgrading and expansion of existing stores. As of
December 28, 2002, we had approximately $43.8 million of loans outstanding to 97 of our food distribution customers, and guaranteed outstanding debt and lease obligations of other food
distribution customers in the amount of $26.5 million. We typically enter into long-term supply agreements with independent customers, ranging from 2 to 20 years,
representing more than 54% of food distribution revenues. These agreements may also contain provisions that give us the opportunity to purchase customers' independent retail businesses before any
third party.

We
distribute products to independent stores that carry our proprietaryFood Pridebanner and the IGAbanner. We encourage our independent customers to join
one of these banner groups to receive many of the same marketing programs and procurement
efficiencies available to larger grocery store chains while allowing them to maintain their flexibility and autonomy as independents. To use either of these banners, these independents must comply
with applicable program standards. As of December 28, 2002, we served approximately 83 retail stores under ourFood Pridebanner and 153 stores
under theIGAbanner.

Retail Segment



Our food retailing segment is made up of our corporate-owned stores which range from conventional stores in rural trade areas to modern supermarkets in growing
urban areas. These stores principally operate under theAVANZA,BuynSave,
Econofoods,Sun Mart,Family Thrift Centerand Wholesale Food Outlet banners.
Our stores are typically located close to our distribution centers in order to create certain operating and logistical efficiencies. As of December 28, 2002, we operated 109 corporate-owned
stores, primarily in the Upper Midwest, including 94 conventional grocery stores, 3 Wholesale Food Outlet grocery stores, 8 BuynSavegrocery stores, 2AVANZAgrocery stores and 2 other retail stores.
The Company continues to focus on operating and customer service initiatives to improve the financial performance of our retail stores.



Our conventional grocery stores offer a wide variety of high quality grocery products and services. Many have specialty departments such as fresh meat counters,
delicatessens, bakeries, eat-in cafes, pharmacies, photo centers, dry cleaners, banks, floral and video rental departments.Kids Korner,
which is offered in 15 store locations, is a secure, complimentary in-store supervised play area for children. Upon entering the play area, each child is given a wristband, which will
trigger an alarm if the child leaves the area, and the parents are given a pager so that they can be immediately contacted if there are any problems with their child. Video monitors are also placed
throughout the store so parents can monitor their children while shopping. We emphasize outstanding customer service. We have created our G.R.E.A.T. (Greet, React, Escort, Anticipate, Thank) Customer
Service Program in order to train every associate (employee) on the core elements of providing exceptional customer service. A mystery shopper visits each store every two weeks to measure performance
and we distribute the results to management and store personnel.

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We
continued the expansion of the "Fresh Place" concept within our conventional grocery stores. "Fresh
Place" is an umbrella banner that emphasizes our conventional grocery stores' high-quality perishable products, such as fresh produce, deli, meats, seafood, baked
goods, and takeout foods for today's busy consumer. Of our 94 conventional grocery stores, 32 carry theFresh Placebanner.



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



In addition to responding to the changing demographics in the United States, we have also responded to the shift in income disparity with our extreme value
grocery stores operating under theBuynSavebanner. BuynSavestores were designed to attract value-conscious shoppers, typically
with household incomes under $35,000, for whom
low prices are a critical factor in selecting a grocery store. These stores provide a limited assortment of Grade A quality products, consisting of approximately 20% national brands and 80% private
label products, including our own proprietary labels, with savings up to 40% off comparable nationally branded items. As of December 28, 2002, we operated eight BuynSavestores in
Minnesota, Iowa and Nebraska.

Military Food Distribution Segment

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

Competition



Competition is intense among the top distributors in the food distribution segment as evidenced by the low margin nature of the business. Success in this segment
will be measured by the ability to leverage scale in order to gain pricing advantages, to provide superior merchandising programs and services to the independent customer base and to utilize
technology to increase distribution efficiencies. We compete with local, regional and national food distributors, as well as grocery store and supercenter chains that purchase directly from suppliers
and self-distribute products to their stores. We face competition from these companies on the basis of price, quality, variety and availability of products, strength of private label
brands, schedules and reliability of deliveries, and the range and quality of customer services.

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Competition in the retail grocery business in our geographic markets is intense. We compete with many organizations of various sizes, ranging from national and
regional chains utilizing a variety of formats (such as supercenters, supermarkets, extreme value food stores and membership warehouse club stores) to local grocery store chains and privately owned
unaffiliated grocery stores. Although our target geographic areas have a relatively low presence of national and multi-regional grocery store chains, we are facing increasing competitive pressure from
the expansion of national and regional supercenter chains. These competitive pressures, occurring in the context of a low margin industry, have contributed to the current trend toward consolidation in
the retail grocery business. Depending upon the product and location involved, we compete based on price, quality and assortment, store appeal, including store location and format, sales promotions,
advertising, service and convenience. We believe that by focusing on convenience, outstanding perishable execution and exceptional customer service, we can successfully compete.

Our AVANZAand Wholesale Food Outlet stores compete primarily with small independent Hispanic retailers, which we believe lack the scale
to have a meaningful impact on our targeted markets, as well as with national grocery store chains and supercenters.



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

Vendor Allowances and Credits

We participate with our vendors in a broad menu of promotions to increase sales of products. These promotions fall into two main categories:
off-invoice allowances and performance-based allowances. These promotional arrangements are often subject to negotiation with our vendors.

In
the case of off-invoice allowances, discounts are typically offered by vendors with respect to certain merchandise purchased by us during a specified period of time. We
use off-invoice allowances to support a variety of marketing programs such as reduced price offerings for specific time periods, food shows, pallet promotions and private label promotions.
The discounts are either reflected directly on the vendor invoice, as a reduction from the normal wholesale prices for merchandise to which the allowance applies, or we are allowed to deduct the
allowance as an offset against the vendor's invoice when it is paid.

In
the case of performance-based allowances, the allowance or rebate is based on our completion of some specific activity, such as purchasing or selling product during a certain time
period. This basic performance requirement may be accompanied by an additional performance requirement such as providing advertising or special in-store promotion, tracking quantities of
product sold (as is the case with count-recount promotions discussed below), slotting (adding a new item to the system) and merchandising a new item, or achieving certain minimum purchase quantities.
The billing for these performance-based allowances is normally in the form of a "bill-back" in which case we are invoiced at the regular price with the understanding that we may bill back
the vendor for the requisite allowance when the performance is satisfied.

We
collectively plan promotions with our vendors and arrive at the amount the respective vendor plans to spend on promotions with us. We and the vendors then monitor, review and discuss
the results of such promotions, and resolve issues relating to promotions and billings. Each vendor has its own method for determining the amount of promotional funds budgeted to be spent with us
during the period. In most situations, the vendor allowances are based on units we purchased from the vendor. In

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other
situations, the allowances are based on our past or anticipated purchases and/or the anticipated performance of the planned promotions.

We
jointly negotiate with our vendors the promotional calendar that governs all promotions. Forecasting promotional expenditures is a critical part of our twice yearly planning sessions
with our vendors. Most vendors work with us to project not just overall spending, but also spending on a category and regional basis. As individual promotions are completed and the associated billing
is processed, the vendors track our promotional program execution and spend rate. The vendors discuss the tracking, performance and spend rate with us on a regular basis throughout the year. Depending
upon the vendor arrangements, such discussions can occur on a weekly, monthly, quarterly or annual basis. These communications include future promotions, product cost, targeted retails and price
points, anticipated volume, promotion expenditures, vendor maintenance, billing issues and procedures, new items/discontinued items, and trade spend levels relative to budget per event and per year,
as well as the resolution of any issues that arise between the vendor and us. In the future, the nature and menu of promotional programs and the allocation of dollars among them may change as a result
of ongoing negotiations and commercial relationships between vendors and us.

Count-Recount Charges

As discussed above, we participate with our vendors in a broad menu of promotions to increase sales of products. Certain promotions require us to track specific
shipments of goods to retailers, or to customers in the case of our own retail stores, during a specified period. At the end of the promotional period, we invoice our vendors for the total promotional
allowance based on the quantity of goods sold. This type of promotion, which is often referred to as "count-recount," requires wholesalers and retailers such as us to incur significant administrative
and other costs to manage such programs.

As
a result of the increased costs associated with count-recount program administration and implementation, we historically, but not uniformly, assessed an administrative fee to recoup
our reasonable costs of performing the tasks associated with administering these promotions. In some instances this fee was separately identified on the invoice to the vendor and in other instances we
raised the invoice amounts by adding additional cases to the quantity of goods sold reflected on the invoices to vendors. Although we attempted to standardize the latter practice at a range of between
15% and 20% on wholesale movement billings and approximately 12% on retail scan billings for our retail stores, the application of the practice was uneven across time and divisions. The aggregate fees
charged to vendors, represented as a percent of total count-recount promotional dollars, were
approximately 17% in fiscal 2000 and 23% in fiscal 2001 and 2002. Our costs associated with administering this program are estimated at approximately 20% of the total count-recount promotional
dollars.

The
count-recount practice described above was established against a backdrop of what we believe was a common industry practice, of which vendors generally were aware. We believe that
our efforts to recapture count-recount costs by adding additional cases to the invoices in lieu of a separately delineated administrative fee were appropriate. The arrangements between us and our
vendors did not separately address or provide for the addition of such charges in lieu of a separately invoiced administrative fee. Our conclusion that our accounting for such charges has been
correct, that the charges were appropriately recognized as a reduction of cost of sales in the period the product was sold and in which the count-recount promotions were actually performed by us, is
based on our overall relationship and method of doing business with our vendors.

Historical Accounting Treatment and Impact on Financial Statements

Count-recount allowances are recorded as a reduction to cost of sales as performance has been completed and as the related inventory is sold. Count-recount
charges in lieu of administrative fees

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were
approximately $6.7 million in fiscal 2000, $8.6 million in fiscal 2001 and $6.7 million through November 17, 2002 when we, as a uniform practice across all divisions,
began stating the administrative fee separately on the invoices to the vendor.

Communications with Vendors

In November 2002, we met with our vendors, and brokers representing vendors, collectively comprising approximately 88% of our purchases that were subject
to count-recount charges in lieu of an administrative fee. In those meetings, we advised the vendors and brokers that (i) we had a historical practice of charging an administrative fee either
separately or, in most instances, by adding amounts to actual quantities sold in the range of 15% to 20% in lieu of an administrative fee, (ii) such fee had not always been separately disclosed
on invoices to vendors, (iii) we had attempted to standardize the practice in late 1999 at a range of 15% to 20%, (iv) we had not been successful in standardizing such practice in that
in some situations the application of the practice had been uneven across time and divisions resulting in a move away from a fixed percentage and sometimes resulting in an uneven percentage being
applied, and (v) in the future we will charge a flat fee set at a fixed percentage of sales, which would be separately itemized on invoices. In those meetings, substantially all the vendors
acknowledged the fees previously charged and none indicated that they would seek any refund based upon the past practice. Subsequently, on November 26, 2002, we notified all of our vendors and
brokers (including but not limited to those with whom we had met in person) in writing of its prior and current practices related to count-recount. As of the date of the filing of these financial
statements, none of
our vendors or brokers is requesting a return of any of the historical count-recount charges assessed, and none has indicated they will make a reduction in future promotional funding.

SEC Investigation

As previously disclosed, on October 9, 2002, we received a letter from the staff of the Division of Enforcement of the SEC indicating that they were
conducting an informal inquiry into our process for assessing count-recount charges to our vendors and how we account for those charges. In response, we commenced an internal review of our practices
in conjunction with the Audit Committee, special outside counsel and our prior and then-current auditors. We filed a written response to the inquiry on November 22, 2002.

On
February 3, 2003, we provided the Office of the Chief Accountant of the SEC a written communication detailing the basis for the manner in which we assess and account for
count-recount charges, advising that we believe these charges were properly accounted for in accordance with generally accepted accounting principles, seeking the SEC staff's concurrence with this
conclusion, and requesting a meeting with the staff of the Office of Chief Accountant at which these matters could be discussed. On February 4, 2003, we were notified by the staff of the SEC's
Division of Enforcement that the SEC had approved a formal order of investigation of Nash Finch.

Our
representatives met with members of the staff of the SEC's Office of the Chief Accountant and Division of Corporation Finance on February 19, 2003. In a letter dated
March 7, 2003, the staffs of the SEC's Office of the Chief Accountant and Division of Corporation Finance indicated that, based on our oral and written representations, they would not object at
that time to our accounting for the count-recount charges. The investigation by the SEC's Division of Enforcement is, however, ongoing and the response by the staffs of the Office of the Chief
Accountant and the Division of Corporation Finance does not preclude any further action by the Division of Enforcement.

Trademarks and Servicemarks

We own or license a number of trademarks, tradenames and servicemarks that relate to our products and services, including those mentioned in this report. We
consider certain of these

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trademarks,
tradenames and servicemarks to be of material value to our business, and we actively defend and enforce such trademarks, tradenames and servicemarks.

Employees

As of December 28, 2002, we employed 10,621 persons, of whom 6,063 were employed on a full-time basis and 4,558 were employed on a
part-time basis. We consider our employee relations to be good. Only 487 of our employees are represented by unions and consist primarily of the distribution center personnel and drivers
in our Ohio and Michigan distribution centers.

Available Information

Our internet website iswww.nashfinch.com. The references to our website in this report are inactive references
only, and the information on our website is not incorporated by reference in this report. Through the Investor Relations portion of our website and a link to a third-party content provider (under the
tab "SEC Filings"), you may access, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K and amendments to such reports filed or furnished pursuant to Sections 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after we
electronically file such material with, or furnish it to, the SEC.

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ITEM 2. PROPERTIES

Our principal executive offices are located in Minneapolis, Minnesota, and consist of approximately 120,486 square feet of office space in a building that we own.

Food Retailing Segment

The table below sets forth, as of December 28, 2002, selected information regarding our 109 corporate-owned stores. We own 34 and lease 75 of these stores.

|Banner                |  | Number
of Stores |  | Areas
of Operation     |  | Average
Square Feet
|--------------------- |  | ---------------- |  | ---------------------- |  | -------------------
|Econofoods            |  | 53               |  | IA, IL, MN, SD, WI, WY |  | 38,659             
|Sun Mart              |  | 35               |  | NE, MN, ND, CO, KS     |  | 31,998             
|BuynSave            |  | 8                |  | MN, IA, NE             |  | 16,219             
|Family Thrift Center  |  | 6                |  | SD                     |  | 33,394             
|Wholesale Food Outlet |  | 3                |  | CO, NE, IA             |  | 28,784             
|AVANZA                |  | 2                |  | CO                     |  | 33,247             
|Other Stores          |  | 2                |  | WI, MN                 |  | 5,356              

As
of December 28, 2002, the aggregate square footage of our 109 retail grocery stores totaled 3,662,557 square feet.

Food Distribution Segment

The table below lists, as of December 28, 2002, the locations and sizes of our distribution centers primarily used in our food distribution operations.
Unless otherwise indicated, we own each of these distribution centers.

|Location              |                              | Approx. Size
(Square Feet)
|--------------------- | ---------------------------- | --------------------------
|Upper Midwest Region: |                              |                           
|                      | Cedar Rapids, Iowa           |                           
|                      | St. Cloud, Minnesota(1)      |                           
|                      | Omaha, Nebraska              |                           
|                      | Fargo, North Dakota          |                           
|                      | Minot, North Dakota          |                           
|                      | Rapid City, South Dakota(3)  |                           
|                      | Sioux Falls, South Dakota(4) |                           
|Southeast Region:     |                              |                           
|                      | Statesboro, Georgia(2)       |                           
|                      | Lumberton, North Carolina(2) |                           
|                      | Bluefield, Virginia          |                           
|Central Region:       |                              |                           
|                      | Bellefontaine, Ohio(5)       |                           
|                      | Cincinnati, Ohio(6)          |                           
|                      | Bridgeport, Michigan(2)      |                           
|                      |                              |                           
|Total Square Footage  |                              | 4,801,500                 
|                      |                              |                           

---

11

---

Military Distribution Segment

The table below lists, as of December 28, 2002, the locations and sizes of our distribution centers exclusively used in our military distribution business.
Unless otherwise indicated, we lease each of these distribution centers.

|Location             |  | Approx. Size
(Square Feet)
|-------------------- |  | --------------------------
|Baltimore, Maryland  |  | 375,800                   
|Norfolk, Virginia(1) |  | 737,600                   
|                     |  |                           
|Total Square Footage |  | 1,113,400                 
|                     |  |                           

---

ITEM 3. LEGAL PROCEEDINGS



Between December 2002 and March 2003, seven class action lawsuits were filed against the Company and certain of its executive officers in the United
States District Court for the District of Minnesota on behalf of purchasers of the Company's common stock during the period from February 23, 2000 through February 4, 2003. The
complaints generally allege that the defendants violated the Securities Exchange Act of 1934 by issuing false statements, including false financial results in which the Company included income from
vendor promotions to which the Company was not entitled, so as to maintain favorable credit ratings on its debt. Three derivative actions have also been filed in state court in Minnesota by
shareholders alleging that certain officers and directors violated duties to the Company to oversee and administer the Company's accounting. These actions are directly tied to the allegations in the
federal securities action. We believe that the lawsuits are without merit and intend to vigorously defend the actions. No damages have been specified. We are unable to evaluate the likelihood of
prevailing in these cases at this early stage of the proceedings, but do not believe that the eventual outcome will have a material impact on our financial position or results of operations.



On October 9, 2002, we received a letter from the staff of the Division of Enforcement of the SEC indicating that they were conducting an informal inquiry
into our process for assessing count-recount charges to our vendors and how we account for those charges. In response, we commenced an internal review of our practices in conjunction with the Audit
Committee, special outside counsel and our prior and then-current auditors. We filed a written response to the inquiry on November 22, 2002.

12

---

On
February 3, 2003, we provided the Office of the Chief Accountant of the SEC a written communication detailing the basis for the manner in which we assess and account for
count-recount charges, advising that we believe these charges were properly accounted for in accordance with generally accepted accounting principles, seeking the SEC staff's concurrence with this
conclusion, and requesting a meeting with the staff of the Office of Chief Accountant at which these matters could be discussed. On February 4, 2003, we were notified by the staff of the SEC's
Division of Enforcement that the SEC had approved a formal order of investigation of Nash Finch.

Our
representatives met with members of the staff of the SEC's Office of the Chief Accountant and Division of Corporation Finance on February 19, 2003. In a letter dated
March 7, 2003, the staffs of the SEC's Office of the Chief Accountant and Division of Corporation Finance indicated that, based on our oral and written representations, they would not object at
that time to our accounting for the count-recount charges. The investigation by the SEC's Division of Enforcement is, however, ongoing and the response by the staffs of the Office of the Chief
Accountant and the Division of Corporation Finance does not preclude any further action by the Division of Enforcement.



In December 1999, the U.S. Department of Agriculture began an investigation of our Lumberton, North Carolina distribution center. We cooperated throughout
the investigation and the inquiry culminated in an agreement between the Company and the United States on October 4, 2001. In accordance with that agreement, the Company appeared in Federal
District Court for the Eastern District of North Carolina and entered a guilty plea to a misdemeanor charge of causing and permitting articles capable of use as human food to become exposed to dust,
dirt and unsanitary conditions (the "causing" charge), and applied to a pre-trial diversion program with respect to a misdemeanor charge of selling adulterated meat and poultry products to
a South Carolina salvage dealer (the "selling" charge).

On
March 13, 2002, the Company was sentenced to pay a fine of $100,000 and to a probationary period of five years on the causing charge, with the probation subject to certain
special conditions regarding establishment of a quality control program, employee training, documentation of disposal of unwholesome products, monthly inspections and reports to appropriate
authorities by representatives of the Company's home office, and that this matter be disclosed in this report. The Company was accepted into the pre-trial diversion program on the selling
charge and, as part of that program, donated 40,000 pounds of food to charitable organizations in North Carolina. Upon successful completion of this 18 month program, the Government will
dismiss the selling charge.

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

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

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

13

---



PART II

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

Our common stock is listed on the Nasdaq National Market and currently trades under the symbol NAFCE. On November 26, 2002, we received a Nasdaq staff
determination stating that the delay in filing our Form 10-Q for the quarter ended October 5, 2002 violates Nasdaq Marketplace Rule 4310(c) (14) and that our
common stock is subject to delisting from the Nasdaq National Market. In connection with this determination, the letter "E" was added to our stock symbol. The delay in filing was attributable to the
previously described investigation of our practices and procedures with respect to count-recount charges. On January 22, 2003, we received a determination from the Nasdaq Listing Qualifications
Panel ("Nasdaq Panel") that continued the listing of our securities on the Nasdaq National Market so long as we filed with the SEC and Nasdaq by March 19, 2003 our Quarterly Report on
Form 10-Q for the quarter ended October 5, 2002 and by March 28, 2003 our Annual Report on Form 10-K for the fiscal year ended December 28,
2002. On March 24, 2003, the Nasdaq Panel agreed to extend the deadlines for the filing of our Quarterly Report on Form 10-Q for third quarter of fiscal 2002 until
May 15, 2003, our Annual Report on Form 10-K for fiscal 2002 until May 30, 2003 and our Quarterly Report on Form 10-Q for the first quarter of
fiscal 2003 until June 9, 2003. Satisfaction of the revised deadlines is a condition to the continued listing of our securities on the Nasdaq National Market.

The
following table sets forth, for each of the calendar periods indicated, the range of high and low closing sales prices for our common stock as reported by the Nasdaq National Market,
and the quarterly cash dividends paid per share of common stock. Prices do not include adjustments for retail mark-ups, mark-downs or commissions. At December 28, 2002
there were 2,797 stockholders of record.

2002

2001

Dividends
Per ShareHigh

Low

High

Low

2002

2001First Quarter

$
31.10

$
25.22

$
17.50

$
11.81

$
0.09

$
0.09Second Quarter


32.20


23.55


23.94


17.19


0.09


0.09Third Quarter


33.18


12.50


35.54


19.88


0.09


0.09Fourth Quarter


15.34


7.12


30.77


20.65


0.09


0.09


14

---



NASH FINCH COMPANY and SUBSIDIARIES  Consolidated Summary of Operations  Five years ended December 28, 2002 (not covered by Independent Auditors' Report)

|(Dollar amounts in thousands except
per share amounts)                    |                                                        | 2002
(52 weeks) |           | 2001
(52 weeks) |   | 2000
(52 weeks) |      | 1999
(52 weeks) |           | 1998
(52 weeks) |  
|------------------------------------------------------------------------- | ------------------------------------------------------ | --------------- | --------- | --------------- | - | --------------- | ---- | --------------- | --------- | --------------- | -
|Sales(1)                                                                  |                                                        | $               | 3,874,672 |                 | $ | 3,982,206       |      | $               | 3,839,499 |                 | $
|Cost of sales including warehousing and transporation expenses(1)         |                                                        |                 | 3,408,409 |                 |   | 3,529,124       |      |                 | 3,409,778 |                 |  
|Selling, general and adminstrative, and other operating expenses          |                                                        |                 | 347,418   |                 |   | 335,886         |      |                 | 322,448   |                 |  
|Special charges                                                           |                                                        |                 | (765      | )               |   |                |      |                 |          |                 |  
|Interest expense                                                          |                                                        |                 | 29,490    |                 |   | 34,303          |      |                 | 34,444    |                 |  
|Depreciation and amortization                                             |                                                        |                 | 39,988    |                 |   | 46,601          |      |                 | 45,330    |                 |  
|Provision for income taxes                                                |                                                        |                 | 19,552    |                 |   | 15,025          |      |                 | 11,659    |                 |  
|                                                                          |                                                        |                 |           |                 |   |                 |      |                 |           |                 |  
|Net earnings (loss) from continuing operations                            |                                                        | $               | 30,580    |                 | $ | 21,267          |      | $               | 15,840    |                 | $
|Earnings (loss) from discontinued operations, net of income tax (benefit) |                                                        |                 |          |                 |   |                |      |                 |          |                 |  
|Earnings (loss) on disposal of discontinued operations, net of income tax |                                                        |                 |          |                 |   |                |      |                 |          |                 |  
|Extraordinary charge from early extinguishment of debt, net of income tax |                                                        |                 |          |                 |   |                |      |                 | (369      | )               |  
|Cumulative effect of change in accounting principle, net of income tax(2) |                                                        |                 | (6,960    | )               |   |                |      |                 |          |                 |  
|                                                                          |                                                        |                 |           |                 |   |                 |      |                 |           |                 |  
|Net earnings (loss)                                                       |                                                        | $               | 23,620    |                 | $ | 21,267          |      | $               | 15,471    |                 | $
|                                                                          |                                                        |                 |           |                 |   |                 |      |                 |           |                 |  
|Basic earnings (loss) per share:                                          |                                                        |                 |           |                 |   |                 |      |                 |           |                 |  
|                                                                          | Earnings (loss) from continuing operations             |                 | $         | 2.59            |   | $               | 1.83 |                 | $         | 1.38            |  
|                                                                          | Earnings (loss) from discontinued operations           |                 |           |                |   |                 |     |                 |           |                |  
|                                                                          | Extraordinary charge from early extinguishment of debt |                 |           |                |   |                 |     |                 |           | (0.03           | )
|                                                                          | Cumulative effect of change in accounting principle(2) |                 |           | (0.59           | ) |                 |     |                 |           |                |  
|                                                                          |                                                        |                 |           |                 |   |                 |      |                 |           |                 |  
|Basic earnings (loss) per share                                           |                                                        | $               | 2.00      |                 | $ | 1.83            |      | $               | 1.35      |                 | $
|                                                                          |                                                        |                 |           |                 |   |                 |      |                 |           |                 |  
|Diluted earnings (loss) per share:                                        |                                                        |                 |           |                 |   |                 |      |                 |           |                 |  
|                                                                          | Earnings (loss) from continuing operations             |                 | $         | 2.52            |   | $               | 1.78 |                 | $         | 1.38            |  
|                                                                          | Earnings (loss) from discontinued operations           |                 |           |                |   |                 |     |                 |           |                |  
|                                                                          | Extraordinary charge from early extinguishment of debt |                 |           |                |   |                 |     |                 |           | (0.03           | )
|                                                                          | Cumulative effect of change in accounting principle(2) |                 |           | (0.57           | ) |                 |     |                 |           |                |  
|                                                                          |                                                        |                 |           |                 |   |                 |      |                 |           |                 |  
|Diluted earnings (loss) per share                                         |                                                        | $               | 1.95      |                 | $ | 1.78            |      | $               | 1.35      |                 | $
|                                                                          |                                                        |                 |           |                 |   |                 |      |                 |           |                 |  
|Cash dividends declared per common share                                  |                                                        | $               | ..36      |                 | $ | ..36            |      | $               | ..36      |                 | $
|                                                                          |                                                        |                 |           |                 |   |                 |      |                 |           |                 |  
|Pretax earnings (loss) from continuing operations as a percent of sales   |                                                        |                 | 1.29      | %               |   | 0.91            | %    |                 | 0.72      | %               |  
|Net earnings (loss) as a percent of sales                                 |                                                        |                 | 0.61      | %               |   | 0.53            | %    |                 | 0.40      | %               |  
|Effective income tax rate                                                 |                                                        |                 | 39.0      | %               |   | 41.4            | %    |                 | 42.4      | %               |  
|Current assets                                                            |                                                        | $               | 468,281   |                 | $ | 479,364         |      | $               | 433,539   |                 | $
|Current liabilities                                                       |                                                        | $               | 309,256   |                 | $ | 383,624         |      | $               | 324,786   |                 | $
|Net working capital                                                       |                                                        | $               | 159,025   |                 | $ | 95,740          |      | $               | 108,753   |                 | $
|Ratio of current assets to current liabilities                            |                                                        |                 | 1.51      |                 |   | 1.25            |      |                 | 1.33      |                 |  
|Total assets                                                              |                                                        | $               | 947,922   |                 | $ | 970,245         |      | $               | 880,828   |                 | $
|Capital expenditures                                                      |                                                        | $               | 52,605    |                 | $ | 43,924          |      | $               | 54,066    |                 | $
|Long-term obligations (long-term debt and capitalized lease obligations)  |                                                        | $               | 405,376   |                 | $ | 368,807         |      | $               | 353,664   |                 | $
|Stockholders' equity                                                      |                                                        | $               | 221,479   |                 | $ | 203,408         |      | $               | 184,540   |                 | $
|Stockholders' equity per share(3)                                         |                                                        | $               | 18.61     |                 | $ | 17.43           |      | $               | 16.12     |                 | $
|Return on stockholders' equity(4)                                         |                                                        |                 | 13.81     | %               |   | 10.46           | %    |                 | 8.58      | %               |  
|Number of common stockholders of record at year-end                       |                                                        |                 | 2,797     |                 |   | 2,710           |      |                 | 2,786     |                 |  
|Common stock high price(5)                                                |                                                        | $               | 33.18     |                 | $ | 35.54           |      | $               | 13.56     |                 | $
|Common stock low price(5)                                                 |                                                        | $               | 7.12      |                 | $ | 11.81           |      | $               | 6.00      |                 | $

---

15

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

RESULTS OF OPERATIONS

Fiscal 2002 vs. 2001



Sales for fiscal 2002 were $3,874.7 million compared to $3,982.2 million for fiscal 2001, a decrease of 2.7%. The decrease is due to increased
competitive pressures and a weak economy for fiscal 2002. The distribution of sales by operating segment is as follows:

Operating Segments

2002

2001Food distribution

$
1,825.8

47.1
%
$
1,951.4

49.0
%Retail


1,028.2

26.5
%

1,035.1

26.0
%Military


1,020.7

26.4
%

995.7

25.0
%$
3,874.7

100.0
%
$
3,982.2

100.0
%


Food
distribution segment sales decreased 6.4% from fiscal 2001 to 2002 due to continued difficult economic conditions, soft sales and store closings because of increased competition in
certain markets and the elimination of marginal accounts the Company chose to no longer service.

Retail
segment sales decreased 0.7% from fiscal 2001 to fiscal 2002 as declines in same store sales were largely offset by the acquisition of U Save Foods Inc. (U Save) in the
second half of fiscal 2001. Same store sales, which compares retail sales for stores which were in operation for the same number of weeks in the comparative years, declined by 5.3% from fiscal 2001 to
fiscal 2002 and by 11.7% for the fourth quarter of fiscal 2002 relative to the fourth quarter of fiscal 2001. These declines primarily reflected the growth of supercenter competition in our retail
territories and retail consumers trading down and/or purchasing less in conventional supermarket channels. As a result of the competitive environment, we expect the trend of declining same store sales
to continue in fiscal 2003. During fiscal 2002, our corporate store count changed as follows:

Fiscal Year
2002Number of stores at beginning of year

110New stores

5Acquired stores

1Closed or sold stores

(7
)Number of stores at end of year

109


We
continued to actively respond to the increasingly competitive retail environment by expanding our two specialty store formats in fiscal 2002. The first format under the AVANZAbanner is designed to
service the Hispanic market, which we believe is under-served by conventional grocery stores. We opened our first two
prototype Hispanic supermarkets in Denver, Colorado under theAVANZAtrade name. The second format under the BuynSavebanner is designed to
service low income, value conscious consumers. We opened three BuynSavelocations, converted two other existing stores to the BuynSaveformat and closed an underperforming location, bringing the total number ofBuynSavestores in operation to eight compared to four stores in fiscal 2001. The expansion of these two new store formats is
part of our strategy to differentiate ourselves in today's competitive retail markets.

Military
segment sales increased 2.5% from fiscal 2001 to 2002. The increase is primarily attributed to higher year-over-year sales to bases overseas and U.S.
military ships afloat. We expect the

16

---

deployment
of military forces in and about the Middle East to temporarily benefit sales in our military segment.



Gross profit for fiscal 2002 was 12.0% of sales compared to 11.4% for fiscal 2001. Gross profit was positively impacted by distribution efficiencies gained in our
food distribution segment as well as more efficient use of promotional spending in our retail segment. In addition, gross profit was increased by a LIFO credit of $2.2 million in fiscal 2002
compared to a LIFO charge of $2.7 million, in fiscal 2001. The LIFO credit in fiscal 2002 is due to food price deflation and decreased inventory levels as a result of lower sales.

In
the fourth quarter of fiscal 2002 we elected to early adopt the provisions of EITF No. 02-16"Accounting by a Customer (Including a
Reseller) for Certain Consideration Received from a Vendor,"(See "New Accounting Standards" below for discussion) retroactive to the beginning of fiscal 2002. The impact of
the adoption on gross profit in fiscal 2002, excluding the cumulative effect adjustment, was an increase of $1.4 million. In addition, the adoption resulted in a reclassification of
$9.1 million of net cooperative advertising income from selling, general and administrative expenses to cost of sales.



Selling, general and administrative expenses for fiscal 2002 were $347.4 million, or 9.0% of sales, compared to $335.9 million, or 8.4% of sales,
for fiscal 2001, an increase of $11.5 million or 3.4%. Selling, general and administrative expense included a $6.6 million charge in fiscal 2002 for retail impairments compared to a
$1.9 million charge recorded in fiscal 2001. The impairment charge for fiscal 2002 related to fifteen stores whose carrying values were impaired due to increased competition within the stores,
respective market areas. The estimated undiscounted cash flows related to these facilities indicated that the carrying value of the assets may not be recoverable based on current expectations, causing
these assets to be written down in accordance with SFAS No. 144. Selling, general and administrative expenses also included a $1.5 million charge for fiscal 2002 for closed store lease
costs compared to a $1.1 million charge recorded in fiscal 2001. The closed store lease costs were recorded for non-cancelable lease costs related to closed corporate-owned and
independent customer stores where we were obligated to assume the lease liability. Selling, general and administrative expenses were also impacted by an increase in bad debt expense from
$4.8 million in fiscal 2001 to $9.0 million in fiscal 2002. The increase in bad debt expense is primarily due to a former customer that has filed for bankruptcy. The foregoing charges
were partially offset by $3.8 million and $2.6 million in gains on the sale of real estate for fiscal 2002 and 2001, respectively. In addition, selling, general and administrative
expenses were impacted by employee benefit costs which increased by $5.5 million in fiscal 2002 relative to fiscal 2001 as a result of rising health care costs, offset by overhead cost
reductions attained through process improvements and cost savings initiatives. Finally, selling, general and administrative expenses were increased as a result of the reclassification of net
cooperative advertising income of $9.1 million to cost of sales in accordance with EITF No. 02-16. (See Item 7 of this report under the caption "New Accounting Standards")



We recorded special charges totaling $31.3 million in fiscal 1997 and $71.4 million (offset by $2.9 million of fiscal 1997 charge
adjustments) in fiscal 1998. These charges impacted our food distribution and retail segments as well as our produce growing and marketing business which was sold in fiscal 1999, and were also
designed to redirect our technologies efforts. All actions contemplated by the charges are complete. At December 28, 2002, the remaining accrued liability is $2.6 million and consists
primarily of lease commitments and pension and post-employment related obligations.

17

---

During
fiscal 2002, we reversed $0.63 million and $0.13 million of our fiscal 1998 and fiscal 1997 special charges, respectively, due to an agreement reached to buyout the
remaining lease for less than what we had originally estimated. In addition, during fiscal 2002 we recorded $0.9 million of pension benefits related to the distribution segment and
$2.5 million in continuing lease and exit costs related to closed retail stores through our 1997 and 1998 special charge reserves.



Depreciation and amortization expense for fiscal 2002 was $40.0 million compared to $46.6 million for fiscal 2001, a decrease of $6.6 million
or 14.2%. The decrease primarily reflects the elimination of goodwill amortization of $5.9 million resulting from the adoption of SFAS No. 142, at the beginning of fiscal 2002, which
requires that goodwill no longer be amortized, but instead be tested at least annually for impairment.



Interest expense for fiscal 2002 was $29.5 million compared to $34.3 million for fiscal 2001, a decrease of $4.8 million or 14.0%. The
decrease primarily relates to a $4.3 million reduction in interest expense paid under the revolving credit facility as a result of a lower average borrowing rate, partially offset by an
increase in the average borrowing level under the credit facility. The average borrowing rate under the credit facility was 4.5% in fiscal 2002 and 8.5% in fiscal 2001. The average borrowing level
under the credit facility was $156.6 million in fiscal 2002 and $133.7 million in fiscal 2001.



The effective tax rate for fiscal 2002 was 39.0% compared to 41.4% in fiscal 2001. The reduction in the effective rate is primarily attributed to changes in
accounting rules relating to the elimination of goodwill amortization for financial reporting as well as a higher proportion of taxable income being generated in lower tax jurisdictions. Refer to the
tax rate table in Part II, Item 8 of this report under Note (9)"Income Taxes" of Notes to the Consolidated Financial Statements for the comparative components of these
rates.



We adopted the provisions of EITF Issue No. 02-16,"Accounting by a Customer (Including a Reseller) for Cash
Considerations Received From a Vendor"as of the beginning of fiscal 2002. The cumulative effect at the beginning of fiscal 2002 was a charge of $7.0 million, net of
income taxes of $4.4 million. The cumulative effect of a change in accounting principle has been presented in our consolidated statement of income as of December 28, 2002 (See "Critical
Accounting Polices" under the caption "Vendor Allowances and Credits" and "New Accounting Standards" in Part II, Item 7 of this report).



Net earnings for fiscal 2002 were $23.6 million, or $1.95 per diluted share compared to $21.3 million, or $1.78 per diluted share, for fiscal 2001.
Excluding the cumulative effect of change in accounting principle for fiscal 2002 due to the adoption of EITF No. 02-16 and excluding the goodwill

18

---

amortization
in fiscal 2001, which was no longer required in fiscal 2002 upon the adoption of SFAS No. 142, net earnings are as follows:

December 28,
2002

December 29,
2001Reported net income:

$
23,620

21,267Add back: Goodwill amortization net of income taxes




4,690Cumulative effect of change in accounting principle, net of income taxes


6,960

Adjusted net income

$
30,580

25,957Diluted earnings per share:Reported earnings per share

$
1.95

1.78Goodwill amortization Net of income taxes




0.39Cumulative effect of change in accounting principle, net of income taxes


0.57

Adjusted earnings per share

$
2.52

2.17


Fiscal 2001 vs. 2000



Sales for fiscal 2001 were $3,982.2 million compared to $3,839.5 million for fiscal 2000, an increase of 3.7%. The increase is attributed to new
food distribution and military business we were able to capture in fiscal 2001. The distribution of total revenues by operating segment is as follows:

Operating Segments

2001

2000Food distribution

$
1,951.4

49.0
%
$
1,841.6

48.0
%Retail


1,035.1

26.0
%

1,029.0

26.8
%Military


995.7

25.0
%

968.9

25.2
%$
3,982.2

100.0
%
$
3,839.5

100.0
%


Food
distribution segment revenues for fiscal 2001 were $1,951.4 million compared to $1,841.6 million for fiscal 2000, an increase of 6.0%. The increase is primarily
attributed to new food distribution customers as we continued to improve service to new and existing customers. In addition, food distribution revenues were improved by the transfer of revenues from
the retail segment as a result of the sale of 18 corporate-owned retail stores, in North and South Carolina, to existing food distribution customers during fiscal 2001.

Retail
segment revenues were $1,035.1 million for fiscal 2001 compared to $1,029.0 million for fiscal 2000, an increase of 0.6%. The improvement is largely due to the
acquisition of 14 stores from U Save on August 13, 2001, offset by the sale of the corporate-owned stores in the Southeast. U Save, a privately held company, operates stores primarily in
Nebraska. All of the stores acquired have been converted to ourprimarybanners. The sale of the Southeast stores allows us to focus our retail strategy on store operations in the upper Midwest.

Same
store sales, which compares retail sales for stores which were in operation for the same number of weeks in the comparative years, declined by 1%, a direct result of reductions in
promotional

19

---

activity
compared to fiscal 2000 and competitive pressures in certain markets. During fiscal 2001, our corporate store count changed as follows:

Fiscal Year
2001Number of stores at beginning of fiscal 2001

118New stores

2Acquired stores

15Closed or sold stores

(25
)Number of stores at end of fiscal 2001

110


Military
segment revenues were $995.7 million for fiscal 2001 compared to $968.9 million for fiscal 2000, an increase of 2.8%. The improvement reflects an addition of new
business in Europe and North Carolina, awarded to us in fiscal 2000 by a major manufacturer. The deployment of military forces in response to the September 11 terrorist attacks had a
short-term negative impact, though not significant (0.9%), on military sales. The negative impact was a result of tighter security which prevented merchandise from reaching certain
military bases as well as off-base personnel having limited access to shop on the base.



Gross profit was 11.4% of sales for fiscal 2001, compared to 11.2% for fiscal 2000. The improvement is attributed to increased productivity, more efficient
utilization of distribution facilities, improved sales mix of private label and value-added products in retail stores and increased procurement efficiencies.
These increases were partially offset by a LIFO charge of $2.7 million, or .07% of sales, in fiscal 2001 compared to a LIFO credit of $1.1 million, or .03% of sales, which increased
gross margins for fiscal 2000. The charge in fiscal 2001 is due to food price inflation and increased inventory levels to accommodate new business.



Selling, general and administrative expenses for fiscal 2001 were $335.9 million compared to $322.4 million for fiscal 2000, both representing 8.4%
of sales, and an increase of $13.5 million, or 4.2%. Selling, general and administrative expenses in fiscal 2001 included retail store impairments of $1.9 million. The
write-down of long-lived assets resulted from our intention to close two stores, as well as the write down of the carrying value of three additional stores due to increased
competition within the respective market areas which resulted in declining market share, deterioration of operating performance and inadequate projected cash flows for these stores. There were no
impairment charges recorded in fiscal 2000. Bad debt expense of $4.8 million was recorded in fiscal 2001 relative to $7.4 million in 2000. The decrease is primarily due to a variety of
accounts experiencing financial difficulty in fiscal 2000. In addition, selling, general and administrative expense for 2001 and 2000 included gains from the sale of real estate in the amounts of
$2.6 million and $3.0 million, respectively. Substantially all of the gain in fiscal 2001 relates to the sale of real estate associated with a distribution center closed as part of the
1998 revitalization plan. The fiscal 2000 real estate gains included $1.1 million from the sale of real estate associated with a distribution center closed as part of the 1997 revitalization
plan, while the remainder primarily relates to the sale of retail stores. Lease related costs associated with stores closed in fiscal 2001 and fiscal 2000 were $1.1 million and
$2.7 million, respectively.



All actions contemplated by the previously discussed special charges we recorded in fiscal 1997 and fiscal 1998 were complete at December 29, 2001. At
December 29, 2001, the remaining accrued liability

20

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was
$6.8 million and consisted primarily of lease commitments and pension and post-employment related obligations.

During
fiscal 2001, we recorded $0.7 million of pension benefits related to the distribution segment and $0.8 million in continuing lease and exit costs related to closed
retail stores through our 1998 special charges reserve. In addition, we recorded $0.13 million and $0.19 million related to warehouse and retail closing through our 1997 special charge
reserve.



Depreciation and amortization expense was $46.6 million for fiscal 2001 compared to $45.3 million for fiscal 2000, an increase of
$1.3 million or 2.9%. The increase primarily reflects the addition of several new stores in fiscal 2000 and 2001 including the acquisition of U Save, offset by the sale of the Southeast stores.



Interest expense for the year was relatively flat at $34.3 million for fiscal 2001 compared to $34.4 million for fiscal 2000. Higher interest costs
under the revolving credit facility resulted from the Company fixing a rate under a swap agreement which expired on December 6, 2001. The average borrowing rate under the revolving credit
facility, including the impact of the interest swap was 8.5% for fiscal 2001 compared to 8.0% for fiscal 2000. The rate difference was offset by an average revolving debt level that was
$23.4 million lower relative to fiscal 2000.



The effective income tax rate for fiscal 2001 was 41.4% compared to 42.4% for fiscal 2000. The rate reduction is attributed to a decrease in the ratio of
nondeductible goodwill to pretax income. Refer to the tax rate tables in Part II, Item 8 of this report under Note (9)"Income Taxes" of Notes to Consolidated Financial
Statements for the comparative components of these rates.



Net earnings for fiscal 2001 were $21.3 million, or $1.78 per diluted share, compared to $15.5 million, or $1.35 per diluted share, for fiscal 2000.

CRITICAL ACCOUNTING POLICIES

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

Vendor Allowances and Credits

We participate with our vendors in a broad menu of promotions to increase sales of products. These promotions fall into two main categories:
off-invoice allowances and performance-based allowances. These promotional arrangements are often subject to negotiation with our vendors.

In
the case of off-invoice allowances, discounts are typically offered by vendors with respect to certain merchandise purchased by us during a specified period of time. We
use off-invoice allowances to support a variety of marketing programs such as reduced price offerings for specific time periods, food shows, pallet promotions and private label promotions.
The discounts are either reflected directly on the vendor invoice, as a reduction from the normal wholesale prices for merchandise to which the

21

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allowance
applies, or we are allowed to deduct the allowance as an offset against the vendor's invoice when it is paid.

In
the case of performance-based allowances, the allowance or rebate is based on our completion of some specific activity, such as purchasing or selling product during a certain time
period. This basic performance requirement may be accompanied by an additional performance requirement such as providing advertising or special in-store promotion, tracking quantities of
product sold (as is the case with count-recount promotions discussed below), slotting (adding a new item to the system) and merchandising a new item, or achieving certain minimum purchase quantities.
The billing for these performance-based allowances is normally in the form of a "bill-back" in which case we are invoiced at the regular price with the understanding that we may bill back
the vendor for the requisite allowance when the performance is satisfied.

We
collectively plan promotions with our vendors and arrive at the amount the respective vendor plans to spend on promotions with us. We and the vendors then monitor, review and discuss
the results of such promotions, and resolve issues relating to promotions and billings. Each vendor has its own method for determining the amount of promotional funds budgeted to be spent with us
during the
period. In most situations, the vendor allowances are based on units we purchased from the vendor. In other situations, the allowances are based on our past or anticipated purchases and/or the
anticipated performance of the planned promotions.

We
jointly negotiate with our vendors the promotional calendar that governs all promotions. Forecasting promotional expenditures is a critical part of our twice yearly planning sessions
with our vendors. Most vendors work with us to project not just overall spending, but also spending on a category and regional basis. As individual promotions are completed and the associated billing
is processed, the vendors track our promotional program execution and spend rate. The vendors discuss the tracking, performance and spend rate with us on a regular basis throughout the year. Depending
upon the vendor arrangements, such discussions can occur on a weekly, monthly, quarterly or annual basis. These communications include future promotions, product cost, targeted retails and price
points, anticipated volume, promotion expenditures, vendor maintenance, billing issues and procedures, new items/discontinued items, and trade spend levels relative to budget per event and per year,
as well as the resolution of any issues that arise between the vendor and us. In the future, the nature and menu of promotional programs and the allocation of dollars among them may change as a result
of ongoing negotiations and commercial relationships between vendors and the Company.

EITF
Issue No. 02-16, "Accounting by a Customer (Including a Reseller) for Cash Consideration Received from a Vendor," addresses how a reseller of a vendor's products
should account for cash consideration received from a vendor and how to measure that consideration in its income statement. We elected to early adopt the provisions of EITF
No. 02-16 at the beginning of fiscal 2002, and recognized a charge of $7.0 million, net of income taxes of $4.4 million, that represents the cumulative effect of the
deferral of consideration received from vendors as of the beginning of fiscal 2002. Excluding the cumulative impact, the adoption of EITF No. 02-16 on the year ended
December 28, 2002 was an increase to net earnings of $0.8 million, net of income taxes of $0.6 million.

As
is common in our industry, we use a third party service to undertake accounts payable audits on an ongoing basis. These audits examine vendor allowances offered to us during a given
year as well as cash discounts, freight allowances and duplicate payments and establishes a basis for us to recover overpayments made to vendors. We reduce future payments to vendors based on the
results of these audits, at which time we also establish reserves for commissions payable to the third party service as well as for amounts that may not be collected. Although our estimates of
reserves do not anticipate changes in our historical payback rates, such changes could have considerable impact on our currently recorded reserves.

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Customer Exposure and Credit Risk



We evaluate the collectability of our accounts and notes receivable based on a combination of factors. In most circumstances when we become aware of factors that
may indicate a deterioration in a specific customer's ability to meet its financial obligations to us (e.g., reductions of product purchases, deteriorating store conditions, changes in payment
patterns), we record a specific reserve for bad debts against amounts due to reduce the net recognized receivable to the amount we reasonably believe will be collected. In determining the adequacy of
the reserves, we analyze factors such as the value of any collateral, customer financial statements, historical collection experience, aging of receivables and other economic and industry factors. It
is possible that the accuracy of the estimation process could be materially affected by different judgments as to the collectibility based on information considered and further deterioration of
accounts. If circumstances change (i.e., further evidence of material adverse creditworthiness, additional accounts become credit risks, store closures), our estimates of the recoverability of amounts
due us could be reduced by a material amount, including to zero. Refer to Part II, Item 8 of this report under Note (7)"Accounts and Notes Receivable" of Notes to
Consolidated Financial Statements for a discussion of these allowances.



We have historically leased store sites for sublease to qualified independent retailers, at rates that are at least as high as the rent paid by us. Under terms of
the original lease agreements, we remain primarily liable for any commitments an independent retailer may no longer be financially able to satisfy. We also lease store sites for our retail segment.
Should a retailer be unable to perform under a sublease or should we close underperforming corporate stores, we record a charge to earnings for costs of the remaining term of the lease, less any
anticipated sublease income. Calculating the estimated losses requires that significant estimates and judgments be made by management. Our reserves for such properties can be materially affected by
factors such as the extent of interested sublessees and their creditworthiness, our ability to negotiate early termination agreements with lessors, and general economic conditions and the demand for
commercial property. More often than not, we have been able to re-sublease such locations to other qualified retailers with minimal interruption of sublease recoveries and cost to us.
Should the number of defaults by sublessees or corporate store closures materially increase, the remaining lease commitments we must record could have a material adverse effect on operating results
and cash flows. Refer to Part II, Item 8 of this report under Note (14)"Leases" of Notes to Consolidated Financial Statements for a discussion of Lease Commitments.



We have guaranteed the debt and lease obligations of certain of our food distribution customers. In the event these retailers are unable to meet their debt
service payments or otherwise experience an event of default, we would be unconditionally liable for the outstanding balance of their debt and lease obligations ($26.5 million as of
December 28, 2002), which would be due in accordance with the underlying agreements. In circumstances when we become aware of factors that indicate deterioration in a customer's ability to meet
its financial obligations guaranteed by us, we record a specific reserve in the amount we reasonably believe we will be obligated to pay on the customer's behalf, net of any anticipated recoveries
from the customer. In determining the adequacy of these reserves, we analyze factors such as those described above. It is possible that the accuracy of the estimation process could be materially
affected by different judgments as to the obligations based on information considered and further deterioration of accounts. Triggering these guarantees would not, however, result in cross default of
our debt, but could restrict resources available for general business initiatives.

23

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Impairment of Long-lived Assets

Impairment losses are recognized when expected net future cash flows are less than the assets' carrying value. We consider historical performance and estimated
future results in our evaluation of potential impairment. Future results are often influenced by assessments of changes in competition, merchandising strategies, human resources and general market
conditions, which may result in not recognizing an impairment loss. No assurance can be given that these assessments and implementation of any resulting initiatives will result in profit margins
sufficient to recover the carrying value of long lived assets.

Reserves for Self Insurance

We are primarily self-insured for workers' compensation, general and automobile liability and health insurance costs. It is our policy to record our
self-insurance liabilities based on claims filed and an estimate of claims incurred but not yet reported. Worker's compensation and general and automobile liabilities are actuarially
determined on a discounted basis. We have purchased stop-loss coverage to limit our exposure to any significant exposure on a per claim basis. Any projection of losses concerning workers'
compensation, general and automobile and health insurance liability is subject to a considerable degree of variability. Among the causes of this variability are unpredictable external factors
affecting future inflation rates, litigation trends, legal interpretations, benefit level changes and claim settlement patterns. Although our estimates of liabilities incurred do not anticipate
significant changes in historical trends for these variables, such changes could have a considerable impact on future claim costs and currently recorded liabilities.

LIQUIDITY AND CAPITAL RESOURCES

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

Operating
cash flows were $57.0 million during fiscal 2002 compared to $90.2 million in fiscal 2001 and $82.2 million in fiscal 2000. The decrease in operating cash
flows in fiscal 2002 was primarily due to changes in operating assets and liabilities. Accounts payable decreased by approximately $48.7 million
which was partially offset by a decrease in inventory balances of approximately $24.4 million. Both of the changes are the result of management's efforts to reduce inventory levels in
conjunction with lower sales volume from the continued difficult economy. The changes in operating cash flows in fiscal 2001 were also due to changes in operating assets and liabilities. Accounts
receivable increased by $36.3 million primarily due to the discontinuance of a receivables securitization program in December 2001, offset by increases in accounts payable of
$26.2 million and accrued expenses of $17.1 million due to timing of payments and increased benefit costs, respectively.

Cash
used for investing activities for fiscal 2002 was $34.6 million compared to $92.2 million in 2001 and $81.3 million in 2000. The reduction in cash used for
investing activities in 2002 primarily relates to the level of acquisitions in fiscal 2001 and fiscal 2000 relative to fiscal 2002 and the reduction in loans extended to customers during fiscal 2002.
Investing activities in fiscal 2002 included $3.4 million of business acquisitions and $4.5 million in net payments received from customer loan activity. In fiscal 2001, investing
activities included business acquisitions of $47.7 million, primarily attributed to U Save, and loans to customers, net of payments received, totaling $9.9 million. Investing activities
for 2000 included business acquisitions of $20.0 million, which consisted of the Hinky Dinky Supermarkets, Inc. acquisition in January of 2000 as well as three other stores, and loans to
customers, net of payments received, totaling $14.9 million.

Cash
used for financing activities for fiscal 2002 was $1.5 million compared to $10.9 million in cash provided by financing activities in fiscal 2001. In fiscal 2000, cash
used for financing activities was

24

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$15.8 million.
Cash used in financing activities increased in fiscal 2002 compared to fiscal 2001 due to an increase in proceeds received from the revolving line of credit of
$39.4 million which was offset by a decrease in outstanding checks of $30.7 million. In fiscal 2001, the proceeds from the revolving line of credit were $12.7 million and there
was an increase in outstanding checks of $5.7 million. In fiscal 2000 the Company made a net payment on the revolving line of credit of $2.7 million after it had completed the
refinancing of the agreement. In addition, the outstanding checks decreased by $2.9 million in fiscal 2000.

We
have certain contractual obligations that extend beyond 2002. These commitments include long-term debt and capital and operating lease obligations, primarily related to
store locations for the our retail segment, as well as store locations subleased to independent food distribution customers. The following summarizes these contractual cash obligations as of
December 28, 2002:

|                                   |  | Payments Due by Period
|---------------------------------- |  | ----------------------
|
|Long Term Debt(1)                  |  | $                     
|Capital Lease Obligations(2)(3)    |  |                       
|Operating Leases(2)                |  |                       
|                                   |  |                       
|Total Contractual Cash Obligations |  | $                     

---

We
also have made certain commercial commitments that extend beyond 2002. These commitments include standby letters of credit and guarantees of certain food distribution customer debt
and lease obligations. The following summarizes these commitments as of December 28, 2002:

|                                   |  |   |        | Commitment Expiration Per Period
|---------------------------------- |  | - | ------ | --------------------------------
|
|Standby Letters of Credit(1)       |  | $ | 17,391 |                                 
|Guarantees(2)                      |  |   | 26,493 |                                 
|                                   |  |   |        |                                 
|Total Other Commercial Commitments |  | $ | 43,884 |                                 

---

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In
December 2000, we completed the refinancing of our revolving credit facility. The credit agreement has a five year term and provides a $100 million term loan and
$150 million in revolving credit. Borrowings under the term loan bear interest at the Eurodollar rate plus a margin increase and a commitment commission on the unused portion of the revolver.
The margin increase and the commitment commission are reset quarterly based on movement of a leverage ratio defined by the agreement. At December 28, 2002 the margin and commitment commission
were 2.0% and 0.5%, respectively, compared to 1.75% and 0.375% at the end of 2001.

The
credit agreement contains financial covenants which, among other matters, require us to maintain predetermined ratio levels related to interest coverage, fixed charges coverage,
leverage and working capital based on EBITDA. Several of these financial covenants are based on EBITDA with some adjustments ("Adjusted EBITDA"). Adjusted EBITDA is defined in our credit agreement as
earnings before interest, income taxes, depreciation and amortization, adjusted to exclude extraordinary gains or losses, gains or losses from sales of assets other than inventory in the ordinary
course of business, and non-cash LIFO and other charges (such as closed store lease costs and retail impairments).

As
of December 28, 2002, we were in compliance with all Adjusted EBITDA-based debt covenants as defined in our credit agreement. Adjusted EBITDA should not be considered an
alternative measure of our net income, operating performance, cash flow or liquidity. The amount of Adjusted EBITDA is provided as additional information relative to compliance with our debt
covenants. The following is a summary of the calculation of Adjusted EBITDA (in thousands) for 2002, 2001 and 2000:

|                                                                                                           |  | 2002 |         | 2001 |         | 2000 |        
|---------------------------------------------------------------------------------------------------------- |  | ---- | ------- | ---- | ------- | ---- | -------
|Earnings before income taxes, extraordinary charge and cumulative effect of change in accounting principle |  | $    | 50,132  |      | 36,292  |      | 27,499 
|Interest expense                                                                                           |  |      | 29,490  |      | 34,303  |      | 34,444 
|Depreciation and amortization                                                                              |  |      | 39,988  |      | 46,601  |      | 45,330 
|LIFO                                                                                                       |  |      | (2,234  | )    | 2,661   |      | (1,092 
|Closed store lease costs                                                                                   |  |      | 1,454   |      | 1,105   |      | 2,722  
|Retail impairments                                                                                         |  |      | 6,585   |      | 1,931   |      |       
|Gains on sale of real estate                                                                               |  |      | (3,826  | )    | (2,647  | )    | (2,954 
|Special charge                                                                                             |  |      | (765    | )    |        |      |       
|                                                                                                           |  |      |         |      |         |      |        
|Total Adjusted EBITDA                                                                                      |  | $    | 120,824 |      | 120,246 |      | 105,949
|                                                                                                           |  |      |         |      |         |      |        

Borrowings
under the credit facility are collateralized by a security interest in substantially all assets of the Company and its wholly-owned subsidiaries that are not pledged under
other debt agreements. The credit agreement also contains covenants that limit the Company's ability to incur debt (including guaranteeing the debt of others) and liens, acquire or dispose of assets,
pay dividends on and
repurchase its stock, make capital expenditures and make loans or advances to others, including customers.

On
February 13, 2003 we were notified by the Trustee for our $165.0 million 8.5% Senior Subordinated Notes, due in 2008 that a default had occurred under the Indenture as a
result of our failure to file our Form 10-Q for the third quarter ended October 5, 2002 with the SEC and that, unless remedied within the 30 day grace period, such
failure would constitute an event of default under the Indenture. In addition, if the default was not remedied within the 30 days, an event of default would also occur under our bank credit
facility.

On
February 28, 2003 we announced that holders of more than 51% of our Senior Subordinated Notes agreed to waive the default under the Indenture. The waiver requires us to file
our Form 10-Q for the third fiscal quarter of 2002 by May 15, 2003. Such holders also agreed to extend the time for us

26

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to
file our Form 10-K for our fiscal year ended December 28, 2002 until May 30, 2003 and our Form 10-Q for the first fiscal quarter ended
March 22, 2003 until June 15, 2003. In consideration for the waiver, we paid a fee to the bondholders equal to 1.5% of the outstanding principal amount of the notes.

On
March 26, 2003, we announced that the requisite number of bank lenders under our revolving credit facility had agreed to extend until June 15, 2003 the deadline for
submission to the lenders of our audited fiscal 2002 financial statements. The credit agreement had originally called for us to provide to our lenders our audited financial statements for fiscal 2002
by March 28, 2003. In consideration for the amendment to the credit facility, we paid a fee to the bank lenders equal to 0.5% of the sum of our revolving loan commitments and aggregate
outstanding term loans as of the effective date of the amendment.

For
debt obligations, the following table presents principal cash flows, related weighted average interest rates by expected maturity dates and fair value as of December 28, 2002:

|           |  | Fixed Rate |         | Variable |  
|---------- |  | ---------- | ------- | -------- | -
|
|
|2003       |  |            |         |          | $
|2004       |  |            |         |          |  
|2005       |  |            |         |          |  
|2006       |  |            |         |          |  
|2007       |  |            |         |          |  
|Thereafter |  |            |         |          |  
|           |  |            |         |          |  
|           |  | $          | 132,976 |          | $
|           |  |            |         |          |  

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. To achieve these objectives, 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 and commodity 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. Deferred gains and losses are amortized as an adjustment to 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 perfectly effective 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.

Interest
rate swap agreements are entered into for periods consistent with related underlying exposures and do not constitute positions independent of those exposures. At
December 28, 2002, we had three outstanding interest rate swap agreements which commenced on December 6, 2001, July 26, 2002 and December 6, 2002, respectively. The
agreements expire on June 6, 2003, September 25, 2004 and October 6, 2004 with notional amounts of $35 million, $50 million and $35 million, respectively. In
addition, we are using a commodity swap agreement to reduce price risk associated with anticipated purchases of diesel fuel. The commodity swap agreement, with a notional amount of 3,500 barrels per
month, or approximately 40% of our monthly fuel consumption, expires in August 2003.

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The
three interest rate swap agreements described above total $120.0 million in notional amounts, which are used to calculate the contractual cash flows to be exchanged under the
contract. Interest rate swap agreements outstanding at year end and their fair value at that date are summarized as follows (in thousands):

|                             |  | 2002 |         | 2001 |  
|---------------------------- |  | ---- | ------- | ---- | -
|Pay fixed / receive variable |  | $    | 120,000 |      | $
|Fair value                   |  |      | (2,315  | )    |  
|Average receive rate         |  |      | 1.4     | %    |  
|Average pay rate             |  |      | 3.0     | %    |  

We
expect our capital expenditures for fiscal 2003 to approximate $60.0 million excluding acquisitions. Approximately $40.0 million of the 2003 capital budget has been
identified for use in the Company's retail segment with the remaining balance relating to distribution maintenance, information technology and other corporate projects.

We
believe that cash flows from operations, short-term bank borrowings, 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 for the foreseeable future.

NEW ACCOUNTING STANDARDS

In June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 142,
"Goodwill and Other Intangible Assets". SFAS No. 142 requires that goodwill and intangible assets with indefinite useful lives no longer be
amortized but instead be tested for impairment at least annually. Separable intangible assets that are not deemed to have an indefinite life will continue to be amortized over their useful lives. We
were required to apply provisions SFAS No. 142 at the beginning of 2002, at which time goodwill was tested for impairment. We have performed the required impairment test of goodwill upon
adoption and as of December 28, 2002 and determined that no impairment issues exist.

In
October 2001, the FASB issued SFAS No. 144,"Accounting for the Impairment or Disposal of Long-Lived Assets",(SFAS No. 144). This statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 retains and expands upon the
fundamental provisions of existing guidance related to the recognition and measurement of the impairment of long-lived assets to be held and used and the measurement of
long-lived assets to be disposed of by sale and broadens the financial reporting presentation of discontinued operations to include more disposal transactions. On December 30, 2001,
we adopted SFAS No. 144. The standard did not have a significant effect on our consolidated financial statements.

In
April 2002, the FASB issued SFAS No. 145,"Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
Technical Corrections",(SFAS No. 145). SFAS No. 145 allows only gains and losses on the extinguishment of debt that meet the criteria of extraordinary items to
be treated as such in the financial statements. SFAS No. 145 also requires sales-leaseback accounting for certain lease modifications that have economic effects that are similar to
sales-leaseback transactions. Certain provisions of SFAS No. 145 are effective for transactions occurring after May 15, 2002, while the remaining provisions became effective for us on
December 29, 2002. The standard did not and is not expected to have a significant effect on our consolidated financial statements.

In
June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities",(SFAS
No. 146). SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue
No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)". SFAS No. 146 applies to costs associated

28

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with
an exit activity that does not involve an entity newly acquired in a business combination or with a disposal activity covered by SFAS No. 144. The provisions of SFAS No. 146 are
effective for exit or disposal activities that are initiated after December 31, 2002.

In
December 2002, the FASB issued SFAS No. 148,"Accounting for Stock-Based Compensation Transition and Disclosurean Amendment of FASB
Statement No. 123",(SFAS No. 148). SFAS No. 148 provides two additional transition methods for entities adopting the fair value method of accounting for
stock issued to employees and requires expanded disclosure regarding stock-based compensation in the Summary of Significant Accounting Polices in the Notes to the Consolidated Financial Statements.
The adoption of the standard did not have a financial impact on the consolidated financial statements. The expanded disclosure will be required in our quarterly financial reports beginning the first
quarter of 2003.

In
November 2002, the FASB issued Interpretation No. 45,"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others",(FIN 45). FIN 45 elaborates on the existing disclosure requirements for most guarantees, including residual value
guarantees issued in conjunction with operating lease agreements. It also clarifies 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 and must disclose that information in its interim and annual financial statements. The initial recognition and measurement provisions apply on a
prospective basis to guarantees issued or modified after December 31, 2002. The disclosure requirements are effective for financial statements of interim or annual periods ending after
December 15, 2002. The adoption of FIN 45 will have no impact on our historical financial statements as existing guarantees are not subject to the measurement provisions of
FIN 45. Future guarantees, if issued, will be accounted for in accordance with this pronouncement.

Emerging
Issue Task Force (EITF) Issue No. 01-09,"Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of a
Vendor's Products)", which codified EITF Issue Nos. 00-14,"Accounting for Certain Sales Incentives";
00-22,"Accounting for Points and Certain Other Time-Based Sales and Incentive Offers"; and 00-25, "Vendor Income Statement Characterization of Consideration Paid to a Reseller of
the Vendor's Products"became effective for us on December 30,
2001. These issues address the accounting for consideration given by a vendor to a customer or a reseller of the vendor's products. EITF No. 01-09 did not have a significant effect
on our consolidated financial statements.

EITF
Issue No. 02-16,"Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a
Vendor",addresses how a reseller of a vendor's products should account for cash consideration received from a vendor and how to measure that consideration in its income
statement.

In
January 2003, the EITF concluded that new arrangements, including modifications of existing arrangements entered into after December 31, 2002 should apply the treatment
outlined in EITF No. 02-16. If determinable, pro forma disclosure of the impact of the consensus on prior periods presented is encouraged. In March 2003, the EITF concluded
that entities may elect to early adopt the provisions of EITF No. 02-16 as a cumulative effect of change in accounting principle. We elected to early adopt the provisions of EITF
No. 02-16 at the beginning of fiscal 2002, and recognized a charge of $7.0 million, net of income taxes of $4.4 million, that represents the cumulative effect of a
change in accounting principle as of the beginning of fiscal 2002. The impact of the adoption of EITF No. 02-16, on the year ended December 28, 2002, excluding the cumulative
effect adjustment, was an increase to net earnings of $0.8 million, net of income taxes of $0.6 million.

In
January 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest Entities". FIN No. 46
states that companies that have exposure to the economic risks and potential rewards from another entity's assets and activities may have a controlling financial interest in a variable interest entity
and should consolidate the entity, despite the absence of clear control through a voting equity interest.

29

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The
consolidation requirements apply to all variable interest entities created after January 31, 2003. For variable interest entities that existed prior to February 1, 2003 the
consolidation requirements are effective for annual or interim periods beginning after June 15, 2003 (the third quarter of 2003 for us), regardless of when the variable interest was created. We
are currently evaluating the impact the adoption of FIN No. 46 will have on the consolidated financial statements.

CAUTIONARY FACTORS

Nash Finch and its representatives may, from time to time, make written or oral forward-looking statements relating to developments, results, conditions or other
events that the Company expects or anticipates will occur in the future. These forward-looking statements may involve a wide variety of topics, such as the Company's future financial performance or
condition, its strategies, market or economic conditions or the competitive environment. Any forward-looking statements made are based on management's then current expectations and assumptions and, as
a result, are subject to various risks and uncertainties that could cause actual results or conditions to differ materially from those predicted or projected.

The
following cautionary factors are considered to be the more significant factors that could cause actual results to differ materially from those predicted or projected by any
forward-looking statements, and are provided here as a readily available reference. These factors are in addition to any other cautionary statements, written or oral, which may be made or referred to
in connection with any forward-looking statement, or contained elsewhere in this report.

Competitive Conditions

The wholesale food distribution and food retailing businesses are intensely competitive, characterized by high inventory turnover, narrow profit margins and
increasing consolidation. Our food retailing business, focused on the Upper Midwest, has historically competed with traditional grocery stores and is increasingly competing with alternative store
formats such as supercenters, warehouse clubs and extreme value food stores. Our distribution business competes not only with local, regional and national food distributors, but also with
vertically-integrated national and regional chains utilizing a variety of formats, including supercenters, supermarkets and warehouse clubs. Some of our competitors are substantially larger and may
have greater financial resources, lower merchandise acquisition costs and lower operating expenses than we do, intensifying price competition at the wholesale and retail levels. Industry consolidation
and the expansion of alternative store formats, which have gained market share at the expense of traditional grocery stores, tend to produce even stronger competition for our food retail business and
for the independent retailer customers of our distribution business. To the extent our independent customers are acquired by competitors or are not successful in competing with other retail chains and
non-traditional competitors, sales by our distribution business will also be affected. If we fail to effectively implement strategies to respond to these competitive pressures, our
operating results could be adversely affected by price reductions, decreased sales or margins, or loss of market share.

Economic Conditions

The food distribution and retailing industry is sensitive to national and regional economic conditions, particularly those that influence consumer confidence,
spending and buying habits. Economic downturns or uncertainty may not only adversely affect overall demand and exacerbate price competition, but also cause consumers to "trade down" by purchasing
lower priced, and often lower margin, items and to purchase less in traditional supermarket channels. These consumer responses, coupled with the impact of general economic factors such as prevailing
interest rates, food price inflation or deflation, employment trends in our markets, and labor and energy costs, can also have a significant impact on the Company's operating results and performance
with respect to forecasts.

30

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Increasing
volatility in financial markets may cause these factors to change with a greater degree of frequency and magnitude.

Credit Risk

In the ordinary course of business, we extend credit, including loans, to our food distribution customers, and provide financial assistance to some customers by
guaranteeing their loan or lease obligations. We also lease store sites for sublease to independent retailers. Generally, our loans and other financial accommodations are extended to small businesses
that are unrated and have limited access to conventional financing. Greater than expected losses from existing or future credit extensions, loans, guarantee commitments or sublease arrangements,
particularly in times of economic difficulty or uncertainty, could negatively impact our financial condition and operating results.

Expansion and Acquisition

The growth strategy for our retail and distribution businesses includes new store openings, new affiliations and acquisitions. Expansion is subject to a number of
risks, including the adequacy of our capital resources, the location of suitable store or distribution center sites and the negotiation of acceptable lease or purchase terms, the expansion into
formats with which we have limited experience, and the ability to hire and train employees. Acquisitions entail certain additional risks such as identifying suitable candidates, effecting acquisitions
at acceptable rates of return, timely and effectively integrating the operations, systems and personnel of the acquired business, and diversion of management's time and attention from other business
concerns.

Indebtedness and Liquidity

Our current level of debt and covenants in the documents governing our outstanding debt could limit our operating and financial flexibility. Our ability to
respond to market conditions and opportunities as well as capital needs could be constrained by the degree to which we are leveraged, by changes in the availability or cost of capital, and by
contractual limitations on the degree to which we may, without the consent of our lenders, take actions such as engaging in mergers or acquisitions, incurring additional debt, making capital
expenditures and making investments, loans or advances. If needs or opportunities were identified that would require financial resources beyond existing resources, obtaining those resources could
increase the Company's borrowing costs, further reduce financial flexibility, require alterations in strategies and affect future operating results.

Other Factors

Other factors that could cause actual results to differ materially from those predicted include changes in federal, state and local laws and regulations; changes
affecting the food distribution and retail industry generally, such as a shift in consumer preferences towards eating away from home, other changes in consumer buying and spending patterns, the growth
of alternative store formats, and the manner in which vendors target their promotional dollars; the ability to attract and retain qualified employees; unanticipated problems with product procurement
and changes in vendor promotions or allowances; adverse determinations or developments with respect to litigation, other legal proceedings or the SEC investigation of Nash Finch; the success or
failure of new business ventures or initiatives; natural disasters and acts of terrorism.

The
foregoing discussion of important factors is not exhaustive, and we do not undertake to revise any forward-looking statement to reflect events or circumstances that occur after the
date the statement is made.

31

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ITEM 7A. 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 debt obligations
outstanding, and derivatives employed from time to time to time to hedge long term variable interest rate debt. In addition, we are using a commodity swap agreement to reduce price risk associated
with anticipated purchases of diesel fuel.

We
carry notes receivable because, in the normal course of business, we make long-term loans to certain retail customers. Substantially all notes receivable are based on
floating interest rates which adjust to changes in market rates. As a result, the carrying value of notes receivable approximates market value. (Refer to Part II, Item 8 of this report under
Note 7"Accounts and Notes Receivable" in Notes to Consolidated Financial Statements for more information). See disclosures set forth under Item 7 under the caption "Liquidity and
Capital Resources."

32

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Nash Finch Company
Report of Management

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

| |  | /s/RON MARSHALLRon Marshall
Chief Executive Officer                                   
| |  | --------------------------------------------------------------------------------------
| |  |                                                                                       
| |  | /s/ROBERT B. DIMONDRobert B. Dimond,
Executive Vice President, Chief Financial Officer

33

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REPORT OF INDEPENDENT AUDITORS

The
Board of Directors and Stockholders
Nash Finch Company:

We
have audited the accompanying consolidated balance sheets of Nash Finch Company and subsidiaries as of December 28, 2002 and December 29, 2001, and the related
consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 28, 2002. Our audits also included the financial statement
schedule listed in the Index at Item 15(2). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In
our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Nash Finch Company and subsidiaries at
December 28, 2002 and December 29, 2001, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 28, 2002,
in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As
discussed in Note 1 to the consolidated financial statements, effective December 30, 2001, the Company adopted Statement of Financial Accounting Standards
No. 142,"Goodwill and Other Intangible Assets."

May 12,
2003
Minneapolis, Minnesota

34

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NASH FINCH COMPANY AND SUBSIDIARIES  Consolidated Statements of Income

|Fiscal years ended December 28, 2002,
December 29, 2001 and December 30, 2000
(In thousands, except per share amounts) |                                                                                              | 2002
(52 weeks)                                                                                            |           | 2001
(52 weeks) |           | 2000
(52 weeks) |          
|---------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------- | --------- | --------------- | --------- | --------------- | ---------
|Sales                                                                                                                  |                                                                                              | $                                                                                                          | 3,874,672 |                 | $         | 3,982,206       |          
|Cost and expenses:                                                                                                     |                                                                                              |                                                                                                            |           |                 |           |                 |          
|                                                                                                                       | Cost of sales                                                                                |                                                                                                            |           | 3,408,409       |           |                 | 3,529,124
|                                                                                                                       | Selling, general and administrative                                                          |                                                                                                            |           | 347,418         |           |                 | 335,886  
|                                                                                                                       | Special charges                                                                              |                                                                                                            |           | (765            | )         |                 |         
|                                                                                                                       | Depreciation and amortization                                                                |                                                                                                            |           | 39,988          |           |                 | 46,601   
|                                                                                                                       | Interest expense                                                                             |                                                                                                            |           | 29,490          |           |                 | 34,303   
|                                                                                                                       |                                                                                              |                                                                                                            |           |                 |           |                 |          
|                                                                                                                       |                                                                                              | Total cost and expenses                                                                                    |           |                 | 3,824,540 |                 |          
|                                                                                                                       |                                                                                              | Earnings before income taxes, extraordinary charge and cumulative effect of change in accounting principle |           |                 | 50,132    |                 |          
|Income tax expense                                                                                                     |                                                                                              |                                                                                                            | 19,552    |                 |           | 15,025          |          
|                                                                                                                       |                                                                                              |                                                                                                            |           |                 |           |                 |          
|                                                                                                                       |                                                                                              | Earnings before extraordinary charge and cumulative effect of change in accounting principle               |           |                 | 30,580    |                 |          
|                                                                                                                       | Extraordinary charge from early extinguishment of debt, net of income tax benefits of $271   |                                                                                                            |           |                |           |                 |         
|                                                                                                                       | Cumulative effect of change in accounting principle, net of income tax benefits of $4,450    |                                                                                                            |           | (6,960          | )         |                 |          
|                                                                                                                       |                                                                                              |                                                                                                            |           |                 |           |                 |          
|                                                                                                                       | Net earnings                                                                                 |                                                                                                            | $         | 23,620          |           | $               | 21,267   
|                                                                                                                       |                                                                                              |                                                                                                            |           |                 |           |                 |          
|Basic earnings per share:                                                                                              |                                                                                              |                                                                                                            |           |                 |           |                 |          
|                                                                                                                       | Earnings before extraordinary charge and cumulative effect of change in accounting principle |                                                                                                            | $         | 2.59            |           | $               | 1.83     
|                                                                                                                       | Extraordinary charge from early extinguishment of debt, net of income tax benefit            |                                                                                                            |           |                |           |                 |         
|                                                                                                                       | Cumulative effect of change in accounting principle, net of income tax benefit               |                                                                                                            |           | (0.59           | )         |                 |          
|                                                                                                                       |                                                                                              |                                                                                                            |           |                 |           |                 |          
|                                                                                                                       | Net earnings per share                                                                       |                                                                                                            | $         | 2.00            |           | $               | 1.83     
|                                                                                                                       |                                                                                              |                                                                                                            |           |                 |           |                 |          
|Diluted earnings per share:                                                                                            |                                                                                              |                                                                                                            |           |                 |           |                 |          
|                                                                                                                       | Earnings before extraordinary charge and cumulative effect of change in accounting principle |                                                                                                            | $         | 2.52            |           | $               | 1.78     
|                                                                                                                       | Extraordinary charge from early extinguishment of debt, net of income tax benefit            |                                                                                                            |           |                 |           |                 |          
|                                                                                                                       | Cumulative effect of change in accounting principle, net of income tax benefit               |                                                                                                            |           | (0.57           | )         |                 |         
|                                                                                                                       |                                                                                              |                                                                                                            |           |                 |           |                 |          
|                                                                                                                       | Net earnings per share                                                                       |                                                                                                            | $         | 1.95            |           | $               | 1.78     
|                                                                                                                       |                                                                                              |                                                                                                            |           |                 |           |                 |          

See
accompanying notes to consolidated financial statements.

35

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

|                                      |                                                                                                            | December 28,
2002                          |         | December 29,
2001 |        
|------------------------------------- | ---------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | ----------------- | -------
|Assets                                |                                                                                                            |                                            |         |                   |        
|Current assets:                       |                                                                                                            |                                            |         |                   |        
|                                      | Cash and cash equivalents                                                                                  |                                            | $       | 31,419            |        
|                                      | Accounts and notes receivable, net                                                                         |                                            |         | 165,527           |        
|                                      | Inventories                                                                                                |                                            |         | 245,477           |        
|                                      | Prepaid expenses                                                                                           |                                            |         | 12,335            |        
|                                      | Deferred tax assets                                                                                        |                                            |         | 13,523            |        
|                                      |                                                                                                            |                                            |         |                   |        
|                                      |                                                                                                            | Total current assets                       |         |                   | 468,281
|Investments in affiliates             |                                                                                                            |                                            | 556     |                   |        
|Notes receivable, net                 |                                                                                                            |                                            | 32,596  |                   |        
|Property, plant and equipment:        |                                                                                                            |                                            |         |                   |        
|                                      | Land                                                                                                       |                                            |         | 25,500            |        
|                                      | Buildings and improvements                                                                                 |                                            |         | 155,865           |        
|                                      | Furniture, fixtures and equipment                                                                          |                                            |         | 323,201           |        
|                                      | Leasehold improvements                                                                                     |                                            |         | 75,360            |        
|                                      | Construction in progress                                                                                   |                                            |         | 7,169             |        
|                                      | Assets under capitalized leases                                                                            |                                            |         | 42,040            |        
|                                      |                                                                                                            |                                            |         |                   |        
|                                      |                                                                                                            |                                            | 629,135 |                   |        
|                                      | Less accumulated depreciation and amortization                                                             |                                            |         | (360,615          | )      
|                                      |                                                                                                            |                                            |         |                   |        
|                                      |                                                                                                            | Net property, plant and equipment          |         |                   | 268,520
|Goodwill, net                         |                                                                                                            |                                            | 148,028 |                   |        
|Investment in direct financing leases |                                                                                                            |                                            | 14,463  |                   |        
|Deferred tax asset, net               |                                                                                                            |                                            | 467     |                   |        
|Other assets                          |                                                                                                            |                                            | 15,011  |                   |        
|                                      |                                                                                                            |                                            |         |                   |        
|                                      |                                                                                                            | Total assets                               |         | $                 | 947,922
|                                      |                                                                                                            |                                            |         |                   |        
|Liabilities and Stockholders' Equity  |                                                                                                            |                                            |         |                   |        
|Current liabilities:                  |                                                                                                            |                                            |         |                   |        
|                                      | Outstanding checks                                                                                         |                                            | $       | 27,076            |        
|                                      | Current maturities of long-term debt and capitalized lease obligations                                     |                                            |         | 7,497             |        
|                                      | Accounts payable                                                                                           |                                            |         | 170,542           |        
|                                      | Accrued expenses                                                                                           |                                            |         | 94,068            |        
|                                      | Income taxes                                                                                               |                                            |         | 10,073            |        
|                                      |                                                                                                            |                                            |         |                   |        
|                                      |                                                                                                            | Total current liabilities                  |         |                   | 309,256
|Long-term debt                        |                                                                                                            |                                            | 357,592 |                   |        
|Capitalized lease obligations         |                                                                                                            |                                            | 47,784  |                   |        
|Other liabilities                     |                                                                                                            |                                            | 11,811  |                   |        
|Commitments and Contigencies          |                                                                                                            |                                            |         |                   |        
|Stockholders' equity:                 |                                                                                                            |                                            |         |                   |        
|                                      | Preferred stockno par value
Authorized 500 shares; none issued                                            |                                            |         |                  |        
|                                      | Common stock of $1.662/3 par value
Authorized 50,000 shares, issued 12,012 and 11,831 shares, respectively |                                            |         | 20,021            |        
|                                      | Additional paid-in capital                                                                                 |                                            |         | 26,275            |        
|                                      | Restricted stock                                                                                           |                                            |         | (894              | )      
|                                      | Accumulated other comprehensive income                                                                     |                                            |         | (7,507            | )      
|                                      | Retained earnings                                                                                          |                                            |         | 184,645           |        
|                                      |                                                                                                            |                                            |         |                   |        
|                                      |                                                                                                            |                                            | 222,540 |                   |        
|                                      | Less cost of 70 and 73 shares of common stock in treasury, respectively                                    |                                            |         | (1,061            | )      
|                                      |                                                                                                            |                                            |         |                   |        
|                                      |                                                                                                            | Total stockholders' equity                 |         |                   | 221,479
|                                      |                                                                                                            |                                            |         |                   |        
|                                      |                                                                                                            | Total liabilities and stockholders' equity |         | $                 | 947,922
|                                      |                                                                                                            |                                            |         |                   |        

See accompanying notes to consolidated financial statements.

36

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

|                                                  |                                                                                   | 2002                                                |                                           | 2001    |         | 2000   |        
|------------------------------------------------- | --------------------------------------------------------------------------------- | --------------------------------------------------- | ----------------------------------------- | ------- | ------- | ------ | -------
|Operating activities:                             |                                                                                   |                                                     |                                           |         |         |        |        
|                                                  | Net earnings                                                                      |                                                     | $                                         | 23,620  |         | $      | 21,267 
|                                                  | Adjustments to reconcile net income to net cash provided by operating activities: |                                                     |                                           |         |         |        |        
|                                                  |                                                                                   | Special chargesnon cash portion                    |                                           |         | (765    | )      |        
|                                                  |                                                                                   | Depreciation and amortization                       |                                           |         | 39,988  |        |        
|                                                  |                                                                                   | Amortization of deferred financing costs            |                                           |         | 1,135   |        |        
|                                                  |                                                                                   | Amortization of rebatable loans                     |                                           |         | 1,798   |        |        
|                                                  |                                                                                   | Provision for bad debts                             |                                           |         | 8,997   |        |        
|                                                  |                                                                                   | Deferred income tax expense                         |                                           |         | 8,320   |        |        
|                                                  |                                                                                   | Gain on sale of property, plant and equipment       |                                           |         | (3,815  | )      |        
|                                                  |                                                                                   | Cumulative effect of change in accounting principle |                                           |         | 6,960   |        |        
|                                                  |                                                                                   | LIFO charge (credit)                                |                                           |         | (2,234  | )      |        
|                                                  |                                                                                   | Retail impairments                                  |                                           |         | 6,585   |        |        
|                                                  |                                                                                   | Other                                               |                                           |         | 1,256   |        |        
|                                                  | Changes in operating assets and liabilities, net of effects of acquisitions       |                                                     |                                           |         |         |        |        
|                                                  |                                                                                   | Accounts and notes receivable                       |                                           |         | (859    | )      |        
|                                                  |                                                                                   | Inventories                                         |                                           |         | 24,448  |        |        
|                                                  |                                                                                   | Prepaid expenses                                    |                                           |         | 2,675   |        |        
|                                                  |                                                                                   | Accounts payable                                    |                                           |         | (48,718 | )      |        
|                                                  |                                                                                   | Accrued expenses                                    |                                           |         | (8,265  | )      |        
|                                                  |                                                                                   | Income taxes payable                                |                                           |         | (1,309  | )      |        
|                                                  |                                                                                   | Other assets and liabilities                        |                                           |         | (2,777  | )      |        
|                                                  |                                                                                   |                                                     |                                           |         |         |        |        
|                                                  |                                                                                   |                                                     | Net cash provided by operating activities |         |         | 57,040 |        
|                                                  |                                                                                   |                                                     |                                           |         |         |        |        
|Investing activities:                             |                                                                                   |                                                     |                                           |         |         |        |        
|                                                  | Disposal of property, plant and equipment                                         |                                                     |                                           | 14,435  |         |        | 8,889  
|                                                  | Additions to property, plant and equipment                                        |                                                     |                                           | (52,605 | )       |        | (43,924
|                                                  | Business acquired, net of cash                                                    |                                                     |                                           | (3,356  | )       |        | (47,680
|                                                  | Loans to customers                                                                |                                                     |                                           | (5,551  | )       |        | (27,813
|                                                  | Payments from customers on loans                                                  |                                                     |                                           | 10,042  |         |        | 17,936 
|                                                  | Repurchase of receivables                                                         |                                                     |                                           |        |         |        |       
|                                                  | Other                                                                             |                                                     |                                           | 2,473   |         |        | 435    
|                                                  |                                                                                   |                                                     |                                           |         |         |        |        
|                                                  |                                                                                   | Net cash used in investing activities               |                                           |         | (34,562 | )      |        
|                                                  |                                                                                   |                                                     |                                           |         |         |        |        
|Financing activities:                             |                                                                                   |                                                     |                                           |         |         |        |        
|                                                  | Proceeds from long-term debt                                                      |                                                     |                                           |        |         |        |       
|                                                  | Proceeds (payments) of revolving debt                                             |                                                     |                                           | 39,400  |         |        | 12,700 
|                                                  | Dividends paid                                                                    |                                                     |                                           | (4,292  | )       |        | (4,204 
|                                                  | Payments of long-term debt                                                        |                                                     |                                           | (3,491  | )       |        | (3,378 
|                                                  | Payments of capitalized lease obligations                                         |                                                     |                                           | (2,845  | )       |        | (1,620 
|                                                  | (Decrease) increase in outstanding checks                                         |                                                     |                                           | (30,674 | )       |        | 5,708  
|                                                  | Other                                                                             |                                                     |                                           | 376     |         |        | 1,708  
|                                                  |                                                                                   |                                                     |                                           |         |         |        |        
|                                                  |                                                                                   | Net cash (used in) provided by financing activities |                                           |         | (1,526  | )      |        
|                                                  |                                                                                   |                                                     |                                           |         |         |        |        
|                                                  |                                                                                   | Net increase (decrease) in cash                     |                                           |         | 20,952  |        |        
|                                                  |                                                                                   | Cash and cash equivalents at beginning of year      |                                           |         | 10,467  |        |        
|                                                  |                                                                                   |                                                     |                                           |         |         |        |        
|                                                  |                                                                                   | Cash and cash equivalents at end of year            |                                           | $       | 31,419  |        | $      
|                                                  |                                                                                   |                                                     |                                           |         |         |        |        
|Supplemental disclosure of cash flow information: |                                                                                   |                                                     |                                           |         |         |        |        
|                                                  | Non cash investing and financing activities                                       |                                                     |                                           |         |         |        |        
|                                                  |                                                                                   | Purchase of real estate under capital leases        |                                           | $       | 3,789   |        | $      
|                                                  |                                                                                   | Acquisition of minority interest                    |                                           |         | 1,849   |        |        

See accompanying notes to consolidated financial statements.

37

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NASH FINCH COMPANY AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity

|                                                                     |                                      |        |   |   |        |   |   |        |   | Accmulated other
comprehensive income (loss) |         |   |   |        |        |   |        |        |  
|-------------------------------------------------------------------- | ------------------------------------ | ------ | - | - | ------ | - | - | ------ | - | -------------------------------------------- | ------- | - | - | ------ | ------ | - | ------ | ------ | -
|
|
|
|Balance at January 1, 2000                                           |                                      | 11,641 |   | $ | 19,402 |   | $ | 18,247 |   | $                                            | 136,905 |   | $ |       |        | $ |       |        | $
|Net earnings                                                         |                                      |       |   |   |       |   |   |       |   |                                              | 15,471  |   |   |       |        |   |       |        |  
|Dividend declared of $.36 per share                                  |                                      |       |   |   |       |   |   |       |   |                                              | (4,122  | ) |   |       |        |   |       |        |  
|Common stock issued for employee stock purchase plan                 |                                      | 70     |   |   | 116    |   |   | 309    |   |                                              |        |   |   |       |        |   |       |        |  
|Amortized compensation under restricted stock plan                   |                                      |       |   |   |       |   |   |       |   |                                              |        |   |   |       |        |   |       |        |  
|Repayment of notes receivable from holders of restricted stock       |                                      |       |   |   |       |   |   |       |   |                                              |        |   |   |       |        |   |       |        |  
|Distribution of stock pursuant to performance awards                 |                                      |       |   |   |       |   |   | 8      |   |                                              |        |   |   |       |        |   |       |        |  
|                                                                     |                                      |        |   |   |        |   |   |        |   |                                              |         |   |   |        |        |   |        |        |  
|Balance at December 30, 2000                                         |                                      | 11,711 |   |   | 19,518 |   |   | 18,564 |   |                                              | 148,254 |   |   |       |        |   |       |        |  
|Net earnings                                                         |                                      |       |   |   |       |   |   |       |   |                                              | 21,267  |   |   |       |        |   |       |        |  
|Other comprehensive income, net of tax                               |                                      |        |   |   |        |   |   |        |   |                                              |         |   |   |        |        |   |        |        |  
|                                                                     | Deferred loss on hedging activities  |        |  |   |        |  |   |        |  |                                              |         |  |   |        |       |   |        | (128   | )
|                                                                     | Additional minimum pension liability |        |  |   |        |  |   |        |  |                                              |         |  |   |        | (2,390 | ) |        |       |  
|                                                                     |                                      |        |   |   |        |   |   |        |   |                                              |         |   |   |        |        |   |        |        |  
|Comprehensive income                                                 |                                      |       |   |   |       |   |   |       |   |                                              |        |   |   |       |        |   |       |        |  
|Dividend declared of $.36 per share                                  |                                      |       |   |   |       |   |   |       |   |                                              | (4,204  | ) |   |       |        |   |       |        |  
|Treasury stock issued upon exercise of options                       |                                      |       |   |   |       |   |   | 943    |   |                                              |        |   |   |       |        |   |       |        |  
|Common stock issued upon exercise of options                         |                                      | 28     |   |   | 46     |   |   | 264    |   |                                              |        |   |   |       |        |   |       |        |  
|Common stock issued for employee stock purchase plan                 |                                      | 92     |   |   | 154    |   |   | 655    |   |                                              |        |   |   |       |        |   |       |        |  
|Amortized compensation under restricted stock plan                   |                                      |       |   |   |       |   |   |       |   |                                              |        |   |   |       |        |   |       |        |  
|Stock based deferred compensation                                    |                                      |       |   |   |       |   |   | 993    |   |                                              |        |   |   |       |        |   |       |        |  
|Repayment of notes receivable from holders of restricted stock       |                                      |       |   |   |       |   |   |       |   |                                              |        |   |   |       |        |   |       |        |  
|Distribution of stock pursuant to performance awards                 |                                      |       |   |   |       |   |   | 475    |   |                                              |        |   |   |       |        |   |       |        |  
|                                                                     |                                      |        |   |   |        |   |   |        |   |                                              |         |   |   |        |        |   |        |        |  
|Balance at December 29, 2001                                         |                                      | 11,831 |   |   | 19,718 |   |   | 21,894 |   |                                              | 165,317 |   |   | (2,390 | )      |   | (128   | )      |  
|Net earnings                                                         |                                      |       |   |   |       |   |   |       |   |                                              | 23,620  |   |   |       |        |   |       |        |  
|Other comprehensive income, net of tax                               |                                      |        |   |   |        |   |   |        |   |                                              |         |   |   |        |        |   |        |        |  
|                                                                     | Deferred loss on hedging activities  |        |  |   |        |  |   |        |  |                                              |         |  |   |        |       |   |        | (1,105 | )
|                                                                     | Additional minimum pension liability |        |  |   |        |  |   |        |  |                                              |         |  |   |        | (3,884 | ) |        |       |  
|                                                                     |                                      |        |   |   |        |   |   |        |   |                                              |         |   |   |        |        |   |        |        |  
|Comprehensive income                                                 |                                      |       |   |   |       |   |   |       |   |                                              |        |   |   |       |        |   |       |        |  
|Dividend declared of $.36 per share                                  |                                      |       |   |   |       |   |   |       |   |                                              | (4,292  | ) |   |       |        |   |       |        |  
|Treasury stock issued upon exercise of options                       |                                      |       |   |   |       |   |   | 73     |   |                                              |        |   |   |       |        |   |       |        |  
|Common stock issued upon exercise of options                         |                                      | 21     |   |   | 35     |   |   | 195    |   |                                              |        |   |   |       |        |   |       |        |  
|Common stock issued for employee stock purchase plan                 |                                      | 43     |   |   | 72     |   |   | 878    |   |                                              |        |   |   |       |        |   |       |        |  
|Issuance of restricted stock                                         |                                      | 50     |   |   | 84     |   |   | 1,373  |   |                                              |        |   |   |       |        |   |       |        |  
|Amortized compensation under restricted stock plan                   |                                      |       |   |   |       |   |   |       |   |                                              |         |   |   |       |        |   |       |        |  
|Stock based deferred compensation                                    |                                      |       |   |   |       |   |   | 248    |   |                                              |        |   |   |       |        |   |       |        |  
|Forfeiture of restricted stock issued pursuant to performance awards |                                      |       |   |   |        |   |   | (61    | ) |                                              |        |   |   |       |        |   |       |        |  
|Distribution of stock pursuant to performance awards                 |                                      | 67     |   |   | 112    |   |   | 1,675  |   |                                              |        |   |   |       |        |   |       |        |  
|                                                                     |                                      |        |   |   |        |   |   |        |   |                                              |         |   |   |        |        |   |        |        |  
|Balance at December 28, 2002                                         |                                      | 12,012 |   | $ | 20,021 |   | $ | 26,275 |   | $                                            | 184,645 |   | $ | (6,274 | )      | $ | (1,233 | )      | $
|                                                                     |                                      |        |   |   |        |   |   |        |   |                                              |         |   |   |        |        |   |        |        |  

38

---



NASH FINCH COMPANY AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Summary of Significant Accounting Policies



Nash Finch Company's fiscal year ends on the Saturday nearest to December 31. Fiscal years 2002, 2001, and 2000 each consisted of 52 weeks. The Company's
interim quarters consist of 12 weeks except for the third quarter which has 16 weeks.



The accompanying financial statements include the accounts of Nash Finch Company (the "Company"), its majority-owned subsidiaries and the Company's share of net
earnings of a 50% owned company. The equity method of accounting is applied to the investment as the ownership structure prevents Nash Finch from exercising a controlling influence over operating and
financial policies of the business as a result of the voting interests of the members. All material intercompany accounts and transactions have been eliminated in the consolidated financial
statements.



In the accompanying financial statements and for purposes of the statements of cash flows, cash and cash equivalents include cash on hand and
short-term investments with original maturities of three months or less.



Revenues for food distribution and military segments are recognized when product orders placed by customers are shipped. Retail segment revenues are recognized at
the point of sale.

The
Company reclassified its treatment of facilitated services, which include invoicing and payment services, where it acts as processing agent for its independent retailers. Prior to
the reclassification, amounts invoiced to independent retailers by the Company for facilitated services were recorded as sales and the related amounts due and paid by the Company to its vendors were
recorded as costs of sales. The reclassification reduced sales and cost of sales by $117.9 million, $125.2 million and $116.3 million for fiscal years 2002, 2001 and 2000,
respectively, but did not have an impact on gross profit, earnings before income taxes and extraordinary charge, net earnings, cash flows or financial position for any period or their respective
trends.



Cost of sales includes the cost of inventory sold during the period, including distribution costs and shipping and handling fees.



The Company reflects vendor allowances and credits, which include allowances and incentives similar to discounts, as a reduction of cost of sales when the related
inventory has been sold, based on the underlying arrangement with the vendor. These allowances primarily consist of promotional allowances, quantity discounts and payments under merchandising
arrangements. Amounts received under promotional or merchandising arrangements that require specific performance are recognized when the performance is satisfied and the related inventory has been
sold. Discounts based on the quantity of purchases from the Company's vendors or sales to customers are recognized as the product is sold. When payment is received prior to fulfillment of the terms,
the amounts are deferred and

39

---

recognized
according to the terms of the arrangement. (Refer to Part II, Item 8 of this report under Note 2, "Vendor Allowances and Credits").



Inventories are stated at the lower of cost or market. At December 28, 2002 and December 29, 2001, approximately 81% of the Company's inventories
were valued on the last-in, first-out (LIFO) method. During fiscal 2002, the Company recorded a LIFO credit of $2.2 million compared to a charge of $2.7 million
in fiscal 2001 and a credit of $1.1 million in fiscal 2000. The remaining inventories are valued on the first-in, first-out (FIFO) method. If the FIFO method of
accounting for inventories had been used, inventories would have been $45.5 million and $47.7 million higher at December 28, 2002 and December 29, 2001, respectively.



Property, plant and equipment are stated at cost. Assets under capitalized leases are recorded at the present value of future lease payments or fair market value,
whichever is lower. Expenditures which improve or extend the life of the respective assets are capitalized while maintenance and repairs are expensed as incurred. Interest costs primarily associated
with construction projects and software development in the amount of $0.3 million, $0.1 million and $0.9 million have been capitalized during 2002, 2001 and 1999, respectively.

Property,
plant and equipment are depreciated on a straight-line basis over the estimated useful lives of the assets which generally range from 10-40 years
for buildings
and improvements and 3-10 years for furniture, fixtures andequipment. Leasehold improvements and capitalized leases are amortized on a straight-line basis over the
shorter of the term of the lease or the useful life of the asset.



An impairment loss is recognized whenever events or changes in circumstances indicate the carrying amount of an asset is not recoverable. In applying Statement of
Financial Accounting Standards (SFAS) No. 144,Accounting for the Impairment or Disposal of Long-Lived Assets,assets are grouped and
evaluated at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets. The Company has generally identified this lowest
level to be individual stores; however, there are limited circumstances where, for evaluation purposes, stores could be considered with the distribution center they support. The Company allocates the
portion of the profit retained at the servicing distribution center to the individual store when performing the impairment analysis in order to determine the store's total contribution to the Company.
The Company considers historical performance and future estimated results in its evaluation of potential impairment. If the carrying amount of the asset exceeds expected undiscounted future cash
flows, the Company measures the amount of the impairment by comparing the carrying amount of the asset to its fair value, generally measured by discounting expected future cash flows at the rate the
Company utilizes to evaluate potential investments.



The Company is primarily self-insured for workers' compensation, general and automobile liability and Health insurance costs. It is the Company's
policy to record its self insurance liabilities based on claims filed and an estimate of claims incurred but not yet reported. Worker's compensation and general and automobile liabilities are
actuarially determined on a discounted basis. The Company has purchased stop-loss coverage to limit its exposure to any significant exposure on a per claim basis. Any projection of losses
concerning workers' compensation, general and automobile and health insurance

40

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liability
is subject to a considerable degree of variability. Among the causes of this variability are unpredictable external factors affecting future inflation rates, litigation trends, legal
interpretations, benefit level changes and claim settlement patterns.



Intangible assets, consisting primarily of goodwill resulting from business acquisitions, are carried at cost. Effective December 30, 2001, Nash Finch
implemented SAS No. 142,"Goodwill and Other Intangible Assets."The Company re-evaluates the carrying value of intangible assets for
impairment annually and/or when factors indicating impairment are present, using an undiscounted operating cash flow assumption.

In
June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other
Intangible Assets". SFAS No. 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized but instead be tested for impairment at
least annually. Separable intangible assets that are not deemed to have an indefinite life will continue to be amortized over their useful lives. The Company was required to apply the provisions of
SFAS No. 142 at the beginning of 2002. The Company has performed the required impairment test of goodwill upon adoption and at December 28, 2002 and determined that no impairment issues
exist. The Company had no intangible assets with indefinite useful lives as of December 28, 2002 or December 29, 2001. At December 28, 2002, the Company had $148.0 million
of goodwill on its consolidated balance sheet of which $99.0 million related to the retail segment, $23.2 million related to the food distribution segment and $25.8 million
related to the military segment. At December 29, 2001, the Company had $137.3 million of goodwill on its consolidated balance sheet of which $88.3 million related to the retail
segment, $23.2 million related to the food distribution segment and $25.8 million related to the military segment.

In
conjunction with SFAS No. 142 the following table provides a reconciliation of fiscal 2002, 2001 and 2000 reported net income excluding goodwill amortization (in thousands,
except per share amounts):

|                                                    |                                           | December 28,
2002 |        | December 29,
2001 |   | December 30,
2000
|--------------------------------------------------- | ----------------------------------------- | ----------------- | ------ | ----------------- | - | -----------------
|Reported net income:                                |                                           | $                 | 23,620 |                   | $ | 21,267           
|Add back: Goodwill amortization net of income taxes |                                           |                   |       |                   |   | 4,690            
|                                                    |                                           |                   |        |                   |   |                  
|Adjusted net income                                 |                                           | $                 | 23,620 |                   | $ | 25,957           
|                                                    |                                           |                   |        |                   |   |                  
|Basic earnings per share:                           |                                           |                   |        |                   |   |                  
|                                                    | Reported earnings per share               |                   | $      | 2.00              |   | $                
|                                                    | Goodwill amortization net of income taxes |                   |        |                  |   |                  
|                                                    |                                           |                   |        |                   |   |                  
|                                                    | Adjusted earnings per share               |                   | $      | 2.00              |   | $                
|                                                    |                                           |                   |        |                   |   |                  
|Diluted earnings per share:                         |                                           |                   |        |                   |   |                  
|                                                    | Reported earnings per share               |                   | $      | 1.95              |   | $                
|                                                    | Goodwill amortization net of income taxes |                   |        |                  |   |                  
|                                                    |                                           |                   |        |                   |   |                  
|                                                    | Adjusted earnings per share               |                   | $      | 1.95              |   | $                
|                                                    |                                           |                   |        |                   |   |                  

41

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Changes
in the net carrying amount of goodwill were as follows (in thousands):

Goodwill as of December 30, 2000

$
113,584Fiscal 2001 amortization expense


(5,915
)Retail acquisitions


29,668Goodwill as of December 29, 2001

$
137,337Retail acquisitions


10,691Goodwill as of December 28, 2002

$
148,028


Other
intangible assets included in other assets on the consolidated balance sheets were as follows (in thousands):

|                                |  | December 28, 2002 |        | December 29, 2001
|------------------------------- |  | ----------------- | ------ | -----------------
|
|Service contracts               |  | $                 | 10,358 |                  
|Tradenames                      |  |                   | 3,300  |                  
|Franchise agreements            |  |                   | 2,703  |                  
|Non-compete agreements          |  |                   | 2,014  |                  
|Leasehold interests             |  |                   | 1,726  |                  
|Consulting agreements and Other |  |                   | 823    |                  
|                                |  |                   |        |                  
|Total                           |  | $                 | 20,924 |                  
|                                |  |                   |        |                  

Aggregate
amortization expense recognized for fiscal 2002, 2001 and 2000 was $1.8 million, $2.1 million and $2.6 million, respectively. The aggregate amortization
expense for each of the five succeeding fiscal years is expected to be approximate $1.2 million. Intangible assets with a definite life are amortized on a straight-line basis over
estimated useful lives ranging from 4-25 years.



Deferred income taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled.



The Company accounts for derivative financial instruments pursuant to SFAS No. 133,Accounting for Derivative Instruments and
Hedging Activitiesas amended. SFAS No. 133 requires derivatives be carried at fair value on the balance sheet and provides for hedge accounting when certain conditions
are met.

The
Company has market risk exposure to changing interest rates primarily as a result of its borrowing activities and commodity price risk associated with anticipated purchases of diesel
fuel. The Company's objective in managing its exposure to changes in interest rates and commodity prices is to reduce fluctuations in earnings and cash flows. To achieve these objectives, the Company
uses derivative instruments, primarily interest rate and commodity swap agreements, to manage risk exposures when appropriate, based on market conditions. The Company does not enter into derivative
agreements for trading or other speculative purposes, nor is it a party to any leveraged derivative instrument.

42

---



As permitted by the provisions of SFAS No. 123, "Accounting for Stock-Based Compensation",the Company has
chosen to continue to apply Accounting Principles Board Opinion No. 25(APB 25), Accounting for Stock Issued to Employeesand related
interpretations in accounting for its stock option plans. As a result, the Company does not recognizecompensation costs if the option price equals or exceeds market price at date of grant. The
following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123,"Accounting
for Stock-Based Compensation",to stock-based employee compensation ($ in thousands, except per share amounts):

|                                                                                                                           |                     | 2002 |        | 2001   |   | 2000  
|-------------------------------------------------------------------------------------------------------------------------- | ------------------- | ---- | ------ | ------ | - | ------
|Reported net income                                                                                                        |                     | $    | 23,620 |        | $ | 21,267
|Total stock-based employee compensation expense determined under fair value based method for all option awards, net of tax |                     |      | 1,157  |        |   | 657   
|                                                                                                                           |                     |      |        |        |   |       
|                                                                                                                           | Adjusted net income |      | $      | 22,463 |   | $     
|                                                                                                                           |                     |      |        |        |   |       
|Reported basic earnings per share                                                                                          |                     | $    | 2.00   |        | $ | 1.83  
|                                                                                                                           |                     |      |        |        |   |       
|Adjusted basic earnings per share                                                                                          |                     | $    | 1.90   |        | $ | 1.77  
|                                                                                                                           |                     |      |        |        |   |       
|Reported diluted earnings per share                                                                                        |                     | $    | 1.95   |        | $ | 1.78  
|                                                                                                                           |                     |      |        |        |   |       
|Adjusted diluted earnings per share                                                                                        |                     | $    | 1.85   |        | $ | 1.72  
|                                                                                                                           |                     |      |        |        |   |       



The Company reports comprehensive income in accordance with SFAS No. 130, "Reporting Comprehensive Income". Comprehensive income refers to revenues,
expenses, gains and losses that are not included in net earnings, but rather are recorded directly in the Consolidated Statements of Stockholders' Equity.



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



In October 2001, the FASB issued SFAS No. 144,"Accounting for the Impairment or Disposal of Long-Lived
Assets",(SFAS No. 144). This statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144
retains and expands upon the fundamental provisions of existing guidance related to the recognition and measurement of the impairment of long-lived assets to be held and used and the
measurement of long-lived assets to be disposed of by sale and broadens the financial reporting presentation of discontinued operations to include more disposal transactions. On
December 30, 2001, the Company adopted SFAS No. 144. The standard did not have a significant effect on the consolidated financial statements.

In
April 2002, the FASB issued SFAS No. 145,"Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
Technical Corrections",(SFAS No. 145). SFAS No. 145 allows only gains and losses on the extinguishment of debt that meet the criteria of extraordinary items to
be treated as such in the financial statements. SFAS No. 145 also requires sales-leaseback accounting for certain lease modifications that have economic effects that are similar to
sales-leaseback transactions. Certain provisions of SFAS No. 145 are effective for transactions occurring after May 15,

43

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2002,
while the remaining provisions became effective for the Company on December 29, 2002. The standard did not and is not expected to have a significant impact on the consolidated financial
statements.

In
June 2002, the FASB issued SFAS No. 146,"Accounting for Costs Associated with Exit or Disposal Activities",(SFAS
No. 146). SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue
No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)".SFAS No. 146 applies to costs associated with an exit activity that does not involve an entity newly acquired in a business combination or with a
disposal activity covered by SFAS No. 144. The provisions of SFAS No. 146 are effective for exit or disposal activities that are initiated after December 31, 2002.

In
December 2002, The FASB issued SFAS No. 148,"Accounting for Stock-Based Compensation Transition and Disclosurean Amendment of FASB
Statement No. 123",(SFAS No. 148). SFAS No. 148 provides two additional transition methods for entities adopting the fair value method of accounting for
stock issued to employees and requires expanded disclosure regarding stock-based compensation in the Summary of Significant Accounting Polices in the Notes to the Consolidated Financial Statements.
The adoption of the standard did not have a financial impact on the consolidated financial statements. The expanded disclosure will be required in the Company's quarterly financial reports beginning
the first quarter of 2003.

In
November 2002, the FASB issued Interpretation No. 45,"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others,"(FIN 45). FIN 45 elaborates on the existing disclosure requirements for most guarantees, including residual value guarantees issued in
conjunction with operating lease agreements. It also clarifies 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 and must disclose that information in its interim and annual financial statements. The initial recognition and measurement provisions apply on a prospective basis to
guarantees issued or modified after December 31, 2002. The disclosure requirements are effective for financial statements of interim or annual periods ending after December 15, 2002. The
adoption of FIN 45 will have no impact on the Company's historical financial statements as existing guarantees are not subject to the measurement provisions of FIN 45. Future guarantees, if issued,
will be accounted for in accordance with this pronouncement.

Emerging
Issue Task Force (EITF) Issue No. 01-09,"Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of a
Vendor's Products)", which codified EITF Issue Nos. 00-14,"Accounting for Certain Sales Incentives";
00-22,"Accounting for Points and Certain Other Time-Based Sales and Incentive Offers"; and 00-25, "Vendor Income Statement Characterization of Consideration Paid to a Reseller of
the Vendor's Products"became effective for the Company on
December 30, 2001. These issues address the accounting for consideration given by a vendor to a customer or a reseller of the vendor's products. EITF No. 01-09 did not have a
significant effect on the consolidated financial statements.

EITF
Issue No. 02-16,"Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a
Vendor",addresses how a reseller of a vendor's products should account for cash consideration received from a vendor and how to measure that consideration in its income
statement.

In
January 2003, the EITF concluded that new arrangements, including modifications of existing arrangements entered into after December 31, 2002 should apply the treatment
outlined in EITF No. 02-16. If determinable, pro forma disclosure of the impact of the consensus on prior periods presented is encouraged. In March 2003, the EITF concluded
that entities may elect to early adopt the provisions of EITF No. 02-16 as a cumulative effect of change in accounting principle. The Company elected in the fourth quarter of fiscal
2002 to early adopt the provisions of EITF No. 02-16 at the

44

---

beginning
of fiscal 2002, and recognized a charge of $7.0 million, net of income taxes of $4.4 million, that represents the cumulative effect of a change in accounting principle as of
the beginning of fiscal 2002. The impact of the adoption of EITF No. 02-16 on the year ended December 28, 2002, excluding the cumulative effect adjustment, was an increase to
net earnings of $0.8 million, net of income taxes of $0.6 million.

The
approximate effect of the change in accounting principle impacts previously disclosed financial information for each quarter of 2002 as follows (in thousands):

Net
earnings

Net
earnings
per diluted
shareFirst quarter

$
927

$
0.08Second quarter


1,430


0.12Third quarter


(809
)

(0.07
)Fourth quarter


(709
)

(0.06
)Total

$
839

$
0.07


In
January 2003, the FASB issued FIN No. 46,"Consolidation of Variable Interest Entities". FIN No. 46 states that
companies that have exposure to the economic risks and potential rewards from another entity's assets and activities have a controlling financial interest in a variable interest entity and should
consolidate the entity, despite the absence of clear control through a voting equity interest. The consolidation requirements apply to all variable interest entities created after January 31,
2003. For variable interest entities that existed prior to February 1, 2003 the consolidation requirements are effective for annual or interim periods beginning after June 15, 2003,
regardless of when the variable interest was created. The Company is currently evaluating the impact the adoption of FIN No. 46 will have on the consolidated financial statements.

(2) Vendor Allowances and Credits

The Company participates with its vendors in a broad menu of promotions to increase sales of products. These promotions fall into two main categories:
off-invoice allowances and
performance- based allowances. These promotional arrangements are often subject to negotiation with the Company's vendors.

In
the case of off-invoice allowances, discounts are typically offered by vendors with respect to certain merchandise purchased by the Company during a specified period of
time. The Company uses off-invoice allowances to support a variety of marketing programs such as reduced price offerings for specific time periods, food shows, pallet promotions and
private label promotions. The discounts are either reflected directly on the vendor invoice, as a reduction from the normal wholesale prices for merchandise to which the allowance applies, or we are
allowed to deduct the allowance as an offset against the vendor's invoice when it is paid.

In
the case of performance-based allowances, the allowance or rebate is based on the Company's completion of some specific activity, such as purchasing or selling product during a
certain time period. This basic performance requirement may be accompanied by an additional performance requirement such as providing advertising or special in-store promotion, tracking
quantities of product sold (as is the case with count-recount promotions discussed below), slotting (adding a new item to the system) and merchandising a new item, or achieving certain minimum
purchase quantities. The billing for these performance-based allowances is normally in the form of a "bill-back" in which case the Company is invoiced at the regular price with the
understanding that the Company may bill back the vendor for the requisite allowance when the performance is satisfied.

45

---

Collectively with its vendors, the Company plans promotions and arrives at the amount the respective vendor plans to spend on promotions with the Company. The Company and the vendors
then monitor, review and discuss the results of such promotions, and resolve issues relating to promotions and billings. Each vendor has its own method for determining the amount of promotional funds
budgeted to be spent with the Company during the period. In most situations, the vendor allowances are based on units the Company purchased from the vendor. In other situations, the allowances are
based on its past or anticipated purchases and/or the anticipated performance of the planned promotions.

The
Company jointly negotiates with its vendors the promotional calendar that governs all promotions. Forecasting promotional expenditures is a critical part of the Company's twice
yearly planning sessions with its vendors. Most vendors work with the Company to project not just overall spending, but also spending on a category and regional basis. As individual promotions are
completed and the associated billing is processed, the vendors track the Company's promotional program execution and spend rate. The vendors discuss the tracking, performance and spend rate with the
Company on a regular basis throughout the year. Depending upon the vendor arrangements, such discussions can occur on a weekly, monthly, quarterly or annual basis. These communications include future
promotions, product cost, targeted retails and price points, anticipated volume, promotion expenditures, vendor maintenance, billing issues and procedures, new items/discontinued items, and trade
spend levels relative to budget per event and per year, as well as the resolution of any issues that arise between the vendor and the Company. In the future, the nature and menu of promotional
programs and the allocation of dollars among them may change as a result of ongoing negotiations and commercial relationships between vendors and the Company.

(3) Count-Recount Charges

As discussed above, the Company participates with its vendors in a broad menu of promotions to increase sales of products. Certain promotions require the Company
to track specific shipments of goods to retailers, or to customers in the case of the Company's own retail stores, during a specified period. At the end of the promotional period, the Company invoices
its vendors for the total promotional allowance based on the quantity of goods sold. This type of promotion, which is often referred to as "count-recount," requires wholesalers and retailers such as
the Company to incur significant administrative and other costs to manage such programs.

As
a result of the increased costs associated with count-recount program administration and implementation, the Company historically, but not uniformly, assessed an administrative fee to
recoup its reasonable costs of performing the tasks associated with administering these promotions. In some instances this fee was separately identified on the invoice to the vendor and in other
instances the
Company raised the invoice amounts by adding additional cases to the quantity of goods sold reflected on the invoices to vendors. Although the Company attempted to standardize the latter practice at a
range of between 15% and 20% on wholesale movement billings and approximately 12% on retail scan billings for its retail stores, the application of the practice was uneven across time and divisions.
The aggregate fees charged to vendors, represented as a percent of total count-recount promotional dollars, were approximately 17% in fiscal 2000 and 23% in fiscal 2001 and 2002. The Company's costs
associated with administering this program are estimated at approximately 20% of the total count-recount promotional dollars.

The
count-recount practice described above was established against a backdrop of what the Company believes was a common industry practice, of which vendors generally were aware. The
Company believes that its efforts to recapture count-recount costs by adding additional cases to the invoices in lieu of a separately delineated administrative fee were appropriate. The arrangements
between the Company and its vendors did not separately address or provide for the addition of such charges in lieu of a separately invoiced administrative fee. The Company's conclusion that its

46

---

accounting
for such charges has been correct, that the charges were appropriately recognized as a reduction of cost of sales in the period the product was sold and in which the count-recount
promotions were actually performed by the Company, is based on its overall relationship and method of doing business with our vendors.



Count-recount allowances are recorded as a reduction to cost of sales as performance has been completed and as the related inventory is sold. Count-recount
charges in lieu of administrative fees were approximately $6.7 million in fiscal 2000, $8.6 million in fiscal 2001 and $6.7 million through November 17, 2002 when the
Company, as a uniform practice across all divisions, began stating the administrative fee separately on the invoices to the vendor.



In November 2002, the Company met with its vendors, and brokers representing vendors, collectively comprising approximately 88% of its purchases that were
subject to count-recount charges in lieu of an administrative fee. In those meetings, the Company advised the vendors and brokers that (i) the Company had a historical practice of charging an
administrative fee either separately or, in most instances, by adding amounts to actual quantities sold in the range of 15% to 20% in lieu of an administrative fee, (ii) such fee had not always
been separately disclosed on invoices to vendors, (iii) the Company had attempted to standardize the practice in late 1999 at a range of 15% to 20%, (iv) the
Company had not been successful in standardizing such practice in that in some situations the application of the practice had been uneven across time and divisions resulting in a move away from a
fixed percentage and sometimes resulting in an uneven percentage being applied, and (v) in the future the Company would charge a flat fee set at a fixed percentage of sales, which would be
separately itemized on invoices. In those meetings, substantially all the vendors acknowledged the fees previously charged and none indicated that they would seek any refund based upon the past
practice. Subsequently, on November 26, 2002, the Company notified all of its vendors and brokers (including but not limited to those with whom the Company had met in person) in writing of its
prior and current practices related to count-recount. As of the date of these financial statements, none of its vendors or their brokers is requesting a return of any of the historical count-recount
Charges assessed, and none has indicated they will make a reduction in future promotional funding.



On October 9, 2002, the Company received a letter from the staff of the Division of Enforcement of the SEC indicating that they were conducting an informal
inquiry into the Company's process for assessing count-recount charges to the Company's vendors and how it accounts for those charges. In response, the Company commenced an internal review of its
practices in conjunction with the Audit Committee, special outside counsel and its prior and then-current auditors. The Company filed a written response to the inquiry on
November 22, 2002.

On
February 3, 2003, the Company provided the Office of the Chief Accountant of the SEC a written communication detailing the basis for the manner in which it assesses and
accounts for count-recount charges, advising that the Company believes these charges were properly accounted for in accordance with generally accepted accounting principles, seeking the SEC staff's
concurrence with this conclusion, and requesting a meeting with the staff of the Office of Chief Accountant at which these matters could be discussed. On February 4, 2003, the Company was
notified by the staff of the SEC's Division of Enforcement that the SEC had approved a formal order of investigation of the Company

Representatives
of the Company met with members of the staff of the SEC's Office of the Chief Accountant and Division of Corporation Finance on February 19, 2003. In a letter
dated March 7,

47

---

2003,
the staffs of the SEC's Office of the Chief Accountant and Division of Corporation Finance indicated that, based on the Company's oral and written representations, they would not object at that
time to the Company's accounting for the count-recount charges. The investigation by the SEC's Division of Enforcement is ongoing and the response by the staffs of the Office of the Chief Accountant
and the Division of Corporation Finance does not preclude any action by the Division of Enforcement.

(4) Business Acquisitions

On March 5, 2002, the Company acquired two stores in Chilton and Kiel, Wisconsin through a cash purchase of 100% of the net assets. The acquisition of
these stores resulted in goodwill of $1.9 million. Results of operations are included in the consolidated statements from the date of acquisition. The pro forma effects of the acquisition are
immaterial for disclosure.

On
August 13, 2001, the Company acquired U Save Foods, Inc. ("U Save"), through a cash purchase of 100% of U Save's outstanding capital stock. U Save was a privately held
retail grocery store chain operating 14 stores, primarily in Nebraska, with annual sales of approximately $145 million. The acquisition resulted in goodwill of $35.6 million which is not
required to be amortized in accordance with SFAS No. 142. Results of operations are included in the consolidated statements from the date of acquisition. The pro forma effects of the
acquisition are immaterial for disclosure.

On
January 30, 2000 the Company acquired Hinky Dinky Supermarkets, Inc. ("Hinky Dinky") through a cash purchase of all of Hinky Dinky's outstanding capital stock. Hinky
Dinky was a majority owner of twelve supermarkets located in Nebraska with annualized sales of approximately $90 million. Assets and liabilities assumed have been recorded at their fair values
at the date of acquisition resulting in goodwill of $14.2 million, which is not required to be amortized in accordance with SFAS No. 142. Results of operations are included in the
consolidated statements from the date of acquisition. The pro forma effects of the acquisition are immaterial for disclosure.

(5) Special Charges

The Company recorded special charges totaling $31.3 million in 1997 and $71.4 million (offset by $2.9 million of 1997 charge adjustments) in
1998. These charges impacted the Company's food distribution and retail segments and the produce growing and marketing business which was sold in 1999, and were designed to redirect the Company's
technologies efforts. All actions contemplated by the charges are complete. At December 28, 2002, the remaining accrued liability is $2.6 million and consists primarily of lease
commitments and pension and post-employment related obligations.

During
the third quarter of fiscal 2002, the Company reversed $0.63 million and $0.13 million of its 1998 and 1997 special charges, respectively, due to an agreement
reached to buyout the remaining lease for less than what we had originally estimated. In addition, during fiscal 2002, the Company recorded $0.9 million of pension benefits related to the
distribution segment and $2.5 million in continuing lease and exit costs related to closed retail stores through its 1997 and 1998 special charge reserves.

(6) Impairment Charges

Impairment charges of $6.6 million and $1.9 million were recorded for retail impairments in fiscal 2002 and 2001, respectively. These charges were
recorded with respect to fifteen stores in fiscal 2002 and five stores in fiscal 2001 due to increased competition within the stores respective market areas. The estimated undiscounted cash flows
related to these facilities indicated that the carrying value of the assets may not be recoverable based on current expectations, therefore these assets were written down in accordance with SFAS
No. 144.

48

---

(7) Accounts and Notes Receivable

Accounts and notes receivable at the end of fiscal years 2002 and 2001 are comprised of the following components (in thousands):

2002

2001Customer notes receivable, current

$
14,571

$
11,976Customer accounts receivable


140,960


147,869Other receivables


36,729


31,296Allowance for doubtful accounts


(26,733
)

(22,987
)Net current accounts and Notes receivable


165,527


168,154Long-term customer notes receivable


29,261


45,299Other noncurrent receivables


3,626


4,070Allowance for doubtful accounts


(291
)

(8,502
)Net long-term notes receivable

$
32,596

$
40,867


Operating
results include bad debt expense totaling $9.0 million, $4.8 million and $7.4 million during fiscal years 2002, 2001 and 2000, respectively. The increase
in bad debt expense from fiscal 2001 to fiscal 2002 is primarily due to a former customer that has filed for bankruptcy. The decrease in bad debt expense from fiscal 2000 to fiscal 2001 is primarily
due to a variety of accounts experiencing financial difficulty in fiscal 2000.

Substantially
all notes receivable are based on floating interest rates which adjust to changes in market rates. As a result, the carrying value of notes receivable approximates market
value.

(8) Long-term Debt and Credit Facilities

Long-term debt at the end of the fiscal years 2002 and 2001 is summarized as follows (in thousands):

2002

2001Revolving credit

$
79,400

$
40,000Term loan


100,000


100,000Senior subordinated debt, 8.5% due in 2008


164,310


164,178Industrial development bonds, 1.8% to 7.8% due in various installments through 2014


7,080


8,675Notes payable and mortgage notes, 3% to 11.5% due in various installments through 2018


11,995


12,175362,785


325,028Less current maturities


5,193


3,267$
357,592

$
321,761


In
December 2000, the Company completed the refinancing of a revolving credit facility. The credit agreement has a five year term and provides a $100 million term loan and
$150 million in revolving credit. Borrowings under the term loan bear interest at the Eurodollar rate plus a margin increase and a commitment commission on the unused portion of the revolver.
The margin increase and the commitment commission are reset quarterly based on movement of a leverage ratio defined by the agreement. At December 28, 2002, the margin and commitment commission
were 2.0% and 0.5%, respectively compared to 1.75% and 0.375% at the end of 2001. The agreement contains financial

49

---

covenants
which, among other matters require the Company to maintain predetermined ratio levels related to interest coverage, fixed charges, leverage and working capital.

The
refinancing resulted in the write-off of deferred financing costs, associated with the previous facility, which have been classified as an extraordinary charge in fiscal
2000 of $0.4 million, or $0.03 per share, net of tax benefit of $0.2 million.

At
December 28, 2002, the Company had three outstanding interest rate swap agreements which commenced on December 6, 2001, July 26, 2002 and December 6, 2002,
respectively to manage interest rates on a portion of its long-term debt. The agreements expire on June 6, 2003, September 25, 2004 and October 6, 2004 with notional
amounts of $35 million, $50 million and $35 million, respectively. The agreements call for an exchange of interest payments with the Company making payments based on fixed rates
of 2.97%, 2.75% and 3.5% for the respective time intervals and receiving payments based on floating rates, without an exchange of the notional amount upon which the payments are based. Interest rate
swap agreements are reflected at fair value in the Company's consolidated balance sheet and related losses of $1.2 million net of income taxes are deferred in stockholders' equity as a
component of other comprehensive income.

In
addition, the Company entered into an additional interest rate swap agreement commencing on June 6, 2003 and expiring on October 6, 2004, with a notional amount of
$35 million. The agreement calls for an exchange of interest payments with the Company making payments based on a fixed rate of 3.97% and receiving payments based on a floating rate, without an
exchange of the notional amount upon which the payments are based.

The
Company has outstanding letters of credit in the amounts of $17.4 million and $18.7 million at December 28, 2002 and December 29, 2001, respectively,
primarily supporting workers' compensation obligations.

At
December 28, 2002, land in the amount of $1.8 million and buildings and other assets with a depreciated cost of approximately $7.1 million are pledged to secure
outstanding mortgage notes and obligations under issues of industrial development bonds. In addition, borrowings under the credit facility are collaterized by a security interest in substantially all
remaining assets not pledged under other debt agreements, including those of wholly owned subsidiaries.

Aggregate
annual maturities of long-term debt for the five fiscal years after December 28, 2002 are as follows (in thousands):

2003

$
5,1932004


1,9732005


181,4092006


2,1912007


738Thereafter


171,281


Interest
paid was $28.4 million, $32.4 million and $37.9 million, for fiscal years 2002, 2001 and 2000, respectively.

Based
on borrowing rates currently available to the Company for long-term financing with similar terms and average maturities, the fair value of long-term debt,
including current maturities, utilizing discounted cash flows is $312.8 million.

On
February 13, 2003 the Company was notified by the Trustee for its $165.0 million 8.5% Senior Subordinated Notes, due in 2008, that a default had occurred under the
Indenture as a result of the Company's failure to file its Form 10-Q for the third quarter ended October 5, 2002 with the SEC and that, unless remedied within the
30 day grace period, such failure would constitute an event of default

50

---

under
the Indenture. In addition, if the default was not remedied within the 30 days, an event of default would also occur under the bank credit facility.

On
February 28, 2003 the Company announced that holders of more than 51% of its Senior Subordinated Notes agreed to waive the default under the Indenture. The waiver requires the
Company to file our Form 10-Q for the third fiscal quarter of 2002 by May 15, 2003. Such holders also agreed to extend the time for the Company to file its
Form 10-K for its fiscal year ended December 28, 2002 until May 30, 2003 and its Form 10-Q for the first fiscal quarter ended March 22, 2003
until June 15, 2003. In consideration for the waiver, the Company paid a fee to the bondholders equal to 1.5% of the outstanding principal amount of the notes.

On
March 26, 2003, the Company announced that the requisite number of bank lenders under its revolving credit facility had agreed to extend until June 15, 2003 the deadline
for submission to the lenders of its audited fiscal 2002 financial statements. The credit agreement had originally called for the Company to provide to its lenders its audited financial statements for
fiscal 2002 by March 28, 2003. In consideration for the amendment to the credit facility, the Company paid a fee to the bank lenders equal to 0.5% of the sum of its revolving loan commitments
and aggregate outstanding term loans as of the effective date of the amendment.

(9) Derivative Instruments

Effective December 31, 2000, the Company adopted Financial Accounting Standard Board Statement No. 133,Accounting for
Derivative Instruments and Hedging Activities(Statement No.133) as amended. SFAS No. 133 requires derivatives be carried at fair value on the balance sheet and provides
for hedge accounting when certain conditions are met.

The
Company has market risk exposure to changing interest rates primarily as a result of its borrowing activities and commodity price risk associated with anticipated purchases of diesel
fuel. The Company's objective in managing its exposure to changes in interest rates and commodity prices is to reduce fluctuations in earnings and cash flows. To achieve these objectives, the Company
uses derivative instruments, primarily interest rate and commodity swap agreements, to manage risk exposures when appropriate, based on market conditions. The Company does not enter into derivative
agreements for trading or other speculative purposes, nor is it a party to any leveraged derivative instrument.

The
interest rate swap and commodity swap agreements are designated as cash flow hedges and are reflected at fair value in the Company's consolidated balance sheet and the related gains
or losses on these contracts are deferred in stockholders' equity as a component of other comprehensive income. Deferred gains and losses are amortized as an adjustment to 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 perfectly effective 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.

Interest
rate swap agreements are entered into for periods consistent with related underlying exposures and do not constitute positions independent of those exposures. At
December 28, 2002, the Company had three outstanding interest rate swap agreements which commenced on December 6, 2001, July 26, 2002 and December 6, 2002, respectively to
manage interest rates on a portion of its long-term debt. The agreements expire on June 6, 2003, September 25, 2004 and October 6, 2004 with notional amounts of
$35 million, $50 million and $35 million, respectively. The agreements call for an exchange of interest payments with the Company making payments based on fixed rates of 2.97%,
2.75% and 3.5% for the respective time intervals and receiving payments based on floating rates, without an exchange of the notional amount upon which the payments are based.

51

---

In addition, at December 28, 2002, the Company had an outstanding commodity swap agreement, expiring in August 2003 with a notional amount of 3,500 barrels per month, or
approximately 40% of the Company's monthly fuel consumption to manage the Company's commodity price risk associated with anticipated purchases of diesel fuel. Interest rate and commodity swap
agreements are reflected at fair value in the Company's consolidated balance sheet and related losses of $1.2 million net of income taxes are deferred in stockholders' equity as a component of
other comprehensive income. The Company expects $0.8 million of the losses deferred in other comprehensive income to reverse during fiscal 2003.

In
addition, the Company entered into an additional interest rate swap agreement commencing on June 6, 2003 and expiring on October 6, 2004, with a notional amount of
$35 million. The agreement calls for an exchange of interest payments with the Company making payments based on a fixed rate of 3.97% and receiving payments based on a floating rate, without an
exchange of the notional amount upon which the payments are based.

(10) Income Taxes

Income tax expense attributable to continued operations is made up of the following components (in thousands):

2002

2001

2000Current:Federal

$
6,575

$
10,643

$
5,490State


1,205


2,114


1,091Tax credits


(62
)

(11
)

(7
)Deferred:


11,834


2,279


5,085Total

$
19,552

$
15,025

$
11,659


Total
income tax expense is allocated as follows:

2002

2001

2000Income from continuing operations

$
19,552

$
15,025

$
11,659Cumulative effect of change in accounting principle


(4,450
)




Extraordinary item








(271
)Total income tax expense

$
15,102

$
15,025

$
11,388


Income
tax expense differed from amounts computed by applying the federal income tax rate to pre-tax income as a result of the following:

2002

2001

2000Federal statutory tax rate

35.0
%
35.0
%
35.0
%State taxes, net of federal income tax benefit

3.9

4.2

4.2Non-deductible goodwill



2.9

3.7Other net

0.1

(0.7
)
(0.5
)Effective tax rate

39.0
%
41.4
%
42.4
%


Income
taxes paid (refunded) were $9.2 million, $4.6 million and $(0.4) million during fiscal years 2002, 2001 and 2000, respectively.

52

---

The
tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 28, 2002 and
December 29, 2001, are presented below (in thousands):

2002

2001Deferred tax assets:Inventories

$
346

$
954Provision for obligations to be settled in future periods


34,917


33,841Closed locations


2,099


2,000Other


1,179


2,215Total deferred tax assets


38,541


39,010Deferred tax liabilities:Depreciation and amortization


13,723


8,527Acquired asset adjustments for fair values


10,305


9,590Accelerated tax deductions


523


1,437Other





1,159Total deferred tax liabilities


24,551


20,713Net deferred tax asset

$
13,990

$
18,297


Temporary
differences for obligations to be settled in the future consist of deferred compensation, vacation, health benefits and other expenses which are not deductible for tax purposes
until paid.

The
Company has determined a valuation allowance for the net deferred tax asset is not required since it is more likely than not the deferred tax asset will be realized through carryback
to taxable income in prior years, future reversals of existing taxable temporary differences, future taxable income and tax planning strategies.

(11) Stockholder Rights Plan

Under the Company's 1996 Stockholder Rights Plan, one right is attached to each outstanding share of common stock. Each right entitles the holder to purchase,
under certain conditions, one-half share of common stock at a priceof $30.00 ($60.00 per full share). The rights are not yet exercisable and no separate rights certificates have been
distributed. All rights expire on March 31, 2006.

The
rights become exercisable 20 days after a "flip-in event" has occurred or 10 business days (subject to extension) after a person or group makes a tender offer for
15% or more of the Company's outstanding common stock. A flip-in event would occur if a person or group acquires (1) 15% of the Company's outstanding common stock, or (2) an
ownership level set by the Board of Directors at less than 15% if the person or group is deemed by the Board of Directors to have interests adverse to those of the Company and its stockholders. The
rights may be redeemed by the Company at any time prior to the occurrence of a flip-in event at $.01 per right. The power to redeem may be reinstated within 20 days after a
flip-in event occurs if the cause of the occurrence is removed.

Upon
the rights becoming exercisable, subject to certain adjustments or alternatives, each right would entitle theholder (other than the acquiring person or group, whose rights become
void) to purchase a number of shares of the Company's common stock having a market value of twice the exercise price of the right. If the Company is involved in a merger or other business combination,
or certain other events occur, each right would entitle the holder to purchase common shares of the acquiring company having a market value of twice the exercise price of the right. Within
30 days after the rights become exercisable following a flip-in event, the Board of Directors may exchange shares of Company common stock or cash or other property for exercisable
rights.

53

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(12) Stock-Based Compensation Plans

The Company follows APB 25 and related interpretations in accounting for its employee stock options. Under APB 25, when the exercise price of
employee stock options equals the market price of the underlying stock on the date of the grant, no compensation expense is recognized.

The
Company has four stock incentive plans under which incentive stock options, non-qualified stock options and other forms of stock-based compensation have been, or may be,
granted primarily to key employees and non-employee members of the Board of Directors. Under the 1995 Director Stock Option Plan ("1995 Plan"), each non-employee director
receives an annual grant of a non-qualified stock option covering 5,000 shares of the Company's common stock. Each option has an exercise price equal to the fair market value of a share of
the Company's stock on the date of grant, becomes fully exercisable six months after the date of grant, and has a five year term. The Company also maintains the 1997 Non-Employee Director
Stock Compensation Plan under which each non-employee director receives one-half of his or her annual retainer in shares of Company common stock. Each director may also defer
receipt of those shares as well as some or all of the balance of his or her annual director compensation until his or her service as a director has ended, and may elect payout of the cash amounts
deferred in shares of Company common stock.

Under
the 1994 Stock Incentive Plan ("1994 Plan"), employees of the Company could be awarded stock options, shares of restricted stock or performance units payable in cash, stock or
both. An award under the 1994 Plan was generally an incentive stock option that had an exercise price equal to the fair market value of a share of the Company's stock on the date of grant, that became
exercisable as to 20% of the shares covered by the option on the grant date and 12, 24, 36 and 48 months thereafter, and that had a term no longer than 10 years. No further awards of any
kind may be made under the 1994 Plan.

Under
the 2000 Stock Incentive Plan ("2000 Plan"), employees, non-employee directors and consultants may be awarded incentive or non-qualified stock options,
shares of restricted stock, stock appreciation rights, performance units or stock bonuses. To date, only employees have received awards under the 2000 Plan, and those awards have commonly been
non-qualified stock options with terms comparable to those of options granted under the 1994 Plan, except that any option is first exercisable six months after the date of the grant.
Awards of restricted stock in lieu of cash have been made under the 2000 Plan to certain employees in connection with the Company's annual bonus program for executives, with such shares subject to a
one-year vesting period. In addition, an award of 50,000 restricted shares was made to
the Company's CEO in February 2002, with 20% of such shares vesting on each of the first five anniversaries of the grant date. Under terms of the award, he has voting power over all of the
shares, and is entitled to receive ordinary cash dividends paid generally to shareholders. The award also provides for a cash payment on each vesting date in an amount equal to forty percent of the
fair market value of the shares vesting at that time to partially offset the taxes due upon vesting. Compensation expense is recognized over the periods during which the restrictions lapse.
Performance units have also been granted to three executives in exchange for phantom stock units those executives had accrued under a now discontinued bonus and deferred compensation plan.

The
Company also maintains the 1999 Employee Stock Purchase Plan under which Company employees may purchase shares of Company common stock at the end of each offering period at a price
equal to 85% of the lesser of the fair market value of a share of the Company's common stock at the beginning or end of such offering period. An offering period under the plan is typically six months,
although the Board of Directors extended the offering period that commenced July 1, 2002 until June 30, 2003. Employees purchased 43,026, 92,253 and 69,170 shares in fiscal 2002, 2001
and 2000, respectively, under this plan. At December 28, 2002 179,519 shares of additional common stock were available for purchase under the plan.

54

---

Changes
in outstanding options under the 1995 Plan, the 1994 Plan and the 2000 Plan during the three fiscal years ended December 28, 2002 are summarized as follows:

Shares

Weighted
Average
Option Price
Per Share(in thousands)Options outstanding January 1, 2000

613

$
13.15Exercised




Forfeited

(188
)

9.72Granted

519


9.01Options outstanding December 30, 2000

944


11.56Exercised

(130
)

13.63Forfeited

(137
)

13.96Granted

469


21.36Options outstanding December 29, 2001

1,146


15.04Exercised

(29
)

11.94Forfeited

(126
)

21.22Granted

354


29.93Options outstanding December 28, 2002

1,345

$
18.45


Stock
options totaling 734,474 and 454,684 were exercisable at December 28, 2002 and December 29, 2001, respectively.

The
following tables summarize information concerning currently outstanding and exercisable stock options at December 28, 2002:

Options OutstandingRanges of Exercise Prices

Number
Outstanding

Weighted
Average
Remaining
Contractual
Life

Weighted
Average
Exercise
Price$
7.25 - 14.50


486,250

2.51

$
9.1514.50 - 21.75


247,224

3.73


16.7321.75 - 29.00


351,050

3.59


22.8429.00 - 36.25


260,000

4.50


31.521,344,524

3.40

$
18.45Options ExercisableRanges of Exercise Prices

Number
Exercisable



Weighted
Average
Exercise
Price$
7.25 - 14.50


296,950



$
8.9314.50 - 21.75


244,824




16.7121.75 - 29.00


147,500




22.4929.00 - 36.25


45,200




31.19734,474



$
15.62


The
weighted average fair value of options granted during 2002, 2001 and 2000 are $8.42, $6.81 and $1.99 respectively. The fair value of each option grant is estimated as of the date of
grant using the

55

---

Black-Scholes
single option pricing model assuming a weighted average risk-free interest rate of 2.74%, an expected dividend yield of 4.66%, expected lives of two and one-half
years and volatility of 55%. Pro forma compensation cost for the stock incentive plans would reduce our net income as described in the "Summary of Significant Accounting Policies" as required by SFAS
No. 148.

(13) Earnings per Share

The following table sets forth the computation of basic and diluted earnings per share for continuing operations (in thousands, except per share amounts):

2002

2001

2000Numerator:Earnings before extraordinary charge and cumulative effect of change in accounting principle

$
30,580

$
21,267

$
15,840Denominator:Denominator for basic earnings per share (weighted-average shares)


11,796


11,624


11,443Effect of dilutive options and awards


318


335


52Denominator for diluted earnings per share (adjusted weighted-average shares)


12,114


11,959


11,495Basic earnings per share

$
2.59

$
1.83

$
1.38Diluted earnings per share

$
2.52

$
1.78

$
1.38


(14) Leases

A substantial portion of the store and warehouse properties of the Company are leased. The following table summarizes assets under capitalized leases (in
thousands):

2002

2001Buildings and improvements

$
42,040

$
40,860Less accumulated amortization


(15,374
)

(13,334
)Net assets under capitalized leases

$
26,666

$
27,526


Total
future minimum sublease rents receivable related to operating and capital lease obligations as of December 28, 2002 are $71.2 million and $31.8 million,
respectively. Future minimum payments for operating and capital leases have not been reduced by minimum sublease rentals receivable under

56

---

non-cancelable
subleases. At December 28, 2002, future minimum rental payments under non-cancelable leases and subleases are as follows (in thousands):

Operating
leases

Capital
leases2003

$
30,309

$
7,9062004


28,382


7,8672005


25,134


7,7342006


20,510


7,6272007


17,890


7,591Thereafter


78,373


58,466Total minimum lease payments

$
200,598

$
97,191Less imputed interest
(rates ranging from 7% to 24.6%)





47,103Present value of net minimum lease payments





50,088Less current maturities





(2,304
)Capitalized lease obligations




$
47,784


Total
rental expense under operating leases for fiscal years 2002, 2001 and 2000 is as follows (in thousands):

2002

2001

2000Total rentals

$
43,858

$
45,648

$
43,431Less real estate taxes, insurance and other occupancy costs


(3,805
)

(3,378
)

(2,692
)Minimum rentals


40,053


42,270


40,739Contingent rentals


(175
)

(175
)

51Sublease rentals


(14,092
)

(15,687
)

(15,575
)$
25,786

$
26,408

$
25,215


Most
of the Company's leases provide that the Company pay real estate taxes, insurance and other occupancy costs applicable to the leased premises. Contingent rentals are determined on
the basis of a percentage of sales in excess of stipulated minimums for certain store facilities. Operating leases often
contain renewal options. Management expects that, in the normal course of business, leases that expire will be renewed or replaced by other leases.

(15) Concentration of Credit Risk

The Company provides financial assistance in the form of loans to some of its independent retailers for inventories, store fixtures and equipment and store
improvements. Loans are generally secured by liens on real estate, inventory and/or equipment, personal guarantees and other types of collateral, and are generally repayable over a period of five to
seven years. The Company establishes allowances for doubtful accounts based upon periodic assessments of the credit risk of specific customers, collateral value, historical trends and other
information. The Company believes that adequate provisions have been recorded for any doubtful accounts. In addition, the Company may guarantee lease and debt obligations of retailers. In the event
these retailers are unable to meet their debt service payments or otherwise experience an event of default, the Company would be unconditionally liable for the outstanding balance of their debt and
lease obligations, which would be due in accordance with the underlying agreements.

57

---

As
of December 28, 2002, one retailer comprises 29.9% of the Company's notes receivable balance. In addition, the Company has guaranteed outstanding debt and lease obligations of
a number of retailers in the amount of $26.5 million, including $13.5 million in loan guarantees to two larger retailers.

(16) Fair Value of Financial Instruments

The estimated fair value of notes receivable approximates the carrying value at December 28, 2002 and December 29, 2001. Substantially all notes
receivable are based on floating interest rates which adjust to changes in market rates.

The
estimated fair value of the Company's long-term debt, including current maturities, was $312.8 million and $316.0 million at December 28, 2002 and
December 29, 2001, respectively, utilizing discounted cash flows.

The
estimated fair value of the Company's interest rate swap agreements is the estimated amount the Company would have to pay or receive to terminate the agreements based upon quoted
market prices as provided by the financial institutions which are counter parties to the agreements.

The
estimated fair value of the Company's commodity fuel hedge agreement is the estimated amount the Company would have to pay or receive to terminate the agreement based upon quoted
market prices as provided by the financial institution which is the counterparty to the commodity agreement.

(17) Commitments and Contingencies



Between December 2002 and March 2003, seven class action lawsuits were filed against the Company and certain of its executive officers in the United
States District Court for the District of Minnesota on behalf of purchasers of the Company's common stock during the period from February 23, 2000 through February 4, 2003. The
complaints generally allege that the defendants violated the Securities Exchange Act of 1934 by issuing false statements, including false financial results in which the Company included income from
vendor promotions to which the Company was not entitled, so as to maintain favorable credit ratings on its debt. Three derivative actions have also been filed in state court in Minnesota by
shareholders alleging that certain officers and directors violated duties to the Company to oversee and administer the Company's accounting. These actions are directly tied to the allegations in the
federal securities actions. The Company believes that the lawsuits are without merit and intends to vigorously defend the actions. No damages have been specified. The Company is unable to evaluate the
likelihood of prevailing in the case at this early stage of the proceedings, but does not believe that the eventual outcome will have a material impact on its financial position or results of
operations.



On October 9, 2002, the Company received a letter from the staff of the Division of Enforcement of the SEC indicating that they were conducting an informal
inquiry into our process for assessing count-recount charges to the Company's vendors and how it accounts for those charges. In response, it commenced an internal review of its practices in
conjunction with the Audit Committee, special outside counsel and its prior and then-current auditors. The Company filed a written response to the inquiry on November 22, 2002.

58

---

On February 3, 2003, the Company provided the Office of the Chief Accountant of the SEC a written communication detailing the basis for the manner in which it assesses and
accounts for count-recount charges, advising that the Company believes these charges were properly accounted for in accordance with generally accepted accounting principles, seeking the SEC staff's
concurrence with this conclusion, and requesting a meeting with the staff of the Office of Chief Accountant at which these matters could be discussed. On February 4, 2003, the Company was
notified by the staff of the SEC's Division of Enforcement that the SEC had approved a formal order of investigation of the Company.

Representatives
of the Company met with members of the staff of the SEC's Office of the Chief Accountant and Division of Corporation Finance on February 19, 2003. In a letter
dated March 7, 2003, the staffs of the SEC's Office of the Chief Accountant and Division of Corporation Finance indicated that, based on our oral and written representations, they would not
object at that time to the Company's accounting for the count-recount charges. The investigation by the SEC's Division of Enforcement is ongoing and the response by the staffs of the Office of the
Chief Accountant and the Division of Corporation Finance does not preclude any action by the Division of Enforcement.

(18) Long-Term Compensation Plans

The Company has a profit sharing plan which includes a 401(k) feature, covering substantially all employees meeting specified requirements. Contributions,
determined by the Board of Directors, are made to a noncontributory profit sharing trust based on profit performances. Profit sharing expense for 2002, 2001 and 2000 was $4.7 million,
$4.9 million and $3.3 million, respectively. Effective January 1, 2003, the Company added a Company match feature to its 401(k) plan. The contribution expense for the 401(k) plan
will be netted against the profit sharing plan before contributions are made to the noncontributory profit sharing trust.

On
January 1, 2000, the Company adopted a Supplemental Executive Retirement Plan ("SERP") for key employees and executive officers. On the last day of the calendar year, each
participant's SERP account is credited with an amount equal to 20% of the participant's base salary for the year. Benefits payable under the SERP vest based on years of participation in the SERP,
ranging from 0% vested for less than five years of participation to 100% vested at 10 years' participation (or age 60 if that occurs sooner). Amounts credited to a SERP account, plus earnings,
are distributed following the executive's termination of employment. Earnings are based on the quarterly equivalent of the average of the annual yield set forth for each month during the quarter in
the Moody's Corporate Bond Yield Averages. Compensation expense related to the plan was $0.6 million, $0.5 million and $0.5 million in 2002, 2001 and 2000, respectively.

The
Company also has an income deferral plan for a select group of management or highly compensated employees. The plan is an unfunded pension plan which permits eligible executives to
defer receipt of a portion of the base salary or annual bonus that would otherwise be paid to them. The deferred amounts, plus earnings, are distributed following the executive's termination of
employment. Earnings are based on the quarterly equivalent of the average of the annual yield set forth for each month during the quarter in the Moody's Corporate Bond Yield Averages.

(19) Pension and Other Post-retirement Benefits

The Company has a qualified non-contributory retirement plan to provide retirement income for certain eligible full-time employees who are
not covered by a union retirement plan. Pension benefits under the plan are based on length of service and compensation. The Company contributes amounts necessary to meet minimum funding requirements.
This plan has been curtailed and no new employees can enter the plan.

The
Company provides certain health care benefits for retired employees not subject to collective bargaining agreements. Employees become eligible for those benefits when they reach
normal

59

---

retirement
age and meet minimum age and service requirements. Health care benefits for retirees are provided under a self-insured program administered by an insurance company.

The
accumulated postretirement benefit obligation was reduced by $9.1 million in 2002 due to a plan amendment effective June 20, 2002. The amendment to the plan:
(1) froze entry into the plan for employees hired after June 30, 2002, (2) eliminated coverage for employees whose age plus service were less than 50 as of June 30, 2002,
and (3) capped the medical benefits to be provided effective July, 1, 2002 at $175 a month for pre-65 retirees and $70 a month for post-65 retirees.

The
estimated future cost of providing post-retirement health costs is accrued over the active service life of the employees. The following table sets forth the benefit
obligations and funded status of the curtailed pension plan and post-retirement benefits.

The
actuarial present value of benefit obligations and funded plan status of December 28, 2002 and December 29, 2001 were (in thousands):

PENSION BENEFITS

OTHER BENEFITS2002

2001

2002

2001Change in benefit obligationBenefit obligation at beginning of year

$
(37,434
)
$
(35,634
)
$
(22,377
)
$
(22,400
)Service cost


(42
)

(61
)

(402
)

(1,122
)Interest cost


(2,759
)

(2,716
)

(737
)

(1,420
)Amendment








9,050


(347
)Participant contributions








(808
)

(778
)Actuarial (loss) gain


(3,599
)

(1,696
)

3,255


1,079Benefits paid


2,720


2,673


2,820


2,611Benefit obligation at end of year


(41,114
)

(37,434
)

(9,199
)

(22,377
)Change in plan assetsFair value of plan assets at beginning of year


36,034


38,799





Actual return on plan assets


(402
)

(92
)




Contributions to plan








2,820


2,611Benefits paid


(2,720
)

(2,673
)

(2,820
)

(2,611
)Fair value of plan assets at end of year


32,912


36,034





Funded status


(8,202
)

(1,400
)

(9,199
)

(22,377
)Unrecognized actuarial loss (gain)


10,608


4,202


5,298


9,082Unrecognized transition obligation











2,719Unrecognized prior service cost


(76
)

(91
)

(4,788
)

992Prepaid (accrued) benefit cost

$
2,330

$
2,711

$
(8,689
)
$
(9,584
)


PENSION BENEFITS

OTHER BENEFITS2002

2001

2002

2001Weighted-average assumptionsDiscount rate

6.75
%
7.50
%
6.75
%
7.50
%Expected return on plan assets

8.00
%
8.00
%


Rate of compensation increase

4.00
%
5.00
%





At
December 28, 2002 the accumulated benefit obligation exceeded the plan assets. Accordingly, the Company recorded an additional minimum liability in the amount
of $6.5 million, the offset of which is recorded, net of tax benefit of $2.6 million, as a reduction of comprehensive income. At December 29, 2001 the Company recorded an
additional minimum liability in the amount of $4.0 million, the offset of which is recorded, net of a tax benefit of $1.6 million, as a reduction of comprehensive income.

60

---

The
aggregate costs for the Company's retirement benefits included the following components (in thousands):

Components of net periodic benefit cost (income)

PENSION BENEFITS

OTHER BENEFITS2002

2001

2000

2002

2001

2000Service cost

$
42

$
61

$
92

$
402

$
1,122

$
887Interest cost


2,759


2,716


2,675


737


1,420


1,509Expected return on plan assets


(2,448
)

(2,673
)

(2,900
)







Amortization of prior service costs


(15
)

(15
)

(15
)







Recognized actuarial (gain) loss


43














Amortization of unrecognized transition obligation











(22
)

828


688Amortization of unrecognized net (gain) loss








(24
)







Net periodic benefit cost (income)

$
381

$
89

$
(172
)
$
1,117

$
3,370

$
3,084


Assumed
health care cost trend rates have a significant effect on the 2002 amounts reported for the health care plans. The assumed annual rate of future increases in per
capita cost of health care benefits was 10.0% in fiscal 2002 declining gradually to 5.5% in 2008 and thereafter. A one-percentage point change in assumed health care cost trend rates would
have the following effects (in thousands):

1%
Increase

1%
DecreaseEffect on total of service and interest cost components

$
24

(22
)Effect on post-retirement benefit obligation


207

(192
)


Approximately
4.6% of the Company's employees are covered by collectively-bargained pension plans. Contributions are determined in accordance with the provisions of
negotiated union contracts and are generally based on the number of hours worked. The Company does not have the information available to reasonably estimate its share of the accumulated plan benefits
or net assets available for benefits under the multi-employer plans. Amounts contributed to those plans were $2.3 million, $2.3 million and $2.5 million in 2002, 2001 and 2000,
respectively.

(20) Segment Information

The Company and its subsidiaries sell and distribute products that are typically found in supermarkets. The Company has three reportable operating segments. The
Company's food distribution segment consists of 15 distribution centers that sell to independently operated retail food stores, 109 corporate-owned retail food stores, and institutional customers. The
retail segment consists of corporate-owned stores that sell directly to the consumer. The military distribution segment consists of two distribution centers that sell products exclusively to military
commissaries.

Information
presented below relates only to results of continuing segments. The Company evaluates segment performance and allocates resources based on profit or loss before income taxes,
general corporate expenses, interest, restructuring charges and earnings from equity investments. The accounting policies of the reportable segments are the same as those described in the summary of
accounting policies except the Company accounts for inventory on a FIFO basis at the segment level compared to a LIFO basis at the consolidated level.

Inter-segment
sales are recorded on a market price-plus-fee and freight basis. For segment financial reporting purposes, a portion of the operational profits
recorded at the Company's distribution centers related to corporate-owned stores is allocated to the retail segment. Certain

61

---

revenues
and costs from the Company's distribution centers are specifically identifiable to either the independent or corporate-owned stores that they serve. The revenues and costs that are
specifically identifiable to corporate-owned stores are allocated to the retail segment. Those that are specifically identifiable to independent customers are recorded in the wholesale segment. The
remaining revenues and costs that are not specifically identifiable to either the independent or corporate-owned stores are allocated to the retail segment as a percentage of corporate-owned store
distribution sales to total distribution center sales. For fiscal 2002, 37% of such warehouse operational profits were allocated to the retail operations compared to 34% and 36% in 2001 and 2000,
respectively. Prior year's segment information has been restated to reflect reclassifications of certain transactions from revenues to expense or cost of sales, changes in the method of allocating
marketing revenues, and an allocation of a military management fee to the military segment.

Schedules

|Year end December 28, 2002
(in thousands)          |  | Food
Distribution |           | Retail |   | Military  |   | Total |          
|-------------------------------------------------- |  | ----------------- | --------- | ------ | - | --------- | - | ----- | ---------
|Revenue from external customers                    |  | $                 | 1,825,788 |        | $ | 1,028,174 |   | $     | 1,020,710
|Inter-segment revenue                              |  |                   | 553,287   |        |   |          |   |       |         
|Interest revenue                                   |  |                   | (454      | )      |   | (338      | ) |       |         
|Interest expense (includes capital lease interest) |  |                   | (443      | )      |   | 3,302     |   |       |         
|Depreciation and amortization expense              |  |                   | 10,507    |        |   | 12,851    |   |       | 1,420    
|Segment profit                                     |  |                   | 61,493    |        |   | 33,738    |   |       | 30,336   
|Segment assets                                     |  |                   | 379,166   |        |   | 160,673   |   |       | 132,170  
|Expenditures for long-lived assets                 |  |                   | 8,126     |        |   | 22,894    |   |       | 1,604    

|Year end December 29, 2001
(in thousands)          |  | Food
Distribution |           | Retail |   | Military  |   | Total |        
|-------------------------------------------------- |  | ----------------- | --------- | ------ | - | --------- | - | ----- | -------
|Revenue from external customers                    |  | $                 | 1,951,384 |        | $ | 1,035,154 |   | $     | 995,668
|Inter-segment revenue                              |  |                   | 575,301   |        |   |          |   |       |       
|Interest revenue                                   |  |                   | (741      | )      |   | (339      | ) |       |       
|Interest expense (includes capital lease interest) |  |                   | (724      | )      |   | 2,847     |   |       |       
|Depreciation and amortization expense              |  |                   | 12,427    |        |   | 12,771    |   |       | 1,373  
|Segment profit                                     |  |                   | 60,717    |        |   | 38,751    |   |       | 31,366 
|Segment assets                                     |  |                   | 386,088   |        |   | 169,051   |   |       | 133,223
|Expenditures for long-lived assets                 |  |                   | 20,484    |        |   | 8,909     |   |       | 1,721  

|Year end December 30, 2000
(in thousands)          |  | Food
Distribution |           | Retail |   | Military  |   | Total |        
|-------------------------------------------------- |  | ----------------- | --------- | ------ | - | --------- | - | ----- | -------
|Revenue from external customers                    |  | $                 | 1,841,653 |        | $ | 1,028,961 |   | $     | 968,885
|Inter-segment revenue                              |  |                   | 584,216   |        |   |          |   |       |       
|Interest revenue                                   |  |                   | (2,724    | )      |   | (349      | ) |       |       
|Interest expense (includes capital lease interest) |  |                   | (221      | )      |   | 2,469     |   |       |       
|Depreciation and amortization expense              |  |                   | 14,990    |        |   | 12,215    |   |       | 1,888  
|Segment profit                                     |  |                   | 47,783    |        |   | 33,290    |   |       | 28,637 
|Segment assets                                     |  |                   | 402,234   |        |   | 164,202   |   |       | 139,329
|Expenditures for long-lived assets                 |  |                   | 11,273    |        |   | 33,931    |   |       | 875    

62

---

Reconciliation (In thousands)

|                                               |                                 | 2002 |           | 2001      |   | 2000      |          
|---------------------------------------------- | ------------------------------- | ---- | --------- | --------- | - | --------- | ---------
|Revenues                                       |                                 |      |           |           |   |           |          
|Total external revenue for segments            |                                 | $    | 3,874,672 |           | $ | 3,982,206 |          
|Inter-segment revenue from reportable segments |                                 |      | 553,287   |           |   | 575,301   |          
|Elimination of intra-segment revenue           |                                 |      | (553,287  | )         |   | (575,301  | )        
|                                               |                                 |      |           |           |   |           |          
|                                               | Total consolidated revenues     |      | $         | 3,874,672 |   | $         | 3,982,206
|                                               |                                 |      |           |           |   |           |          
|Profit or Loss                                 |                                 |      |           |           |   |           |          
|Total profit for segments                      |                                 | $    | 125,567   |           | $ | 130,834   |          
|Unallocated amounts:                           |                                 |      |           |           |   |           |          
|                                               | Adjustment of LIFO to inventory |      |           | 2,234     |   |           | (2,661   
|                                               | Unallocated corporate overhead  |      |           | (78,434   | ) |           | (91,881  
|                                               | Special charges                 |      |           | 765       |   |           |         
|                                               |                                 |      |           |           |   |           |          
|Income before income taxes                     |                                 | $    | 50,132    |           | $ | 36,292    |          
|                                               |                                 |      |           |           |   |           |          
|Assets                                         |                                 |      |           |           |   |           |          
|Total assets for segments                      |                                 | $    | 672,009   |           | $ | 688,362   |          
|Unallocated corporate assets                   |                                 |      | 328,643   |           |   | 338,907   |          
|Accumulated LIFO reserves                      |                                 |      | (45,519   | )         |   | (47,753   | )        
|Elimination of intercompany receivables        |                                 |      | (7,141    | )         |   | (9,271    | )        
|                                               |                                 |      |           |           |   |           |          
|                                               | Total consolidated assets       |      | $         | 947,992   |   | $         | 970,245  
|                                               |                                 |      |           |           |   |           |          

Other Significant Items2002

|                                      |  | Segment
Totals |        | Adjustments |   | Consolidated
Totals
|------------------------------------- |  | -------------- | ------ | ----------- | - | -------------------
|Depreciation and amortization expense |  | $              | 24,778 |             | $ | 15,210             
|Interest expense                      |  |                | 2,859  |             |   | 26,631             
|Expenditures for long-lived assets    |  |                | 32,624 |             |   | 19,981             

Other Significant Items2001

|                                      |  | Segment
Totals |        | Adjustments |   | Consolidated
Totals
|------------------------------------- |  | -------------- | ------ | ----------- | - | -------------------
|Depreciation and amortization expense |  | $              | 26,571 |             | $ | 20,030             
|Interest expense                      |  |                | 2,123  |             |   | 32,180             
|Expenditures for long-lived assets    |  |                | 31,114 |             |   | 12,810             

Other Significant Items2000

|                                      |  | Segment
Totals |        | Adjustments |   | Consolidated
Totals
|------------------------------------- |  | -------------- | ------ | ----------- | - | -------------------
|Depreciation and amortization expense |  | $              | 29,093 |             | $ | 16,237             
|Interest expense                      |  |                | 2,248  |             |   | 32,196             
|Expenditures for long-lived assets    |  |                | 46,079 |             |   | 7,987              

63

---

The reconciling items to adjust expenditures for depreciation, interest revenue, interest expense and expenditures for long-lived assets are for unallocated general corporate
activities. All revenues are attributed to and all assets are held in the United States. The Company's market areas are in the Midwest, Mid-Atlantic and Southeast United States.

(21) Subsidiary Guarantees

The following table presents summarized combined financial information for certain wholly owned subsidiaries which guarantee on a full unconditional and joint and
several basis, $165.0 million of senior subordinated notes due May 1, 2008, which were offered and sold by the Company on April 24, 1998:

Summarized
financial information for the year ended December 28, 2002 (in thousands):

Nash
Finch

Guarantor
Subsidiaries

Elimination

ConsolidatedCurrent assets

$
331,992

$
141,829

$
(5,540
)
$
468,281Non-current assets


655,153


47,041


(222,553
)

479,641Current liabilities


279,120


37,450


(7,314
)

309,256Non-current liabilities


410,654


23,542


(17,009
)

417,187Sales


3,027,101


1,057,740


(210,169
)

3,874,672Operating expenses


2,983,286


1,051,423


(210,169
)

3,824,540Operating profit


43,815


6,317





50,132Net earnings


19,826


3,794





23,620


Summarized
financial information for the year ended December 29, 2001 (in thousands):

Nash
Finch

Guarantor
Subsidiaries

Elimination

ConsolidatedCurrent assets

$
333,721

$
145,507

$
136

$
479,364Non-current assets


659,269


57,606


(225,994
)

490,881Current liabilities


348,358


48,150


(12,884
)

383,624Non-current liabilities


371,163


23,901


(11,851
)

383,213Sales


3,084,317


1,082,307


(184,418
)

3,982,206Operating expenses


3,065,258


1,065,074


(184,418
)

3,945,914Operating profit


20,099


16,193





36,292Net earnings


11,495


9,772





21,267


Summarized
financial information for the year ended December 30, 2000 (in thousands):

Nash
Finch

Guarantor
Subsidiaries

Elimination

ConsolidatedCurrent assets

$
282,800

$
146,946

$
3,793

$
433,539Non-current assets


554,965


106,331


(214,007
)

447,289Current liabilities


293,911


42,764


(11,889
)

324,786Non-current liabilities


334,370


44,944


(7,812
)

371,502Sales


2,897,595


1,099,719


(157,815
)

3,839,499Operating expenses


2,883,084


1,086,731


(157,815
)

3,812,000Operating profit


15,655


11,844





27,499Net earnings


8,664


6,807





15,471


64

---



NASH FINCH COMPANY AND SUBSIDIARIES  Quarterly Financial Information (Unaudited)

|                                                                                     |                                              | First Quarter
12 Weeks |         | Second Quarter
12 Weeks |   | Third Quarter
16 Weeks |      | Fourth Quarter
12 Weeks
|------------------------------------------------------------------------------------ | -------------------------------------------- | ---------------------- | ------- | ----------------------- | - | ---------------------- | ---- | -----------------------
|
|
|Sales(1)                                                                             |                                              | $                      | 894,575 |                         | $ | 877,595                |      | $                      
|Cost of sales(1)                                                                     |                                              |                        | 788,639 |                         |   | 776,604                |      |                        
|Earnings before income taxes and cumulative effect of change in accounting principle |                                              |                        | 11,291  |                         |   | 5,554                  |      |                        
|Income taxes                                                                         |                                              |                        | 4,505   |                         |   | 2,299                  |      |                        
|Net earnings before cumulative effect of change in accounting principle              |                                              |                        | 6,786   |                         |   | 3,255                  |      |                        
|Cumulative effect of change in accounting principle, net of income tax benefit(2)    |                                              |                        | (6,960  | )                       |   |                       |      |                        
|Net earnings(2)                                                                      |                                              |                        | (174    | )                       |   | 3,255                  |      |                        
|Percent to sales and revenues(2)                                                     |                                              |                        | (0.02   | )                       |   | 0.37                   |      |                        
|Basic earnings per share                                                             |                                              |                        |         |                         |   |                        |      |                        
|                                                                                     | Earnings before cumulative accounting change |                        | $       | 0.58                    |   | $                      | 0.28 |                        
|                                                                                     | Net earnings                                 |                        | $       | (0.01                   | ) | $                      | 0.28 |                        
|Diluted earnings per share                                                           |                                              |                        |         |                         |   |                        |      |                        
|                                                                                     | Earnings before cumulative accounting charge |                        | $       | 0.56                    |   | $                      | 0.28 |                        
|                                                                                     | Net earnings                                 |                        | $       | (0.01                   | ) |                        | 0.28 |                        

---

First
Quarter
2002

Second
Quarter
2002

Third
Quarter
2002Sales

$
894,575

$
908,266

$
1,191,072Cost of sales


792,389


801,288


1,053,610Earnings before income taxes and cumulative effect of change in accounting principle


9,749


13,415


11,891Income taxes


3,890


5,352


4,429Net earnings before cumulative effect of change in accounting principle


5,859


8,063


7,462Cumulative effect of change in accounting principle, net of income tax benefit








Net earnings


5,859


8,063


7,462Basic earnings per share

$
0.50

$
0.68

$
0.63Diluted earnings per share

$
0.48

$
0.66

$
0.61


65

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Information regarding changes in our principal independent accountants during fiscal 2002 and the first fiscal quarter of 2003 is incorporated herein by reference
to Exhibit 99.2.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

A.    DIRECTORS OF THE REGISTRANT.

Information Regarding Directors

The following information is provided concerning the directors of Nash Finch as of April 30, 2003:

|Three-year terms expiring in 2003:          
|--------------------------------------------
|Jerry L. FordDirector since 1997
Age 62     
|Robert F. NashDirector since 1968
Age 69    
|John E. StokelyDirector since 1999
Age 50   
|Three year terms expiring in 2004:          
|Allister P. GrahamDirector since 1992
Age 67
|                                            

66

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|Ron MarshallDirector since 1998
Age 49         |  | Mr. Marshall has served as the Chief Executive Officer of Nash Finch since June 1998, and served as the President of Nash Finch from June 1998 to September 2002. Mr. Marshall previously served as Executive Vice President and Chief
Financial Officer of Pathmark Stores, Inc., a retail grocery store chain, from September 1994 to May 1998.                                                                                                                                                                                                                        
|---------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Laura SteinDirector since 2001
Age 41          |  | Ms. Stein has served as Senior Vice President and General Counsel of H. J. Heinz Company, a global marketer and manufacturer of branded food products, since January 2000. She previously served in various positions in the Legal Services
Department of The Clorox Company, a global manufacturer of branded household products, from May 1992 to December 1999, last holding the position of Assistant General CounselRegulatory Affairs.                                                                                                                            
|Three year terms expiring in 2005:            
|Carole F. BitterDirector since 1993
Age 57     |  | Dr. Bitter has served as the President and Chief Executive Officer of Harold Friedman, Inc., an operator of retail supermarkets, since 1976.                                                                                                                                                                                                                                                                                                                                                                                                                             
|John H. GrunewaldDirector since 1992
Age 66    |  | Mr. Grunewald retired in January 1997 as Executive Vice President, Finance and Administration of Polaris Industries, Inc., a manufacturer of recreational equipment, a position he had held since September 1993. Mr. Grunewald also serves
as a director of Renaissance Learning, Inc.                                                                                                                                                                                                                                                                                  
|William R. VossDirector since 1998
Age 49      |  | Mr. Voss has served as Managing Director of Lake Pacific Partners, LLC, a private equity investment firm, since January 2000. From June 1999 to December 1999, he was an independent business consultant. He previously served as Chairman of
the Board, President and Chief Executive Officer of Natural Nutrition Group, Inc., a manufacturer of organic and natural food products, from August 1995 until May 1999. Mr. Voss also serves as a director of Interphase
Corporation.                                                                                     
|William H. WeintraubDirector since 2002
Age 60 |  | Mr. Weintraub is currently an adjunct professor in the School of Journalism and Mass Communications at the University of Colorado at Boulder. He is also a frequent guest lecturer at several other universities and he is Executive-in-Residence at
the University of Colorado's Leeds School of Business. He was the Senior Vice President of Marketing of the Coors Brewing Company from 1993 to 2002. His professional career also includes 15 years at Procter & Gamble Company, as well as
chief marketing officer positions at Kellogg Company and Tropicana, Inc.

Audit Committee Financial Experts

The Nash Finch Board of Directors has determined that four members of the Audit Committee, John E. Stokely, John H. Grunewald, Robert F. Nash
and William R. Voss, qualify as "audit committee financial experts" as defined in Item 401(h) of Regulation S-K, and that each of those individuals is "independent" as
the term is used in Item 7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act.

67

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Code of Ethics

On April 15, 2003, the Nash Finch Board of Directors adopted a Code of Ethics for Senior Financial Management, which is applicable to its Chief Executive
Officer, Executive Vice President and Chief Financial Officer, and Vice President and Corporate Controller. This document has been filed as Exhibit 14.1 to this report. This Code of Ethics
supplements the Nash Finch Code of Ethics and Business Conduct applicable to all employees, including the three officers previously mentioned.

B.    EXECUTIVE OFFICERS OF THE REGISTRANT.

The following table sets forth information about our executive officers as of March 31, 2003:

|Name                  |  | Age |  | Year First Elected or
Appointed as an
Executive Officer |  | Title                                                          
|--------------------- |  | --- |  | ------------------------------------------------------- |  | ---------------------------------------------------------------
|Ron Marshall          |  | 49  |  | 1998                                                    |  | Chief Executive Officer                                        
|Jerry L. Nelson       |  | 56  |  | 2000                                                    |  | President and Chief Operating Officer                          
|Christopher A. Brown  |  | 40  |  | 1999                                                    |  | Executive Vice President, Merchandising                        
|Robert B. Dimond      |  | 41  |  | 2000                                                    |  | Executive Vice President, Chief Financial Officer and Treasurer
|David J. Bersie       |  | 52  |  | 2002                                                    |  | Sr. Vice President, Food Distribution                          
|Bruce A. Cross        |  | 51  |  | 1998                                                    |  | Sr. Vice President, Business Transformation                    
|James R. Dorcy        |  | 43  |  | 2001                                                    |  | Sr. Vice President, Retail                                     
|Kathleen E. McDermott |  | 53  |  | 2002                                                    |  | Sr. Vice President, General Counsel and Secretary              
|Rose M. Bailey        |  | 52  |  | 2001                                                    |  | Vice President, Human Resources                                
|William F. Harbecke   |  | 58  |  | 2002                                                    |  | Vice President, Real Estate and Construction                   
|Jeffrey E. Poore      |  | 44  |  | 2001                                                    |  | Vice President, Distribution and Logistics                     
|LeAnne M. Stewart     |  | 38  |  | 1999                                                    |  | Vice President and Corporate Controller                        

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

Ron Marshallhas served as our Chief Executive Officer and a director since June 1998 and as our President from June 1998 to
September 2002. Mr. Marshall previously served as Executive Vice President and Chief Financial Officer of Pathmark Stores, Inc., a grocery store chain, from September 1994
to May 1998.

Jerry L. Nelsonhas served as our President and Chief Operating Officer since September 2002. He previously served as our Executive
Vice President, Food Distribution from October 2000 to September 2002, as our Senior Vice President, Midwest Region, from April 2000 to October 2000, and as Vice President,
Midwest Region, from November 1999 to April 2000. Prior to joining us, he served as Executive Vice President of Hagemeyer N.A., a specialty food distributor, from March 1997 to
June 1999. From March 1995 to August 1996, he served as Operating Group President of Fleming Companies Inc., a food wholesaler and retailer.

Christopher A. Brownhas served as Executive Vice President, Merchandising since October 1999. Prior to joining us,
Mr. Brown was employed for over five years by Richfood Holdings, Inc., a food wholesaler and retailer. At Richfood Holdings, Inc., he served in various executive positions,
including Executive Vice President, Procurement and Merchandising of the Farm Fresh Division from

68

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October 1998
to October 1999, Executive Vice President, Procurement for Richfood Holdings, Inc. from April 1997 to October 1998, Senior Executive Vice President of
Super Rite Foods division from March 1996 to April 1997 and President and Chief Operating Officer of Rotelle, Inc., a subsidiary, from August 1994 to March 1996.

Robert B. Dimondhas served as our Executive Vice President since May 2002, as Treasurer since May 2001, as our Chief
Financial Officer since October 2000 and as our Senior Vice President from October 2000 to May 2002. Mr. Dimond previously served as Group Vice President and Chief
Financial Officer for the western region of Kroger Co., a grocery store chain, from March 1999 to September 2000. From February 1992 until March 1999, he served as Group
Vice President, Administration and Controller, for Smith's Food & Drug Centers, Inc., a grocery store chain.

David J. Bersiehas served as our Senior Vice President, Food Distribution since September 2002. He previously served as our Vice
President of the Midwest Region from October 2000 to September 2002 and as Division Manager of the Cincinnati and Cedar Rapids Distribution Centers from October 1999 to
October 2000. Prior to joining us, he served in various positions with Fleming Companies, including Division PresidentPeoria Division, Director of Merchandising and Director of
GroceryMinneapolis Division, from 1977 to 1999.

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

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

Kathleen E. McDermotthas served as our Senior Vice President, General Counsel and Secretary since March 2002. She previously
served as a Partner with Collier Shannon Scott, PLLC, a law firm, from January 2001 to March 2002. From June 1993 to June 1996, she served as Executive Vice President and
Chief Legal Officer at American Stores Company. From 1980 to 1993, she served as a Partner with the Collier, Shannon, Rill & Scott law firm.

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

William F. Harbeckehas served as our Vice President, Real Estate and Construction since May 2002. He previously served as Regional
Vice President of Real Estate for Albertson's Inc. from 1999 to 2002. From 1986 to 1999 he served in various positions with American Stores Company ranging from Director of Real Estate in Anaheim, CA
and Oakbrook, IL to Senior Vice President of Real Estate in Salt Lake City, UT.

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

69

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

C.    SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers and all persons who beneficially own more than 10% of
our outstanding shares of common stock to file with the SEC reports of initial ownership and reports of changes in ownership in Nash Finch securities. We provide assistance to our directors and
executive officers in complying with Section 16(a), including preparing the reports and forwarding them to the SEC for filing.

To
our knowledge, based upon a review of the copies of reports filed and written representations, all filing requirements applicable to directors and executive officers were complied
with during the fiscal year ended December 28, 2002 except for the following:



ITEM 11. EXECUTIVE COMPENSATION

A.    COMPENSATION OF DIRECTORS

Directors' Fees.Directors who are not full-time employees of Nash Finch, otherwise known as our outside
directors, receive compensation for serving as a director and are reimbursed for out-of-pocket traveling expenses incurred in attending Board and committee meetings.

Each
outside director is entitled to receive $1,500 for each Board meeting attended and $750 for each committee meeting attended. Each outside director, other than the Board Chair, is
also entitled to receive a retainer of $1,833 per month ($22,000 annually) for serving as a director. Since March 1, 2002, outside directors have received an additional retainer of either $208
per month ($2,500 annually) for serving as a member of a committee of the Board or $416 per month ($5,000 annually) for serving as chair of a committee of the Board. Prior to March 1, 2002, the
committee and committee chair retainers were $125 per month ($1,500 annually) and $250 per month ($3,000 annually), respectively. The Board Chair receives a retainer of $5,500 per month ($66,000
annually).

1997 Non-Employee Director Stock Compensation Plan.The 1997 Non-Employee Director Stock Compensation
Plan provides outside directors with (i) 50% of their annual retainer either in shares of common stock or units credited to a phantom stock account, and (ii) the opportunity to defer the
receipt of the remainder of their director compensation either through units credited to a phantom stock account or dollar denominated credits to an interest bearing cash account. Amounts deferred to
the phantom stock account will be credited with additional units representing the deemed reinvestment

70

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of
dividend equivalents, and distributions from the phantom stock account are made only in shares of common stock. Amounts deferred to the cash account are payable only in cash. In each case, the
amounts deferred are payable upon termination of service as a director.

1995 Director Stock Option Plan.The 1995 Director Stock Option Plan currently provides for an annual grant of an option to
purchase 5,000 shares of common stock to each outside director, effective immediately following each annual meeting of stockholders of Nash Finch while the plan is in effect. The options have an
exercise price equal to the fair market value of a share of Nash Finch common stock on the date of grant, become exercisable six months after the date of grant and have five-year terms.
According to the terms of the plan, each outside director was granted an option under the 1995 Director Stock Option Plan on May 14, 2002.

Outside
directors are also eligible to participate in the 2000 Stock Incentive Plan. However, no awards have been granted to outside directors under that plan.

A
director who is a current employee of Nash Finch receives no additional compensation for serving as a director.

B.    EXECUTIVE COMPENSATION AND OTHER BENEFITS

Summary of Cash and Certain Other Compensation

The following table sets forth the cash and non-cash compensation earned during the fiscal years ending December 28, 2002, December 29,
2001 and December 30, 2000 by our Chief Executive Officer and our four other most highly compensated executive officers, otherwise known as our "named executive officers."

Summary Compensation Table

|                                                                                 |  |                |  | Annual Compensation |                         | Long Term Compensation
Awards |   |                         | 
|-------------------------------------------------------------------------------- |  | -------------- |  | ------------------- | ----------------------- | ----------------------------- | - | ----------------------- | 
|
|Ron Marshall Chief Executive Officer                                             |  | 2002
2001
2000 |  | $                   | 673,149
655,889
582,533 |                               | $ | 507,303
750,000
297,750 | 
|Jerry L. Nelson President and Chief Operating Officer                            |  | 2002
2001
2000 |  | $                   | 350,191
288,246
205,876 |                               | $ | 252,805
275,000
107,549 | 
|Christopher A. Brown Executive Vice President, Merchandising                     |  | 2002
2001
2000 |  | $                   | 359,109
349,040
307,807 |                               | $ | 289,205
350,000
150,000 | 
|Robert B. Dimond Executive Vice President, Chief Financial Officer and Treasurer |  | 2002
2001
2000 |  | $                   | 284,506
247,742
69,041  |                               | $ | 210,707
240,000
36,923  | 
|Bruce A. Cross Sr. Vice President, Business Transformation                       |  | 2002
2001
2000 |  | $                   | 254,300
247,742
229,561 |                               | $ | 168,565
192,000
83,370  | 

---

71

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Name

Amount of 2002
Bonus Paid in Shares

No. Unrestricted
Shares IssuedJerry L. Nelson

$
11,994

1,069Robert B. Dimond

$
29,991

2,673


Restricted Shares Awarded in
Payment of 50% of BonusName2001

2000Ron Marshall

12,818

9,925Jerry L. Nelson

4,700

3,584Christopher A. Brown

5,981

5,000Robert B. Dimond

4,101

1,230Bruce A. Cross

3,281

2,779


Name

Restricted Shares
at 12/28/02

Value at 12/28/02Ron Marshall

62,818

$
471,763Jerry L. Nelson

4,700


35,279Christopher A. Brown

5,981


44,917Robert B. Dimond

4,101


30,799Bruce A. Cross

3,281


24,640


72

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Option Grants During Fiscal 2002

The following table summarizes the options granted to the named executive officers during fiscal 2002.

|                     |  | Individual Grants |  |     |   |      
|-------------------- |  | ----------------- |  | --- | - | -----
|
|
|
|
|
|Ron Marshall         |  |                  |  |    |   |     
|Jerry L. Nelson      |  | 25,000            |  | 7.1 | % | 31.60
|Christopher A. Brown |  | 25,000            |  | 7.1 | % | 31.60
|Robert B. Dimond     |  | 25,000            |  | 7.1 | % | 31.60
|Bruce A. Cross       |  | 7,500             |  | 2.0 | % | 31.60

---

73

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Option Exercises in Fiscal 2002/Fiscal Year-End Option Values

The following table summarizes the number of shares acquired upon exercise of stock options by our named executive officers during fiscal year 2002 and the number
of their outstanding stock options at the end of the fiscal year and the value of such options for which the fair market value of our common stock on that date exceeded the exercise price.

|                     |  |   |  |   |  | Number of Securities
Underlying Unexercised
Options at 12/28/02 |  | Value of Unexercised In-the-
Money Options at 12/28/02(a)
|-------------------- |  | - |  | - |  | --------------------------------------------------------------- |  | ---------------------------------------------------------
|
|Ron Marshall         |  |  |  |  |  | 279,000                                                         |  | 81,000                                                   
|Jerry L. Nelson      |  |  |  |  |  | 56,000                                                          |  | 69,000                                                   
|Christopher A. Brown |  |  |  |  |  | 73,000                                                          |  | 67,000                                                   
|Robert B. Dimond     |  |  |  |  |  | 51,000                                                          |  | 64,000                                                   
|Bruce A. Cross       |  |  |  |  |  | 46,000                                                          |  | 26,500                                                   

---

Supplemental Executive Retirement Plan

The Nash Finch Supplemental Executive Retirement Plan ("SERP") is an unfunded plan designed to provide retirement income to eligible participants to supplement
amounts available from other sources. The plan is administered by the Compensation Committee, which selects participants from among Nash Finch's management or highly compensated employees, including
the named executive officers.

Under
the SERP, each participant who is actively employed by, or on an approved leave of absence from, Nash Finch or an affiliated entity on the last day of a calendar year will be
credited with an amount equal to 20% of his or her base salary for that year. On the last day of each calendar quarter, the Compensation Committee will credit each participant's SERP account with
earnings on the average daily account balance for the quarter equal to the quarterly equivalent of the average annual corporate bond yield for each month during the quarter, as reported by Moody's
Investor's Service, Inc.

Participants
become fully vested in their SERP contribution account and the related earnings upon attaining age 65. Participants also become fully vested in their SERP accounts upon
death or disability during the term of their employment. If a participant's employment terminates prior to any of the foregoing events, the degree of vesting will be determined on the basis of his or
her years of participation in the SERP, ranging from 0% for less than five years' participation to full vesting for ten or more years' participation. The entire balance of a participant's SERP account
will be forfeited if the participant competes with Nash Finch while the participant is employed by Nash Finch or an affiliated entity or is receiving distributions under the SERP, or if the
participant's employment is terminated for dishonesty or criminal conduct.

74

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Distributions
under the SERP begin the first month of the next calendar year following a participant's termination of employment. Payments will be made in 120 monthly
installments, determined in each case by dividing the participant's vested account balance by the number of remaining payments due. Prior to commencement of a participant's distributions, the
Compensation Committee may elect to make the distribution in any alternative form, subject to certain conditions set forth in the SERP.

We
credited the SERP accounts of the named executive officers with respect to fiscal year 2002 as shown in the Summary Compensation Table above.

Change in Control and Severance Arrangements

We have entered into change in control agreements with certain executive officers and key employees of Nash Finch and its subsidiaries, including the executive
officers named in the Summary Compensation Table. Absent a "change in control," these agreements do not require Nash Finch to retain the executives or to pay them any specified level of compensation
or benefits.

Each
agreement provides that if an employee is terminated within 24 months of a change in control of Nash Finch (or, in limited circumstances, prior to such a change in control)
for any reason other than death, disability, retirement or cause, or if the employee terminates within 24 months of a change in control for "good reason," then the employee is entitled to
receive a lump sum payment equal to the employee's highest monthly compensation during the 36 months prior to the termination multiplied by either 12, 24 or 36 months. The employee is
also entitled to the continuation of certain benefit plans (including health, life, dental and disability) for the employee and his or her dependents for 12, 24 or 36 months. The multiple
referred to above is 36 months for Mr. Marshall, 24 months for Mr. Brown, Mr. Nelson, Mr. Cross and Mr. Dimond, and either 24 months or
12 months for all other designated employees. In addition, if the employee is required to pay any federal excise tax or related interest or penalties on the payments associated with the change
in control, an additional payment ("gross-up") is required in an amount such that after the payment of all taxes, income and excise, the employee will be in the same after-tax
position as if no such excise tax had been imposed.

For
purposes of these agreements, "good reason" generally includes reductions in compensation or benefits, demotions, relocation and any termination for reasons other than death,
disability or retirement within 6 months of a change in control. A "change in control" is generally deemed to have occurred if: (a) a majority of Nash Finch's Board is no longer
comprised of individuals who were directors at the time these agreements were entered into or who became directors with the approval of a majority of the "incumbent directors"; (b) another
party becomes the beneficial owner of at least 30% of Nash Finch's outstanding voting stock; (c) Nash Finch sells or otherwise disposes of all or substantially all of its assets, or is
liquidated or dissolved; or (d) a change in control of the type required to be reported in response to item 1(a) of Form 8-K under the Securities Exchange Act occurs.

Similar
events, which specifically include certain mergers or consolidations and a third party becoming the beneficial owner of varying percentages of Nash Finch's outstanding voting
stock, also constitute a change in control under other compensation and benefit plans maintained by Nash Finch and in which the executive officers named in the Summary Compensation Table participate.
Under the terms of the 1994 Stock Incentive Plan and the 2000 Stock Incentive Plan and the agreements evidencing stock options awarded under these plans, upon a change in control, the Compensation
Committee may (a) provide that the options will become immediately exercisable upon the change in control, or (b) provide that the optionee will receive, as of the effective date of the
change in control, cash in an amount equal to the "spread" between the fair market value of the option shares immediately prior to the change in control and the exercise price of the option shares.

75

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Under the terms of the 2000 Stock Incentive Plan and award agreements thereunder, if a change in control of Nash Finch occurs, all restricted stock awards that have been outstanding at
least six months will immediately and fully vest, and the forfeiture provisions relating to the shares underlying all performance units will lapse and the units will immediately be settled and the
underlying shares distributed, unless the named executive (or his designee) waives the right to acceleration.

Under
the terms of deferred compensation plans applicable to directors and officers of Nash Finch, upon a change in control, Nash Finch must transfer to a benefit protection trust to be
established in connection with each such plan an amount of assets sufficient to bring the value of trust assets to at least 125% of the aggregate balance of all participant accounts in each such plan
as of the last day of the month immediately preceding the change in control.

Under
the terms of the Nash Finch Employee Stock Purchase Plan, the Compensation Committee may accelerate the end of an offering period upon a change in control and either provide for
the immediate exercise of all outstanding options under that plan or terminate such options and refund all payroll deductions to plan participants.

Under
the terms of their employment offer letters, Mr. Brown and Mr. Dimond are both entitled to payment of twelve months of severance compensation in the event that their
employment is terminated by the Company, other than for cause or by reason of a change in control.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

A.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following table sets forth information regarding beneficial ownership of our common stock as of April 30, 2003 for each stockholder who we know owns
beneficially more than five percent of the outstanding shares of common stock on that date.

|Name and Address of
the Beneficial Owner                                             |  | Amount  |     | Percent
of Class(a) |  
|------------------------------------------------------------------------------------ |  | ------- | --- | ------------------- | -
|Barclay's Global Investors, N.A.                                                     |  | 894,330 | (b) | 7.5                 | %
|Barclay's Global Fund Advisors
45 Fremont Street
San Francisco, CA 94105             |  |         |     |                     |  
|Dimensional Fund Advisors, Inc.
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401 |  | 860,992 | (c) | 7.2                 | %
|Franklin Resources, Inc.,                                                            |  | 800,000 | (d) | 6.7                 | %
|Charles B. Johnson,                                                                  |  |         |     |                     |  
|Rupert H. Johnson, Jr.
One Franklin Parkway
San Mateo, CA 94403;                     |  |         |     |                     |  
|Franklin Advisory Services, LLC
One Parker Plaza, 16th Floor,
Fort Lee, NJ 07024     |  |         |     |                     |  

---

76

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B.    SECURITY OWNERSHIP OF MANAGEMENT

The table below sets forth information regarding beneficial ownership of our common stock as of April 30, 2003 for:



For
the purpose of calculating the percentage of the class beneficially owned, the number of shares of common stock outstanding includes:



77

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Except
as indicated in the footnotes to this table and subject to any applicable community property laws, the persons in the following table have sole voting and investment power with
respect to all shares listed as beneficially owned by them.

|                                                             |  |         |     |         |  |         |  | Total Shares of Common
Stock Beneficially
Owned | 
|------------------------------------------------------------ |  | ------- | --- | ------- |  | ------- |  | ----------------------------------------------- | 
|
|
|Carole F. Bitter                                             |  | 4,000   | (c) | 11,000  |  | 21,724  |  | 36,724                                          | 
|Jerry L. Ford                                                |  | 8,500   | (d) | 11,000  |  | 6,782   |  | 26,282                                          | 
|Allister P. Graham                                           |  | 17,000  |     | 11,000  |  | 30,917  |  | 58,917                                          | 
|John H. Grunewald                                            |  | 10,569  | (e) | 8,000   |  | 16,253  |  | 34,822                                          | 
|Robert F. Nash                                               |  | 80,253  | (f) | 11,000  |  | 7,532   |  | 98,785                                          | 
|Laura Stein                                                  |  | 300     |     | 7,500   |  | 3,220   |  | 11,020                                          | 
|John E. Stokely                                              |  | 7,765   |     | 10,000  |  |        |  | 17,765                                          | 
|William R. Voss                                              |  | 2,043   |     | 10,500  |  | 16,317  |  | 28,860                                          | 
|William H. Weintraub                                         |  | 1,500   |     |        |  | 887     |  | 2,387                                           | 
|Ron Marshall                                                 |  | 91,180  | (g) | 279,000 |  | 8,175   |  | 378,355                                         | 
|Christopher A. Brown                                         |  | 24,774  |     | 78,000  |  | 1,132   |  | 103,906                                         | 
|Jerry L. Nelson                                              |  | 9,284   |     | 61,000  |  |        |  | 70,284                                          | 
|Bruce A. Cross                                               |  | 14,060  |     | 47,500  |  | 3,342   |  | 64,902                                          | 
|Robert B. Dimond                                             |  | 5,331   |     | 56,000  |  |        |  | 61,331                                          | 
|All Directors and Executive Officers as a Group (21 persons) |  | 299,520 | (h) | 671,500 |  | 116,281 |  | 1,087,301                                       | 

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78

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C.    EQUITY COMPENSATION PLAN INFORMATION

The following table provides information about Nash Finch common stock that may be issued upon the exercise of stock options, the payout of share units or
performance units, or the granting of other awards under all of Nash Finch's equity compensation plans in effect as of December 28, 2002:

|                                                           |       | Equity Compensation Plan Information |          
|---------------------------------------------------------- | ----- | ------------------------------------ | ---------
|
|Equity compensation plans approved by security holders     |       | 1,267,433                            | (1)      
|Equity compensation plans not approved by security holders |       | 200,000                              | (4)      
|                                                           |       |                                      |          
|                                                           | Total |                                      | 1,467,433
|                                                           |       |                                      |          

---

79

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Plan

Number of
Shares

Type of Award2000 Plan

386,329

Stock options, restricted stock, stock appreciation rights, performance units, stock bonuses1995 Director Plan

139,500

Stock options1997 Director Plan

80,712

Phantom stock unitsEmployee Stock Purchase Plan

179,519

Stock options (IRC §423 plan)


No
shares remain available for issuance and no future awards may be made under the 1994 Plan. Shares reserved for issuance in connection with awards outstanding under the 1994 Plan will, if those
awards are forfeited, be added to the shares available for issuance under the 2000 Plan.

Description of Plan Not Approved by Shareholders

Effective June 1, 1998, Mr. Marshall was granted an option to purchase 200,000 shares of Nash Finch common stock at an exercise price of $16.84 per
share. The option became exercisable in 25% installments on each June 1 of the years 1999 - 2002. The option expires on May 31, 2007. If Mr. Marshall's
employment ends due to his death, disability or retirement, the option will remain exercisable until the earlier of one year after the date his employment ends or May 31, 2007. If his
employment ends for any other reason, the option will terminate unless the Compensation Committee of the Board causes it to remain exercisable. If a change in control of Nash Finch occurs, the
Compensation Committee may cause the option to remain exercisable until May 31, 2007 regardless of whether Mr. Marshall remains employed by Nash Finch, or may cause Mr. Marshall
to receive cash as of the effective date of the change in control in an amount equal to the "spread" between the fair market value of the option shares as of the date of the change in control and the
aggregate exercise price of those shares.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

There are no reportable relationships or transactions.

ITEM 14. CONTROLS AND PROCEDURES

In connection with the internal inquiry into our process for assessing count-recount charges to our vendors and how we account for those charges, we
re-evaluated our system of internal controls and reporting processes as they relate to vendor allowances and credits generally. As a result of that re-evaluation, we have
implemented a number of additional controls and reporting processes and established a vendor policy oversight committee that includes senior Company officers to improve consistency, oversight and
reporting in this area. In addition, we have implemented a policy under which the administrative fee associated with count-recount charges will be set as a fixed percentage of sales and separately
itemized on invoices.

Under
the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the
effectiveness of the

80

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design
and operation of our disclosure controls and procedures, as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, subsequent to the
events described in the previous paragraph and as of a date within 90 days prior to the filing date of this Annual Report on Form 10-K. Based on this evaluation, our
principal executive officer and principal financial officer have concluded that the our disclosure controls and procedures are effective to insure that information required to be disclosed by us in
reports that are filed or submitted to the SEC is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.

Subsequent
to the date of the most recent evaluation of our internal controls, and except as discussed in the first paragraph of this Item 14, there were no significant changes in the
Company's internal controls or in other factors that could significantly affect these controls, including any corrective actions with regard to significant deficiencies or material weaknesses.

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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

1.     FINANCIAL STATEMENTS.

The following financial statements are included in this report on the pages indicated:



2.     FINANCIAL STATEMENT SCHEDULES.



3.     EXHIBITS.

|Exhibit No. |  | Description                                                                                                                                                                                                                                               
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1         |  | Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 1985 (File No. 0-785)
).                                                
|3.2         |  | Amendment to Restated Certificate of Incorporation of the Company, effective May 29, 1986 (incorporated by reference to Exhibit 19.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended October 4, 1986 (File
No. 0-785)).              
|3.3         |  | Amendment to Restated Certificate of Incorporation of the Company, effective May 15, 1987 (incorporated by reference to Exhibit 4.5 to the Company's Registration Statement on Form S-3 (File No. 33-14871)).                                             
|3.4         |  | Amendment to Restated Certificate of Incorporation of the Company, effective May 13, 2002 (incorporated by reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 15, 2002 (File
No. 0-785)).                 
|3.5         |  | Bylaws of the Company, as amended effective April 15, 2003 (filed herewith).                                                                                                                                                                              
|4.1         |  | Stockholder Rights Agreement, dated February 13, 1996, between the Company and Norwest Bank Minnesota, National Association (incorporated by reference to Exhibit 4 to the Company's Current Report on Form 8-K dated February 13,
1996 (File No. 0-785)).
|            |  |                                                                                                                                                                                                                                                           

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|4.2   |  | Amendment to Stockholder Rights Agreement dated as of October 30, 2001 (incorporated by reference to Exhibit 4.2 to Amendment No. 1 to the Company's Registration Statement on Form 8-A (filed July 26, 2002) (File
No. 0-785)).                                                                                                                 
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.3   |  | Indenture dated as of April 24, 1998 between the Company, the Guarantors, and U.S. Bank Trust National Association (incorporated by reference to Exhibit 4.2 to the Company's Registration Statement on Form S-4 filed May 22, 1998
(File No. 333-53363)).                                                                                       
|4.4   |  | Form of Company's 8.5% Senior Subordinated Notes due 2008 Series A (incorporated by reference to Exhibit 4.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 20, 1998 (File No. 0-785)).                                                                                                                               
|4.5   |  | Form of Company's 8.5% Senior Subordinated Notes due 2008 Series B (incorporated by reference to Exhibit 4.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 20, 1998 (File No. 0-785)).                                                                                                                               
|4.6   |  | First Supplemental Indenture of Trust dated as of June 10, 1999 between the Company, the Subsidiary Guarantors, Erickson's Diversified Corporation and U.S. Bank Trust National Association (incorporated by reference to Exhibit 4.5 to the
Company's Annual Report on Form 10-K for the fiscal year ended January 1, 2000 (File No. 0-785)).   
|4.7   |  | Second Supplemental Indenture of Trust Dated as of January 31, 2000 between the Company, the Subsidiary Guarantors, Hinky Dinky Supermarkets, Inc., and U.S. Bank Trust National Association (incorporated by reference to Exhibit 4.6 to
the Company's Annual Report on Form 10-K for the fiscal year ended December 29, 2001 (File No. 0-785)).
|4.8   |  | Third Supplemental Indenture of Trust dated as August 13, 2001 between the Company, the Subsidiary Guarantors, U Save Foods, Inc., and U.S. Bank Trust National Association (incorporated by reference to Exhibit 4.7 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 29, 2001(File No. 0-785)).                  
|4.9   |  | Fourth Supplemental Indenture of Trust, dated as of February 25, 2003, between the Company, the Subsidiary Guarantors and U.S. Bank National Association (incorporated by reference to Exhibit 4.1 to the Company's Current Report on
Form 8-K dated February 25, 2003 (File No. 0-785)).                                                        
|10.1  |  | Credit Agreement dated as of December 19, 2000 among the Company, Bankers Trust Company, as administrative agent, and various lenders (incorporated by reference to Exhibit 10.7 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 30, 2000 (File No. 0-785)).                                                      
|10.2  |  | First Amendment, dated as of March 21, 2003, to Credit Agreement dated as of December 19, 2000 (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated March 27, 2003. (File No. 0-785)
).                                                                                                                  
|*10.3 |  | Nash Finch Profit Sharing Trust Agreement (as restated effective January 1, 1994) (incorporated by reference to Exhibit 10.6 to the Company's Annual Report on Form 10-K for the fiscal year ended January 1, 1994 (File
No. 0-785)).                                                                                                            
|*10.4 |  | Excerpts from minutes of the February 19, 2002 meeting of the Board of Directors regarding director compensation (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended
March 23, 2002 (File No. 0-785)).                                                                               
|*10.5 |  | Form of Change in Control Agreement (filed herewith).                                                                                                                                                                                                                                                                                            
|      |  |                                                                                                                                                                                                                                                                                                                                                  

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|*10.6  |  | Nash Finch Income Deferral Plan (incorporated by reference to Exhibit 10.17 to the Company's Annual Report on Form 10-K for the fiscal year ended January 1, 1994 (File No. 0-785)).                                                                                                                                                                                                        
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*10.7  |  | Nash Finch 1994 Stock Incentive Plan, as amended (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 14, 1997 (File No. 0-785)).                                                                                                                                                                                           
|*10.8  |  | Nash Finch 2000 Stock Incentive Plan, as amended (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 15, 2002 (File No. 0-785)).                                                                                                                                                                                           
|*10.9  |  | Nash Finch 1995 Director Stock Option Plan, as amended (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 15, 2002 (File N. 0-785)).                                                                                                                                                                                      
|*10.10 |  | Nash Finch 1997 Non-Employee Director Stock Compensation Plan (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 14, 1997 (File No. 0-785)).                                                                                                                                                                              
|*10.11 |  | Nash Finch 1999 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.18 to the Company's Annual Report on Form 10-K for the fiscal year ended December 29, 2001 (File No. 0-785)).                                                                                                                                                                                         
|*10.12 |  | Declaration of Amendment to the Nash Finch 1999 Employee Stock Purchase Plan, dated as of March 28, 2003 (filed herewith).                                                                                                                                                                                                                                                                  
|*10.13 |  | Nash Finch Supplemental Executive Retirement Plan (incorporated by reference to Exhibit 10.27 to the Company's Annual Report on Form 10-K for the fiscal year ended January 1, 2000 (File No. 0-785)).                                                                                                                                                                                      
|*10.14 |  | Non-Statutory Stock Option Agreement dated as of June 1, 1998 between Nash Finch and Ron Marshall (incorporated by reference to Exhibit 10.20 to the Company's Annual Report on Form 10-K for the fiscal year ended December 29, 2001
(File No. 0-785)).                                                                                                                                    
|*10.15 |  | Restricted Stock Award Agreement between the Company and Ron Marshall, effective as of February 19, 2002 (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended October 5,
2002 (File No. 0-785)).                                                                                                                                 
|*10.16 |  | Nash Finch Performance Incentive Plan (incorporated by reference to Exhibit 10.6 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 15, 2002 (File No. 0-785)).                                                                                                                                                                                                      
|14.1   |  | Code of Ethics for Senior Financial Management (filed herewith).                                                                                                                                                                                                                                                                                                                            
|21.1   |  | Subsidiaries of the Company (filed herewith).                                                                                                                                                                                                                                                                                                                                               
|23.1   |  | Consent of Ernst & Young LLP (filed herewith).                                                                                                                                                                                                                                                                                                                                              
|24.1   |  | Power of Attorney (filed herewith).                                                                                                                                                                                                                                                                                                                                                         
|99.1   |  | Certification Under Section 906 of the Sarbanes-Oxley Act of 2002 (included herewith). This certification shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act or otherwise subject to the liability of that
section, and will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act.
|       |  |                                                                                                                                                                                                                                                                                                                                                                                             

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|99.2 |  | Excerpts from the Company's Current Reports on Form 8-K dated July 29, 2002, January 28, 2003 and March 11, 2003 (filed herewith).                                                                                                                                                                                                                                               
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |  | A copy of any of these exhibits will be furnished at a reasonable cost to any person who was a stockholder of the Company as of April 30, 2003, upon receipt from any such person of a written request for any such exhibit. Such request should be
sent to Nash Finch Company, 7600 France Avenue South, P.O. Box 355, Minneapolis, Minnesota, 55440-0355, Attention: Secretary.

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85

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B.    REPORTS ON FORM 8-K:



86

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87

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NASH FINCH COMPANY and SUBSIDIARIES  Valuation and Qualifying Accounts  Fiscal Years ended December 28, 2002, December 29, 2001 and January 1, 2000

|Description                       |                                                             | Balance at
beginning
of year |        | Charged to
costs and
expenses |   | Charged
(credited)
to other
accounts |       | Deductions |       | Balance
at end
of year
|--------------------------------- | ----------------------------------------------------------- | ---------------------------- | ------ | ----------------------------- | - | ------------------------------------ | ----- | ---------- | ----- | ----------------------
|52 weeks ended December 30, 2000: |                                                             |                              |        |                               |   |                                      |       |            |       |                       
|                                  | Allowance for doubtful receivables(c)                       |                              | $      | 30,430                        |   | $                                    | 7,361 |            | $     | 23                    
|                                  | Provision for losses relating to leases on closed locations |                              |        | 5,650                         |   |                                      | 2,722 |            |       |                       
|                                  |                                                             |                              |        |                               |   |                                      |       |            |       |                       
|                                  |                                                             | $                            | 36,080 |                               | $ | 10,083                               |       | $          | 23    |                       
|                                  |                                                             |                              |        |                               |   |                                      |       |            |       |                       
|52 weeks ended December 29, 2001: |                                                             |                              |        |                               |   |                                      |       |            |       |                       
|                                  | Allowance for doubtful receivables(c)                       |                              | $      | 31,012                        |   | $                                    | 4,812 |            | $     | 1,083                 
|                                  | Provision for losses relating to leases on closed locations |                              |        | 6,075                         |   |                                      | 1,105 |            |       |                       
|                                  |                                                             |                              |        |                               |   |                                      |       |            |       |                       
|                                  |                                                             | $                            | 37,087 |                               | $ | 5,917                                |       | $          | 1,083 |                       
|                                  |                                                             |                              |        |                               |   |                                      |       |            |       |                       
|52 weeks ended December 28, 2002: |                                                             |                              |        |                               |   |                                      |       |            |       |                       
|                                  | Allowance for doubtful receivables(c)                       |                              | $      | 31,489                        |   | $                                    | 8,997 |            | $     | 956                   
|                                  | Provision for losses relating to leases on closed locations |                              |        | 5,000                         |   |                                      | 1,454 |            |       |                       
|                                  |                                                             |                              |        |                               |   |                                      |       |            |       |                       
|                                  |                                                             | $                            | 36,489 |                               | $ | 10,451                               |       | $          | 956   |                       
|                                  |                                                             |                              |        |                               |   |                                      |       |            |       |                       

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88

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

|Dated: May 15, 2003 |  | NASH-FINCH COMPANY
|------------------- |  | ------------------
|                    |  | By                

Pursuant
to the requirements of the Securities Exchange Act of 1934, this Report has been signed below on May 15, 2003 by the following persons on behalf of the Registrant and in
the capacities indicated.

|/s/RON MARSHALLRon Marshall, Chief Executive Officer (Principal Executive Officer) and
Director                                    |  | /s/LEANNE M. STEWARTLeAnne M. Stewart, Vice President and Corporate Controller (Principal Accounting
Officer)
|---------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------
|/s/ROBERT B. DIMONDRobert B. Dimond, Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial
Officer) |  |                                                                                                              
|/s/CAROLE F. BITTER*Carole F. Bitter, Director                                                                                     |  | /s/WILLIAM H. WEINTRAUB*William H. Weintraub, Director                                                       
|/s/JERRY L. FORD*Jerry L. Ford, Director                                                                                           |  | /s/JOHN H. GRUNEWALD*John H. Grunewald, Director                                                             
|/s/ROBERT F. NASH*Robert F. Nash, Director                                                                                         |  | /s/LAURA STEIN*Laura Stein, Director                                                                         
|/s/JOHN E. STOKELY*John E. Stokely, Director                                                                                       |  | /s/WILLIAM R. VOSS*William R. Voss, Director                                                                 
|/s/ALLISTER P. GRAHAM*Allister P. Graham, Director                                                                                 |  |                                                                                                              



|*By |  | /s/KATHLEEN E. MCDERMOTTKathleen E. McDermott
Attorney-in-fact | 
|--- |  | -------------------------------------------------------------- | 

89

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I, Ron Marshall, certify that:

1.     I
have reviewed this annual report on Form 10-K of Nash-Finch Company;

2.     Based
on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.     Based
on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.     The
registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and have:



5.     The
registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent functions):



6.     The
registrant's other certifying officer and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

|Date: May 15, 2003 |  | By:                            |  | /s/RON MARSHALL
|------------------ |  | ------------------------------ |  | ---------------
|                   |  | Name: Ron Marshall            
|                   |  | Title: Chief Executive Officer

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I,
Robert B. Dimond, certify that:

1.     I
have reviewed this annual report on Form 10-K of Nash-Finch Company;

2.     Based
on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.     Based
on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.     The
registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and have:



5.     The
registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent functions):



6.     The
registrant's other certifying officer and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

|Date: May 15, 2003 |  | By:                                                         |  | /s/ROBERT B. DIMOND
|------------------ |  | ----------------------------------------------------------- |  | -------------------
|                   |  | Name: Robert B. Dimond                                     
|                   |  | Title: Executive Vice President and Chief Financial Officer

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NASH FINCH COMPANY  EXHIBIT INDEX TO ANNUAL REPORT  ON FORM 10-K  For Fiscal Year Ended December 28, 2002

|Exhibit No. |  | Description                                                                                                                                                                                  |  | Method of Filing               
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------
|3.1         |  | Restated Certificate of Incorporation of the Company                                                                                                                                         |  | Incorporated by reference (IBR)
|3.2         |  | Amendment to Restated Certificate of Incorporation of the Company, effective May 29, 1986                                                                                                    |  | IBR                            
|3.3         |  | Amendment to Restated Certificate of Incorporation of the Company, effective May 15, 1987                                                                                                    |  | IBR                            
|3.4         |  | Amendment to Restated Certificate of Incorporation of the Company, effective March 16, 2002                                                                                                  |  | IBR                            
|3.5         |  | Bylaws of the Company, as amended effective April 15, 2002                                                                                                                                   |  | Electronically (E)             
|4.1         |  | Stockholder Rights Agreement, dated February 13, 1996, between the Company and Norwest Bank Minnesota, National Association                                                                  |  | IBR                            
|4.2         |  | Amendment to Stockholder Rights Agreement dated as of October 30, 2001                                                                                                                       |  | IBR                            
|4.3         |  | Indenture dated as of April 24, 1998 between the Company, the Guarantors, and U.S. Bank Trust National Association                                                                           |  | IBR                            
|4.4         |  | Form of Company's 8.5% Senior Subordinated Notes due 2008 Series A                                                                                                                           |  | IBR                            
|4.5         |  | Form of Company's 8.5% Senior Subordinated Notes due 2008 Series B                                                                                                                           |  | IBR                            
|4.6         |  | First Supplemental Indenture of Trust dated as of June 10, 1999 between the Company, the Subsidiary Guarantors, Erickson's Diversified Corporation and U.S. Bank Trust National Association  |  | IBR                            
|4.7         |  | Second Supplemental Indenture of Trust Dated as of January 31, 2000 between the Company, the Subsidiary Guarantors, Hinky Dinky Supermarkets, Inc., and U.S. Bank Trust National Association |  | IBR                            
|4.8         |  | Third Supplemental Indenture of Trust Dated as August 13, 2001 between the Company, the Subsidiary Guarantors, U Save Foods, Inc., and U.S. Bank Trust National Association                  |  | IBR                            
|4.9         |  | Fourth Supplemental Indenture of Trust Dated as February 25, 2003, between the Company, the Subsidiary Guarantors and U.S. Bank Trust National Association                                   |  | IBR                            
|10.1        |  | Credit Agreement dated as of December 19, 2000 among the Company, Bankers Trust Company, as administrative agent, and various lenders                                                        |  | IBR                            
|            |  |                                                                                                                                                                                              |  |                                

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|10.2  |  | First Amendment, dated as of March 21, 2003, to the Credit Agreement dated as of December 19, 2000               |  | IBR
|----- |  | ---------------------------------------------------------------------------------------------------------------- |  | ---
|10.3  |  | Nash Finch Profit Sharing Trust Agreement (as restated effective January 1, 1994)                                |  | IBR
|10.4  |  | Excerpts from minutes of the February 19, 2002 meeting of the Board of Directors regarding director compensation |  | IBR
|10.5  |  | Form of Change in Control Agreement                                                                              |  | E  
|10.6  |  | Nash Finch Income Deferral Plan                                                                                  |  | IBR
|10.7  |  | Nash Finch 1994 Stock Incentive Plan, as amended                                                                 |  | IBR
|10.8  |  | Nash Finch 2000 Stock Incentive Plan, as amended                                                                 |  | IBR
|10.9  |  | Nash Finch 1995 Director Stock Option Plan, as amended                                                           |  | IBR
|10.10 |  | Nash Finch 1997 Non-Employee Director Stock Compensation Plan                                                    |  | IBR
|10.11 |  | Nash Finch 1999 Employee Stock Purchase Plan                                                                     |  | IBR
|10.12 |  | Declaration of Amendment to Nash Finch Employee Stock Purchase Plan, dated as of March 28, 2003                  |  | E  
|10.13 |  | Nash Finch Supplemental Executive Retirement Plan                                                                |  | IBR
|10.14 |  | Non-Statutory Stock Option Agreement dated as of June 1, 1998 between Nash Finch and Ron Marshall                |  | IBR
|10.15 |  | Restricted Stock Award Agreement between the Company and Ron Marshall, effective as of February 19, 2002         |  | IBR
|10.16 |  | Nash Finch Performance Incentive Plan                                                                            |  | IBR
|14.1  |  | Code of Ethics for Senior Financial Management                                                                   |  | E  
|21.1  |  | Subsidiaries of the Company                                                                                      |  | E  
|23.1  |  | Consent of Ernst & Young LLP                                                                                     |  | E  
|24.1  |  | Power of Attorney                                                                                                |  | E  
|99.1  |  | Certification Under Section 906 of the Sarbanes-Oxley Act of 2002                                                |  | E  
|99.2  |  | Excerpts from Current Reports on Form 8-K                                                                        |  | E  

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