NASH FINCH COMPANY

2002ANNUALREPORT $2.52

$1.78 $4.0 $4.0 $3.9 $3.9 $3.8

$1.34 $1.38

Total Sales and Revenues Earnings (Loss) from Continuing Operations(a) $ in billions

98 99 00 01 02 98 99 00 01 02

$(3.50)

(a) Calculated on a diluted basis. Fiscal 2001 includes goodwill amortization of 39 cents; Fiscal 2000 includes goodwill amortization of 39 cents; Fiscal 1999 includes goodwill amortization of 32 cents; and Fiscal 1998 includes goodwill amortization of 21 cents.

% Increase FINANCIALHIGHLIGHTS 2002 2001 (Decrease)

Fiscal years ended December 28, 2002 and December 29, 2001 (Amounts in thousands, except per share data and number of employees)

Sales $ 3,874,672 3,982,206 (2.7)% Earnings from continuing operations $ 30,580 21,267 43.8 % As a percent of total sales 0.79% 0.53 % Diluted earnings per share from continuing operations (EPS) $ 2.52 1.78 41.6 % Dividends paid per share $ .36 .36 0.0% Percentage change in same-store sales (5.28) % (1.10) % Net working capital $ 159,025 95,740 66.1% Ratio of current assets to current liabilities 1.51 1.25 Total stockholders’ equity $ 221,479 203,408 8.9% Return from continuing operations on stockholders’ equity 13.81% 10.46 % Capital expenditures $ 52,605 43,924 19.8% Weighted-average number of shares outstanding on a diluted basis 12,114 11,959 Number of employees 10,621 12,755 (16.7)% , established in 1885, is a Fortune 500 company and one of the leading food and distribution companies in the United States with approximately $4 billion in annual revenues. Nash Finch owns and operates more than 100 stores in the Midwest, principally under the AVANZA™, PROFILE COMPANY ® ® ™ Buy•n•Save , , Family Thrift Center , and

Sun Mart® trade names. In addition to its retail operations, Nash Finch’s food distribution business serves independent retailers and military commissaries in approximately 28 states, the District of Columbia and Europe. Further information is available on the Company’s website at www.nashfinch.com.

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Retail and Food Distribution Presence Food Distribution Presence Distribution Center

2002ANNUALREPORT 2

Fiscal 2002 proved to be the most profitable year ever in the 118 year history of the Nash Finch

Company. Not only did the financial results reflect the strength of our strategies, but they also

underscored the quality and dedication of our associ-

DEARSHAREHOLDERS ates. Although we are faced with several serious

challenges over the next year, the confidence and commitment levels we have throughout the

organization have positioned us to continue to achieve performance driven success in 2003.

In fiscal 2002, earnings before the million, or $0.39 per diluted share, because we cumulative effect of an accounting change were no longer required to amortize goodwill discussed below were a record $30.6 million, in 2002. Net earnings in 2002, including the or $2.52 per diluted share. This represents a cumulative effect of the accounting change, 17.7 percent increase over comparable 2001 totaled $23.6 million, or $1.95 per diluted earnings of $26.0 million, or $2.17 per diluted share. This compares to 2001 net earnings, share. The 2001 earnings figure does not including goodwill amortization, of $21.3 include after-tax goodwill amortization of $4.7 million, or $1.78 per diluted share. Nash Finch Company Executive Team supercenter competition in our core retail markets and difficult economic conditions. (front row, l to r) Ron Marshall, Chief Executive Officer; Kathleen McDermott, Senior Vice President, Secretary and Retail segment profits declined as a result of General Counsel; and Jerry Nelson, President and Chief reduced sales, lower margins and delays in Operating Officer adjusting expenses. These operational issues (back row, l to r) James Dorcy, Senior Vice President, Retail will be resolved in the upcoming year. The Sales and Marketing; Robert Dimond, Executive Vice store count at the end of fiscal 2002 was 109 President, Chief Financial Officer and Treasurer; David Bersie, Senior Vice President, Food Distribution; Christopher as compared to 110 at the end of fiscal 2001. Brown, Executive Vice President, Merchandising; and Bruce In the fourth quarter of fiscal 2002, the Cross, Senior Vice President, Business Transformation Company early adopted EITF Issue No. 02-16, “Accounting by a Customer (including a Reseller) for Cash Consideration Received from a Vendor.” In adopting this accounting change, the Company modified its previous 3 Although intense competition and an accounting methodology, which was in unsettled economic landscape affected our accordance with generally accepted business segment results, we continued to accounting principles. Under the new maintain our profit momentum. Our Food accounting method, all vendor allowances Distribution segment sales for fiscal 2002 will reside in inventory and will not be were $1.826 billion versus $1.951 billion in recognized into income until the product is fiscal 2001. Despite a decline in revenue, our sold. This change resulted in a cumulative, continued relentless focus on cost savings non-cash, one-time adjustment retroactive and efficiencies led to improved profit to the beginning of fiscal 2002 of $7.0 margins. Fiscal 2002 Food Distribution million, net of taxes of $4.4 million. We segment profits were $61.5 million versus decided to early adopt this new accounting $60.7 million last year. principle, in part, to ensure that 2002 and The Military segment posted sales for 2003 results can be accurately compared. fiscal 2002 at $1.021 billion compared to More importantly, however, we have come $995.7 million in 2001. There was a moder- to appreciate, firsthand, the uncertainty and ate decline in profits primarily due to our confusion surrounding the subject of vendor warehouse consolidation efforts. This monies. We will be a leader in providing consolidation is expected to be complete comprehensive information in this area. mid-year 2003, and will strongly position us Early adoption of this new accounting princi- for greater efficiencies in the second half of ple is just one step in that process. 2003 and beyond. Looking ahead to 2003 and beyond, Faced with intense competition, our we recognize that conquering the challenges Retail segment has been investing heavily in facing us will require even higher levels of our core markets, promoting our Fresh Place effort and execution. These challenges concept. This concept provides our stores include structural changes within our with the highest-quality fresh produce, deli industry, a continued soft economy, the offerings, meats, seafood and bakery items. need for higher operating standards and the Our world-class customer service, exclusive continued government scrutiny of industry signature items and convenient amenities trade practices. exceed the expectations of today’s demand- First, the ongoing challenge of super- ing shopper. The roll-out of our Hispanic center growth (particularly Wal-Mart supermarkets, AVANZA, has proven to be a Supercenters) represents the single greatest big success, and presents many unique threat that the industry has advantages and opportunities. This concept faced in decades. At the end of 2001, there is focused on meeting the needs of a rapidly were approximately 585 Wal-Mart growing population in our communities, and Supercenters in territories in has provided immeasurable experience in which the Company operates, addressing the desires of the Hispanic clearly a formidable consumer. For fiscal 2002, corporate Retail presence. In 2002, 114 segment sales were $1.028 billion versus more locations were $1.035 billion in 2001, reflecting increased opened, raising the total

2002ANNUALREPORT almost twenty percent to approximately 700 to extend and deepen those lines but also, at year-end. The expansion of Wal-Mart we believe, reflect consumers’ uncertainty. Supercenters alone translates to nearly 40 Third, in the today’s competitive million new square feet across the United environment, operating standards that States each year, and of that, roughly half is worked in years past are no longer in the areas in which we operate. On the adequate. We must raise the bar across our retail side of our business, Wal-Mart has retail concepts to ensure that we carefully manage promotional spending, efficiently allocate labor and continually focus on expense reduction. I consider this to be one of our most important missions during the upcoming year. 4 Finally, our entire industry continues to undergo unprecedented scrutiny of its trade practices. As I am sure you are aware, Nash Finch has had to address scrutiny and press speculation of how it has dealt with one specific form of vendor promotional allowance in the past. The 2002 Form 10-K which accompanies this report contains extensive discussions describing the events that unfolded after we received in October 2002 the SEC’s initial informal letter of inquiry regarding a type of vendor allowance known as count-recount. I encourage you to read this report. AVANZA’s mascot Paco, local students, their In the face of these challenges, there are principal and Ron Marshall, CEO, celebrate the still many profound opportunities for the donation of books to an area elementary school. Nash Finch Company in the year ahead. In Retail, time-stressed consumers continue to look for a pleasant and convenient shopping experience, with outstanding perishable opened 26 new Supercenters in the last three execution and exceptional customer service. years in cities in which we operate one or We have a proven track record in meeting more retail stores. The threat continues to these needs, as seen through success of our grow as we anticipate at least eleven more Fresh Place concept. Furthermore, we believe Supercenters to be opened in our retail that our chain of Hispanic supermarkets, markets in 2003. AVANZA, is a shining example of focusing on Second, the U.S. economy continues to serving the specific needs of today’s shopper. soften despite high levels of monetary and Not only are these stores successful individu- fiscal stimuli. While inflation-adjusted Gross ally, but combined they have already become Domestic Product rose an anemic 2.1 percent truly a community presence in the Denver, for all of 2002, recent performance has been Colorado area. even softer with fourth quarter GDP increas- Our Food Distribution segment is ing at only 1.4 percent and the first quarter uniquely positioned to benefit from an of this year only marginally better at 1.6 immense industry restructuring. In 1985, percent. The effect of falling employment there were 366 full-line grocery wholesalers numbers in 2001, 2002 and through serving U.S. supermarkets. By 1990, the total April of 2003 appears to have declined to 242. By the end of 1997, there severely weakened consumer were just 97 wholesalers remaining, and the confidence. The double- consolidation continues. While the size of the digit sales increases that independent base that we serve has we’ve enjoyed in our contracted as well during this timeframe, the private label product lines shrinking number of distributors has created not only reflect our efforts a substantial opportunity for our distribution

2002ANNUALREPORT (l-r) Leticia Calzada, Honorable Consul General of Mexico in Denver; Raphael Hernandez, AVANZA’s Director of Hispanic Marketing; Jaime Camile, Mexican Recording Artist; and Ron Marshall, CEO, gather to open the first AVANZA store.

5 unit to acquire new business. Magnifying our efforts in areas where we live and work, opportunity in Food Distribution is a set of actively supporting the arts, health and industry-leading performance metrics. Our family-related charities including the United fill-rate of 96 percent, on-time delivery of 99 Way, educational programs, food banks, etc. percent, and selector accuracy of 99.68 Our communities have benefited greatly percent set the standard for meeting the from the participation of our associates in needs of independent retailers. Since 1998, programs such as meals on wheels, health there has been a strong commitment to fairs, emergency relief efforts and food providing continuous productivity improve- drives. The Nash Finch Company is proud to ments. Throughput has increased 73 percent have such a dedicated and community- in cases per hour. Our facility efficiency is up spirited workforce. 21 percent in sales per sq. ft., with trans- As we look toward the future, the Nash portation achieving a 16 percent increase Finch Company will conduct business follow- in fleet utilization. As a result, deployed ing three simple principles: equipment assets have been decreased by 18 percent. 1) We will concentrate on delivering In the wake of the Horizons project, exemplary customer service in all three which was discontinued in 1998, we have segments of our business: Retail, Food quietly built a technology infrastructure that Distribution and Military, and continue to has become a core strength of the Company. raise our industry-leading metrics that Since 1998, our strategy has been to measure and validate our success. standardize and centralize. To date, eleven 2) We will continue to develop, support and system conversions have been completed, effectively manage innovative store system performance has increased and formats, such as AVANZA, anticipating overall system costs have been reduced. In and meeting the needs of today’s chang- addition, our NashNet™ solution, an Internet- ing shopper. based service, allows customers the benefit 3) We will further position ourselves to take of quickly assessing new merchandise offer- full advantage of tremendous changes ings, capitalizing on special promotions, occurring in our industry. reviewing online reports, and viewing By effectively executing these three plan-o-grams, just to name a few benefits. principles, the management and associates Through April 2003, using NashNet, eleven of the Nash Finch Company are committed of our Distribution Centers have reduced to deliver value for our shareholders, regard- expenses by eliminating the printing and less of the competitive, economic or opera- handling of customer’s reports, and two tional challenges that lie ahead. Centers are now completely paperless. Throughout 2002, the Company continued to distinguish itself within our communities through charitable involve- ments. The NFC Foundation focused its Ron Marshall, Chief Executive Officer 6

Nash Finch owns and operates more than 100 supermarkets in the Upper Midwest,

primarily under the AVANZA, Buy•n•Save, Econofoods, Family Thrift Center and Sun Mart

brands. The majority of Nash

CORPORATERETAIL STORES Finch stores offer a conventional

supermarket approach, but our 2002 retail emphasis also benefited from the exciting launch

of our innovative Hispanic supermarket concept, AVANZA, and the expansion of our

extreme value retail format, Buy•n•Save.

Targeting specific customer groups is 35 million people according to the 2000 key to our growth strategy and vital to long Census. Hispanics are now the largest single term success in today’s diverse and highly minority group in the United States and with competitive retail environment. Our vision of rapid growth projected to continue, serving exemplary service tailored for the Hispanic these consumers presents tremendous community became a reality with the opportunity. opening of the first two AVANZA stores in AVANZA offers an innovative and 2002, followed by a third in early 2003, all in memorable shopping experience. The store Denver, Colorado. The Hispanic population in décor reflects styles of well-known Mexican the United States has increased to more than artists, such as Chucho Reyes, the architec- (left) The first AVANZA Store in the Lakeside area of Denver, Colorado.

(right) Paco greets a young visitor to AVANZA.

(below) Culturally appropriate products and bi-lingual signage enhance the AVANZA shopping experience.

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Services such as money orders and check cashing add to the store offerings. Community involvement is also a cornerstone of AVANZA. From establishing local Hispanic advisory boards, to working closely with community leaders and digni- taries such as the Honorable Consul General of Mexico in Denver, to hosting a local Hispanic health fair, AVANZA strives to be a true contributor to every neighborhood in which we operate. Also during the year, our Buy•n•Save store base grew by adding new stores in Columbia Heights, Robbinsdale and West tural influence of Luis Barragan, as well as a St. Paul, . This format appeals sense of the Mexican countryside itself. to shoppers looking for a value-oriented Many store associates, as well as store shopping experience and offers high signs and advertising, are bilingual. The quality private label products at an produce offerings include authentic favorites attractive price point. such as an extensive variety of peppers, One new Econofoods store was cactus leaves and tomatillos. Meat items like opened during the year, the pierna de puerco and fajitas de puerco o de result of an acquisition in pollo are also standard fare. In the grocery Chilton, . aisles, popular brands such as La Moderna Additionally, in January and Herdez are imported from Mexico. 2003, five Sunshine stores

2002ANNUALREPORT (left) This Buy•n•Save, located in West St. Paul, Minnesota, is an attractive addition to the neighborhood.

(below) The Buy•n•Save format serves the extreme value shopper.

8 (right) The recent expansion of freezer capacity permits improved productivity in our Omaha, Nebraska Distribution Center.

in South Dakota were purchased; three were converted to Econofoods and two were sold to an experienced Nash Finch independent retailer. Also, in February 2003, we purchased a supermarket in Cannon Falls, Minnesota, and subsequently rebranded it as an Econofoods. These acquired stores join many other company-owned conven- tional supermarkets, including our many Fresh Place stores, offering premium-quality fresh produce, secure in-store childcare, appealing deli offerings, fresh meats, seafood and bakery. Whether it is serving a more traditional supermarket shopper at Econofoods or SunMart, a Hispanic family at AVANZA, or a Buy•n•Save customer looking for the best value, we provide a format to meet the needs of today’s consumer. While each individual store may look slightly different, all are built upon a foundation of Nash Finch values — our pledge of cleanliness, good service, high quality and fair prices.

2002ANNUALREPORT 9

In 2002, your company continued to perform above and beyond customer expectations in

its food distribution business. Our food distribution team not only provides industry leading

performance, but also offers a broad range of quality programs and services to meet the

needs of our customers, from the single store indepen-

FOODDISTRIBUTION dent to the large chain operator. This includes powerful

offerings in retail technology, business development, affiliate banner programs, market

research, engineering, retail counseling, advertising, marketing and merchandising.

High performance and unparalleled capacity for our Omaha distribution customers customer service remain a core focus for Nash by adding 50,000 square feet of freezer space. Finch. We believe that in order to be success- This addition helps guarantee customers the ful, we must maintain a strong bond with each freshness, quality and quantity of the products and every customer by delivering the products they need to succeed. ordered, accurately and on-time. To this end, Furthermore, we are constantly looking we monitor and measure our performance on at innovative ways to increase use of our a daily basis to ensure customer satisfaction. distribution capacity, as well as making As part of our effort to provide the best technological improvements to reduce our service possible in 2002, we expanded the cost of operations. In today’s ever-changing retail environ- All of the above, and our many other ment, many supermarket retailers demand strong procurement programs, are gaining the strength and buying power of a chain even more momentum with the efficiencies coupled with the flexibility of remaining gained from NashNet, an Internet-based independent. Our “virtual chain” approach, supply chain solution. NashNet provides through our Food Pride®, Economart® and independent retailers the ability to quickly Nash Finch supplied IGA stores, creates take advantage of Nash Finch promotions by powerful efficiencies in merchandising, immediately viewing purchase opportunities procurement, marketing and advertising for online and ordering electronically. Catalogs, independent retailers. reports and invoices are also all available One key advantage for our customers is through NashNet. our award-winning store brands program. Nash Finch remains fully committed 10 While we have long offered store brands, to the success of all of our independent including Our Family®, IGA and Fame®, we customers through high performance more recently rolled out two new brands — distribution, solid logistical planning, AVANZA and Value Choice™. The AVANZA efficient facilities management, exceptional store brand program has more than 150 value-added services and expertise, quality items to meet the needs of the rapidly store brand offerings and cost-effective growing Hispanic population. Our new Value procurement programs. Choice line, currently consisting of approxi- mately 130 items, is specifically geared to offer quality products at a low price point — especially important in today’s challenging economic times. Our exciting marketing programs and services also continue to pay dividends for independent retailers and our corporate stores. From our growing expertise in Hispanic marketing programs to our wide range of signature products, we have created an extensive range of tools to help drive sales. Capitalizing on current trends, our new “Everything for a Dollar” section addresses the needs of the value conscious consumer with profitable dollar store merchandise. Innovative procurement programs, especially in an increasingly competitive landscape, reap great rewards. Nash Finch offers our independent customers significant cost of goods savings through several leading programs, such as Slam Dunk Deals, offering spot buys at significant savings. Our Pallet Power program provides merchandise in pallet-ready displays at a lower cost of (above) The quality, variety and value of Nash Finch private label products is clearly evident goods. Price Break and Money Line provide in the new Value Choice line. profit opportunities, while still (right) Nash Finch is honored to be the largest allowing retailers to pass supplier to military commissaries in this along significant savings to country and Europe, as well as ships at sea. the consumer.

2002ANNUALREPORT 11

As the leading distributor to the United States Defense Commissary Agency (DeCA),

Nash Finch continues to serve the needs of our military personnel with pride and

distinction. DeCA provides an

MILITARYFOOD DISTRIBUTION important benefit for America’s

military by operating nearly 280 commissaries throughout the world, providing groceries

to active and retired military personnel at significant savings over commercial prices.

Nash Finch excels in the military supply the District of Columbia, as well as interna- business. Not only do we perform better than tionally. Outside the U.S., we distribute to our competitors by offering exceptional bases in the Azores, Cuba, England and customer service, including fill rates among Germany, and we also supply ships afloat. the best in the industry, we also continue to Our strong performance, combined with hold leading market share in our core an experienced and seasoned team of markets and worldwide. military supply professionals, has earned us From our dedicated military distribution the position as the leader in supplying the center, located in Norfolk, Virginia, and from DeCA system. We remain committed to the our entire Midwest and Southeast distribu- highest standards possible in this important tion network, we efficiently supply approxi- business segment. mately 100 commissaries in 20 states plus NOTICE OF ANNUAL MEETING BOARDOF DIRECTORS CORPORATEOFFICERS The annual meeting of Nash Finch Company (Year Elected) will be held at 10:00 a.m., July 8, 2003, *†Carole F. Bitter (1993) Ron Marshall at Corporate Offices, 7600 France Avenue President and Chief Executive Officer, Chief Executive Officer South, , MN. Harold Friedman, Inc. (operator of retail supermarkets) Jerry L. Nelson TRANSFER AGENT AND REGISTRAR President and Chief Operating Officer Wells Fargo Bank Minnesota, N.A. †°Jerry L. Ford (1997) Shareowner Services Independent Business Consultant Christopher A. Brown 161 North Concord Exchange Executive Vice President, Merchandising South St. Paul, MN 55075 + Allister P. Graham (1992) Robert B. Dimond Retired Chairman and Chief Executive INDEPENDENT AUDITORS Officer, The Oshawa Group Limited Executive Vice President, Chief Financial 12 (Canadian food distributor) Officer and Treasurer Ernst & Young LLP

David J. Bersie STOCKHOLDER INFORMATION *†John H. Grunewald (1992) Senior Vice President, Food Distribution Retired Executive Vice President, Finance Nash Finch Company common stock is and Administration, Polaris Industries, Inc. traded on the Nasdaq National Market tier (manufacturer of recreational equipment) Bruce A. Cross of the Nasdaq Stock Market under the Senior Vice President, Business Transformation symbol NAFC. Ron Marshall (1998) Chief Executive Officer James R. Dorcy OFFER OF FORM 10-K Senior Vice President, Retail Sales and A copy of the annual report to the Securities *° Robert F. Nash (1968) Marketing and Exchange Commission (Form 10-K) is Retired Vice President and Treasurer available without charge to Nash Finch Kathleen E. McDermott Company stockholders. Address requests to: Senior Vice President, Secretary and †° Laura Stein (2001) General Counsel Senior Vice President and General Corporate Secretary Counsel, H.J. Heinz Company Rose M. Bailey Nash Finch Company (manufacturer of food products) Vice President, Human Resources P.O. Box 355 Minneapolis, MN 55440-0355 *° John E. Stokely (1999) William F. Harbecke Consultant. Former Chairman, President Vice President, Real Estate and Construction and Chief Executive Officer, Richfood AUTOMATIC DIVIDEND REINVESTMENT PLAN Under the Automatic Dividend Reinvestment Holdings, Inc. (wholesale and retail Jeffrey E. Poore food distributor) Plan, Nash Finch Company stockholders of Vice President, Distribution and Logistics record can reinvest all or part of their *° William R. Voss (1998) LeAnne M. Stewart dividends in Nash Finch Company common Managing Director, Lake Pacific Partners, Vice President and Corporate Controller stock and make optional cash purchases of LLC (private equity investment company) additional shares without paying brokerage commissions. Stockholders wishing * William H. Weintraub (2002) information about the plan may obtain a Professor, University of Colorado OPERATINGOFFICERS brochure and enrollment card by writing: Daniel M. Davidson Vice President, Distribution and Logistics, Wells Fargo Bank Minnesota, N.A. Midwest Region * Member of the Audit Committee Dividend Reinvestment Unit P.O. Box 64856 ° Member of the Corporate Governance Allen W. Frost St. Paul, MN 55164-9442 Committee Vice President, Retail Operations, West Zone † Member of the Compensation Committee Forward-looking statements contained in this + Board Chair Randy J. Jaeger Vice President, Food Distribution, Midwest report are subject to risks and uncertainties and Southeast Regions that could cause actual results to differ materi- ally from those anticipated. Important factors Gregory L. Sandeno known to Nash Finch Company that could Vice President, Retail Operations, East Zone cause such material differences are detailed in the Company’s SEC reports, including the Timothy M. Tveitnes report on Form 10-K for the year ended Vice President, Distribution and Logistics, Central and Southeast Regions December 28, 2002.

2002ANNUALREPORT

7600 FRANCE AVENUE SOUTH, P.O. BOX 355, MINNEAPOLIS, MN 55440-0355 (952)832-0534