NAFC Nash-Finch Company (MM)

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

                We are currently in compliance with all covenants contained within the Credit Agreement.

Senior Subordinated Convertible Debt

To finance a portion of the acquisition of two distribution centers in 2005, we sold $150.1 million in aggregate issue price (or $322.0 million aggregate principal amount at maturity) of senior subordinated convertible notes due in 2035. The notes were unsecured senior subordinated obligations and ranked junior to our existing and future senior indebtedness, including borrowings under our Revolving Credit Facility.  On March 15, 2013, the Company completed the redemption of the notes at a price equal to $466.11 per $1,000 in principal amount at maturity, which resulted in a total payment of $150.1 million.  See our Annual Report on Form 10-K for the fiscal year ended December 29, 2012 filed with the Securities and Exchange Commission (“SEC”), for additional information regarding the notes.

Notes Payable and Mortgage Notes

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

                On June 26, 2013, the Company entered into a six-year $32.25 million term loan facility (“the Agreement”) with First National Bank of Omaha.  This loan facility is intended to provide working capital to be used for general corporate purposes. The Agreement is secured by our executive office building in Minneapolis, Minnesota and our distribution centers in St. Cloud, Minnesota and Omaha, Nebraska.

Note 6 – Guarantees

We have guaranteed lease obligations of certain food distribution customers.  In the event these retailers are unable to meet their lease payments or otherwise experience an event of default, we would be unconditionally liable for the outstanding balance of their lease obligations ($1.1 million as of October 5, 2013, as compared to $1.4 million as of December 29, 2012), which would be due in accordance with the underlying agreements.

For guarantees issued after December 31, 2002, we are required to recognize an initial liability for the fair value of the obligation assumed under the guarantee.  The maximum undiscounted payments we would be required to make in the event of default under these guarantees is $1.1 million, which is referenced above.  These guarantees are secured by certain business assets and personal guarantees of the respective customers.  We believe these customers will be able to perform under the lease agreements and that no payments will be required and no loss will be incurred under the guarantees.  A liability representing the fair value of the obligations assumed under the guarantees is included in the accompanying consolidated financial statements.  The amount of this liability is currently not significant.

We have also assigned various leases to other entities.  If the assignees become unable to continue making payments under the assigned leases, we estimate our maximum potential obligation with respect to the assigned leases to be $7.9 million as of October 5, 2013 as compared to $8.3 million as of December 29, 2012.

Multi-employer pension plan

Certain of our unionized employees are covered by the Central States Southeast and Southwest Areas Pension Funds (“the Plan”), a multi-employer pension plan. Contributions are determined in accordance with the provisions of negotiated union contracts and are generally based on the number of hours worked.  In fiscal 2012, the Company contributed $2.9 million to the Plan.  Based on the most recent information available, we believe the present value of actuarial accrued liabilities of the Plan substantially exceeds the value of the assets held in trust to pay benefits.  The underfunding is not a direct obligation or liability of the Company. However, if the Company were to exit certain markets or otherwise cease making contributions to the Plan, the Company could trigger a substantial withdrawal liability. The amount of any increase in contributions would depend upon several factors, including the number of employers contributing to the Plan, results of the Company’s collective bargaining efforts, investment returns on assets held by the Plan, actions taken by the trustees of the Plan, and actions that the Federal government may take.  The Company does not believe it is likely that events requiring recognition of a withdrawal liability will occur. Any adjustment for withdrawal liability will be recorded when it is probable that a liability exists and can be reasonably estimated.

A more detailed discussion of the risks associated with the Plan are contained in Part I, Item 1A, “Risk Factors,” of our Annual Report filed with the SEC on Form 10-K for the fiscal year ended December 29, 2012.

Note 9 – Earnings (Loss) Per Share

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

Note 11 – Legal Proceedings

Shareholder Litigation

On or about July 24, 2013, a putative class action complaint (the “State Court Action”) was filed in the District Court for the Fourth Judicial District, State of Minnesota, County of Hennepin (the “State Court”), by a stockholder of Nash-Finch in connection with the pending transaction. The State Court Action is styled Greenblatt v. Nash-Finch Co. et al. , Case No. 27-cv-13-13710. That complaint was amended on August 28, 2013 after Spartan Stores filed a registration statement with the SEC containing a preliminary version of the joint proxy statement/prospectus. On September 9, 2013, the defendants filed motions to dismiss the State Court Action. On or about September 19, 2013, a second putative class action complaint (the “Federal Court Action” and, together with the State Court Action, the “Putative Class Actions”) was filed in the United States District Court for the District of Minnesota (the “Federal Court”), by a stockholder of Nash-Finch. The Federal Class Action is styled Benson v. Covington et al. , Case No. 0:13-cv-02574.

The Putative Class Actions alleged that the directors of Nash-Finch breached their fiduciary duties by, among other things, approving a merger that provides for inadequate consideration under circumstances involving certain alleged conflicts of interest; that the Merger Agreement (as defined in Note 12) includes allegedly preclusive deal protection provisions; and that Nash-Finch and Spartan Stores allegedly aided and abetted the directors in breaching their duties to Nash-Finch’s stockholders. Both Putative Class Actions also alleged that the preliminary joint proxy statement/prospectus was false and misleading due to the omission of a variety of allegedly material information. The complaint in the Federal Court Action also asserts additional claims individually on behalf of the plaintiff under the federal securities laws. The Putative Class Actions sought, on behalf of their putative classes, various remedies, including enjoining the merger from being consummated in accordance with its agreed-upon terms, damages, and costs and disbursements relating to the lawsuit.

Nash-Finch believes that these lawsuits are without merit and that no further disclosure is required to supplement the joint proxy statement/prospectus under applicable laws; however, to eliminate the burden, expense and uncertainties inherent in such litigation, Nash-Finch and Spartan Stores agreed, as part of settlement discussions, to make certain supplemental disclosures requested by the Putative Class Actions in the definitive joint proxy statement/prospectus.  On October 30, 2013, the defendants entered into the Memorandum of Understanding regarding the settlement of the Putative Class Actions. The Memorandum of Understanding outlines the terms of the parties’ agreement in principle to settle and release all claims which were or could have been asserted in the Putative Class Actions. In consideration for such settlement and release, Nash-Finch and Spartan Stores acknowledged that the supplemental disclosures in the joint proxy statement/prospectus were made in response to the Putative Class Actions. The Memorandum of Understanding contemplates that the parties will use their best efforts to agree upon, execute and present to the State Court for approval a stipulation of settlement within thirty days after the later of the date that the Merger is consummated or the date that plaintiffs and their counsel have confirmed the fairness, adequacy, and reasonableness of the settlement.    Upon execution of such stipulation, and as a condition to final approval of the settlement, the plaintiff in the Federal Action shall withdraw the claims in and cause to be dismissed the Federal Action, with any individual claims being dismissed with prejudice.  The Memorandum of Understanding provides that Nash-Finch will pay, on behalf of all defendants, the plaintiffs’ attorneys’ fees and expenses, subject to approval by the State Court, in an amount not to exceed $550,000. The stipulation of settlement will be subject to customary conditions, including approval by the State Court, which will consider the fairness, reasonableness and adequacy of such settlement.  There can be no assurance that the parties will ultimately enter into a stipulation of settlement or that the State Court will approve the settlement even if the parties were to enter into such stipulation. In such event, or if the transactions contemplated by the Merger Agreement are not consummated for any reason, the proposed settlement will be null and void and of no force and effect.

Other

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

Note 12 – Merger

                On July 21, 2013, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among the Company, Spartan Stores, Inc., a Michigan corporation (“Spartan”), and SS Delaware, Inc., a Delaware corporation and a wholly owned subsidiary of Spartan (the “Merger”).  The Merger A greement, upon closing, will result in an all-stock merger valued at approximately $1.3 billion, including existing net debt of each company, and was unanimously approved by the Board of Directors of the Company.

                At the effective time of the Merger, (a) each share of the Company’s common stock issued and outstanding immediately prior to the effective time (other than shares owned by the Company, Spartan or Merger Sub) will be automatically cancelled and converted into the right to receive 1.2 (the “ Exchange Ratio ”) fully paid and nonassessable shares of Spartan’s common stock and (b) the Company’s stock options and other equity awards will be generally converted into stock options and equity awards with respect to Spartan’s common stock, after giving effect to the Exchange Ratio.  Consummation of the Merger Agreement is subject to various conditions, including, among other things, the approval by Nash-Finch Company shareholders and Spartan Stores shareholders which will be submitted for consideration by proxy vote on November 18, 2013.  Upon closing, which is expected shortly after the shareholder vote, Spartan Stores shareholders will own approximately 57.7% of the equity of the combined company and the former Nash-Finch shareholders will own approximately 42.3%.  It is expected that the Merger will qualify as a tax-free reorganization for U.S. federal income tax purposes.  Additional information regarding this merger can be found in Nash-Finch Company’s Registration Statement on Form S-4 filed on October 15, 2013.

Forward Looking Information and Cautionary Factors

                This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  Such statements relate to trends and events that may affect our future financial position and operating results.  Any statement contained in this report that is not a statement of historical fact may be deemed a forward-looking statement.  For example, words such as “may,” “will,” “should,” “likely,” “expect,” “anticipate,” “estimate,” “believe,” “intend, ” “potential” or “plan,” or comparable terminology, are intended to identify forward‑looking statements.  Such statements are based upon current expectations, estimates and assumptions, and entail various risks and uncertainties that could cause actual results to differ materially from those expressed in such forward‑looking statements.  Important factors known to us that could cause or contribute to material differences include, but are not limited to the following:

•   the effect of traditional and alternative format competition on our food distribution, military and retail businesses;

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

•    macroeconomic and geopolitical events affecting commerce generally;

•   changes in consumer buying and spending patterns including a shift to non-traditional retail channels;

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

•   possible changes in the military commissary system, including those stemming from the redeployment of forces, congressional action, changes in funding levels, or the effects of mandated reductions in or sequestration of government expenditures;

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

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

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

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

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

•   limitations on financial and operating flexibility due to debt levels and debt instrument covenants and ability to access capital to support capital spending and growth opportunities;

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

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

•   changes in accounting standards;

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

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

•   unionization of a significant portion of our workforce;

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

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

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

•    changes in food safety regulations and other regulations applicable to the products we sell;

•    threats or potential threats to security;

•   unanticipated problems with product procurement; and

•   maintaining our reputation and corporate image.

A more detailed discussion of many of these factors, as well as other factors, that could affect the Company’s results is contained in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the fiscal year ended December 29, 2012.  You should carefully consider each of these factors and all of the other information in this report.  We believe that all forward-looking statements are based upon reasonable assumptions when made.  However, we caution that it is impossible to predict actual results or outcomes and that accordingly you should not place undue reliance on these statements.  Forward-looking statements speak only as of the date when made and we undertake no obligation to revise or update these statements in light of subsequent events or developments.  Actual results and outcomes may differ materially from anticipated results or outcomes discussed in forward-looking statements.  You are advised, however, to consult any future disclosures we make on related subjects in future reports to the SEC.

Overview

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

                Our strategic plan is built upon extensive knowledge of current industry, consumer and market trends, and is formulated to differentiate the Company.  The strategic plan includes long-term initiatives to increase revenues and earnings, improve productivity and cost efficiencies of our Military, Food Distribution and Retail business segments, and leverage our corporate support services.  The Company has strategic initiatives to improve working capital, manage debt, and increase shareholder value through capital expenditures with acceptable returns on investment.  Several important elements of the strategic plan include:

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

·          Growing the Military segment through acquisition and expansion of our distribution network, as well as creating warehousing and transportation cost efficiencies;

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

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

Our Military segment contracts with manufacturers to distribute a wide variety of food products to military commissaries and exchanges located in the United States and the District of Columbia, and in Europe, Puerto Rico, Cuba, the Azores, Egypt and Bahrain.  We have over 30 years of experience acting as a distributor to U.S. military commissaries and exchanges.  During the third quarter of fiscal 2010, we purchased a facility in Oklahoma City, Oklahoma for expansion of our Military business.  This facility became operational during the first quarter of fiscal 2012.  During the third quarter of 2012, we transferred the operations of our Military distribution center in Jessup, Maryland to a larger facility in Landover, Maryland.

Our Food Distribution segment sells and distributes a wide variety of nationally branded and private label grocery products and perishable food products from 13 distribution centers to customers located in 41 states.

Our Retail segment operated 76 corporate-owned grocery stores primarily in the Upper Midwest as of October 5, 2013.  During the second quarter of 2012, we acquired twelve Bag ‘N Save® supermarkets located in Omaha and York, Nebraska.  During the third quarter of 2012, we acquired eighteen No Frills® supermarkets located in Nebraska and western Iowa.  This expansion of the Retail segment, including the addition of one store in the fourth quarter of 2012 and two stores in the third quarter of 2013, was offset by the sale of two stores and the closure of one store since the end of fiscal 2011.  We are also implementing initiatives of varying scope and duration with a view toward improving our financial performance under the highly competitive conditions the Retail segment of our business faces.  These initiatives include designing and reformatting some of our retail stores into alternative formats to increase overall retail sales performance.  We converted two of our existing retail stores to our Family Fresh Market® format during the third quarter of 2012, and converted one additional store to this format during the third quarter of 2013.  As we continue to assess the impact of performance improvement initiatives and the operating results of individual stores, we may need to recognize impairments of long-lived assets and goodwill associated with our Retail segment, and may incur restructuring or other charges in connection with closure or sales activities.  The Retail segment yields a higher gross profit percent of sales and higher selling, general and administrative (“SG&A”) expenses as a percent of sales compared to our Food Distribution and Military segments.  Thus, changes in sales of the Retail segment can have a disproportionate impact on consolidated gross profit and SG&A as compared to similar changes in sales in our Food Distribution and Military segments.

Results of Operations

Sales

The following tables summarize our sales activity for the 16 weeks ended October 5, 2013 (“third quarter 2013”) compared to the 16 weeks ended October 6, 2012 (“third quarter 2012”) and the 40 weeks ended October 5, 2013 (“year-to-date 2013”) compared to the 40 weeks ended October 6, 2012 (“year-to-date 2012”):

Depreciation and amortization expense was $29.5 million for year-to-date 2013 as compared to $28.5 million for year-to-date 2012. Depreciation and amortization expense during year-to-date 2013 for our Retail segment increased by $1.9 million as compared to the prior year period, which was primarily the result of our acquisitions of retail stores in the second and third quarters of 2012.  Depreciation and amortization expense for our Military segment increased by $0.5 million as compared to the prior year period, primarily due to the transfer of the operations of our Jessup, Maryland facility to a larger facility in Landover, Maryland during the third quarter of 2012.  This was partially offset by a $1.4 million decrease for our Food Distribution segment as compared to the prior year period.

Interest Expense

Interest expense was $5.6 million for the third quarter of 2013 as compared to $8.1 million for the third quarter of 2012.  Average borrowing levels increased to $432.4 million during the third quarter of 2013 from $399.9 million during the third quarter of 2012, primarily due to an increase in working capital requirements to support the addition of new customers.  The effective interest rate was 2.8% for the third quarter of 2013 as compared to 3.6% for the third quarter of 2012.  The decrease in the effective interest rate was primarily due to the redemption of our Senior Subordinated Convertible Debt in the first quarter of 2013, which was financed by an increase in the debt outstanding under our revolving credit facility.  During the third quarter of 2013, the effective interest rate on our revolving credit facility was lower than the effective interest rate on the Senior Subordinated Convertible Debt in the prior year quarter.

Interest expense was $15.6 million for year-to-date 2013 as compared to $18.7 million for year-to-date 2012.  Average borrowing levels increased to $423.9 million during year-to-date 2013 from $365.7 million during year-to-date 2012, primarily due to our acquisitions in the second and third quarters of 2012 and an increase in working capital requirements to support the addition of new customers.  The effective interest rate was 3.1% for year-to-date 2013 as compared to 3.8% for year-to-date 2012.  The decrease in the effective interest rate was primarily due to the redemption of our Senior Subordinated Convertible Debt in the first quarter of 2013, which was financed by an increase in the debt outstanding under our revolving credit facility.  During year-to-date 2013, the effective interest rate on our revolving credit facility was lower than the effective interest rate on the Senior Subordinated Convertible Debt in the prior year period.  Certain components of our interest expense are excluded from the calculation of our effective interest rate as the costs are not directly attributable to our long-term borrowing rates.

The calculation of our effective interest rate excludes non-cash interest required to be recognized on our Senior Subordinated Convertible Debt .  Non-cash interest expense recognized was zero and $1.9 million for the third quarters of 2013 and 2012, respectively.  Non-cash interest expense recognized was $1.4 million and $4.7 million for the year-to-date periods of 2013 and 2012, respectively.  Additionally, the calculation of our average borrowing levels includes any unamortized equity component of our Senior Subordinated Convertible Debt that is required to be recognized .  The inclusion of the unamortized equity component brings the basis in our Senior Subordinated Convertible Debt to $150.1 million for purposes of calculating our average borrowing levels, or their aggregate issue price, on which we were required to pay semi-annual cash interest at a rate of 3.50% until March 15, 2013.  

Income Taxes

Income tax expense is provided on an interim basis using management’s estimate of the annual effective rate.  Our effective tax rate for the full fiscal year is subject to change and may be impacted by changes to nondeductible items and tax reserve requirements in relation to our forecasts of operations, sales mix by taxing jurisdictions, or changes in tax laws and regulations.  The effective income tax rate was 38.0% and 36.4% for the third quarters of 2013 and 2012, respectively.  The effective income tax rate was 37.6% and 20.1% for year-to-date 2013 and 2012, respectively.  The difference between the 2013 and 2012 effective income tax rates was primarily due to the goodwill impairment and the related non-deductible portion thereof taken in 2012.

The effective rate for the third quarter differed from statutory rates due to the amount of permanent book tax differences relative to the Company’s pre-tax book income.  We estimate the full year effective tax rate for 2013 will be approximately 38.0%, which excludes the potential impact of any additional discrete events.

Net Earnings

During the third quarter of 2013, we recorded net earnings of $6.0 million, or $0.46 per diluted share, as compared to net earnings of $14.6 million, or $1.12 per diluted share, during the third quarter of 2012.  During  year-to-date 2013, we recorded net earnings of $17.0 million, or $1.30 per diluted share, as compared to a net loss of $64.9 million, or $5.01 per diluted share, during year-to-date 2012.  Net earnings in the periods presented in this report were affected by the items included in the discussion above.

Liquidity and Capital Resources

The following table summarizes our cash flow activity and should be read in conjunction with the Consolidated Statements of Cash Flows:

                On November 27, 2012, the Company and its subsidiaries entered into Amendment No. 1 (the “Amendment”) to the Credit Agreement.

                Among other things, the Amendment (i) increased the commitments under the Credit Agreement by $70.0 million to $590.0 million, including within the increase a first-in last-out tranche (“FILO Tranche Loans”) of $30.0 million which amortizes by $2.5 million on the first day of each fiscal quarter beginning March 24, 2013, (ii) extended the maturity of the Credit Agreement by one year to December 21, 2017, and (iii) provided for increases to advance rates of certain components of the borrowing base as well as permitting the inclusion of asset classes in the borrowing base that were previously excluded.

                The principal amount outstanding under the amended Revolving Credit Facility, plus accrued and unpaid interest thereon, will be due and payable in full at maturity on December 21, 2017.  The Company can elect, at the time of borrowing, for loans to bear interest at a rate equal to either the base rate or LIBOR plus a margin.  The LIBOR interest rate margin can vary quarterly in 0.25% increments between three pricing levels ranging from 1.50% to 2.00%, except for FILO Tranche Loans which bear interest at a rate equal to LIBOR plus 2.75%.  The pricing levels for the non-FILO Tranche Loans are based on the Excess Availability, which is defined in the Credit Agreement as (a) the lesser of (i) the borrowing base; or (ii) the aggregate commitments; minus (b) the aggregate of the outstanding credit extensions.  The LIBOR interest rate margin was 1.75% as of October 5, 2013.

                At October 5, 2013, $248.0 million was available under the Revolving Credit Facility after giving effect to outstanding borrowings and to $13.7 million of outstanding letters of credit primarily supporting workers’ compensation obligations.

                The Credit Agreement contains no financial covenants unless and until (i) the continuance of an event of default under the Credit Agreement, or (ii) the failure of the Company to maintain Excess Availability equal to or greater than 10% of the borrowing base at any time, in which event, the Company must comply with a trailing 12-month basis consolidated fixed charge covenant ratio of 1.0 : 1.0, which ratio shall continue to be tested each period thereafter until Excess Availability exceeds 10% of the borrowing base for three consecutive fiscal periods.

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

                We are currently in compliance with all covenants contained within the Credit Agreement.

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

Senior Subordinated Convertible Debt

To finance a portion of the acquisition of two distribution centers in 2005, we sold $150.1 million in aggregate issue price (or $322.0 million aggregate principal amount at maturity) of senior subordinated convertible notes due in 2035.  The notes were unsecured senior subordinated obligations and ranked junior to our existing and future senior indebtedness, including borrowings under our Revolving Credit Facility.  Cash interest at the rate of 3.50% per year was payable semi-annually on the issue price of the notes until March 15, 2013.  On March 15, 2013, the Company completed the redemption of the notes at a price equal to $466.11 per $1,000 in principal amount at maturity, which resulted in a total payment of $150.1 million.  See our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) for the fiscal year ended December 29, 2012, for additional information.

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

On June 26, 2013, the Company entered into a sixyear $32.25 million term loan facility (“the Agreement”) with First National Bank of Omaha.  This loan facility is intended to provide working capital to be used for general corporate purposes.  The Agreement is secured by our executive office building in Minneapolis, Minnesota and our distribution centers in St. Cloud, Minnesota and Omaha, Nebraska.

Consolidated EBITDA (Non-GAAP Measurement)

 The following is a reconciliation of EBITDA and Consolidated EBITDA to net earnings (loss) for the third quarters and year-to-date periods of 2013 and 2012 (amounts in thousands):