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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q

(Mark One)

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

For the quarterly period ended June 29, 2003

OR

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

For the transition from ____ to ____

Commission file number 001-13222

STATER BROS. HOLDINGS INC.

(Exact name of registrant as specified in its charter)


|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 33-0350671                          
|                                                               |  |                                     
|(State or other jurisdiction of incorporation or
organization) |  | (I.R.S. Employer Identification No.)
|                                                               |  |                                     
|21700 Barton Road                                              |  |                                     
|Colton, California                                             |  | 92324                               
|                                                               |  |                                     
|(Address of principal executive offices)                       |  | (Zip Code)                          
|                                                               |  |                                     
|Registrants telephone number, including area code             |  | (909) 783-5000                      
|                                                               |  |                                     

Not Applicable

(Former name, former address and former fiscal year, if changed since last report.)




| |  | Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months
(or for such shorter period that the registrant was required to file
such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes X
No .
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2
of the Act). Yes                      No X .                                                                                                                                                                                                                       

As of August 13, 2003, there were issued and outstanding
38,301 shares of the registrants Class A Common Stock.



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TABLE OF CONTENTS



|                               |                                                                                                                    |                                                                   |  |  |  |  |  | 
|------------------------------ | ------------------------------------------------------------------------------------------------------------------ | ----------------------------------------------------------------- |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION
|                               | Item 1. FINANCIAL STATEMENTS                                                                                      
|                               |                                                                                                                    | CONSOLIDATED BALANCE SHEETS                                      
|                               |                                                                                                                    | CONSOLIDATED STATEMENTS OF INCOME for the 39 Weeks Ended         
|                               |                                                                                                                    | CONSOLIDATED STATEMENTS OF INCOME for the 13 Weeks Ended         
|                               |                                                                                                                    | CONSOLIDATED STATEMENTS OF CASH FLOWS                            
|                               |                                                                                                                    | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                       
|                               | Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION                      AND RESULTS OF OPERATIONS
|                               |                                                                                                                    | Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
|                               | Item 4. CONTROLS AND PROCEDURES                                                                                   
|PART II  OTHER INFORMATION   
|                               | Item 1. LEGAL PROCEEDINGS                                                                                         
|                               | Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS                                                                 
|                               | Item 3. DEFAULTS UPON SENIOR SECURITIES                                                                           
|                               | Item 5. OTHER INFORMATION                                                                                         
|                               | Item 6. EXHIBITS AND REPORTS ON FORM 8-K                                                                          
|Signatures                    
|EXHIBIT 31.1                  
|EXHIBIT 31.2                  
|EXHIBIT 32.1                  



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STATER BROS. HOLDINGS INC.
JUNE 29, 2003

INDEX

|           |  |                                                                                       |  |                                                                                                          |    |  |   | 
|---------- |  | ------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------- | -- |  | - | 
|PART I     |  | FINANCIAL INFORMATION (Unaudited)                                                     |  | Page                                                                                                    
|           |  |                                                                                       |  |                                                                                                         
|Item 1.    |  | Financial Statements                                                                  |  |                                                                                                          |    | 
|           |  |                                                                                       |  | Consolidated Balance Sheets (Unaudited) as of September 29, 2002
and June 29, 2003                       |    |  | 3 | 
|           |  |                                                                                       |  | Consolidated Statements of Income (Unaudited) for the 39 weeks ended
June 30, 2002 and June 29, 2003     |    |  | 5 | 
|           |  |                                                                                       |  | Consolidated Statements of Income (Unaudited) for the 13 weeks ended
June 30, 2002 and June 29, 2003     |    |  | 6 | 
|           |  |                                                                                       |  | Consolidated Statements of Cash Flows (Unaudited) for the 39 weeks ended
June 30, 2002 and June 29, 2003 |    |  | 7 | 
|           |  |                                                                                       |  | Notes to Consolidated Financial Statements (Unaudited)                                                   |    |  | 8 | 
|Item 2.    |  | Managements Discussion and Analysis of Financial
Condition and Results of Operations |  |                                                                                                          | 11 | 
|Item 3.    |  | Quantitative and Qualitative Disclosure about Market Risk                             |  |                                                                                                          | 19 | 
|Item 4.    |  | Controls and Procedures                                                               |  |                                                                                                          | 20 | 
|PART II    |  | OTHER INFORMATION                                                                     |  |                                                                                                          |    | 
|Item 1.    |  | Legal Proceedings                                                                     |  |                                                                                                          | 21 | 
|Item 2.    |  | Changes in Securities and Use of Proceeds                                             |  |                                                                                                          | 21 | 
|Item 3.    |  | Defaults Upon Senior Securities                                                       |  |                                                                                                          | 21 | 
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                   |  |                                                                                                          | 21 | 
|Item 5.    |  | Other Information                                                                     |  |                                                                                                          | 21 | 
|Item 6.    |  | Exhibits and Reports on Form 8-K                                                      |  |                                                                                                          | 22 | 
|SIGNATURES |  |                                                                                       |  |                                                                                                          | 23 | 

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PART I  FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS




STATER BROS. HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)

ASSETS

|                                       |                                                |   |           |         |          |   |         |         | 
|-------------------------------------- | ---------------------------------------------- | - | --------- | ------- | -------- | - | ------- | ------- | 
|                                       |                                                |   | Sept. 29, |         | June 29,
|                                       |                                                |   | 2002      |         | 2003    
|                                       |                                                |   |           |         |         
|Current assets                         |                                                |   |           |         |          |   |         |        
|                                       | Cash and cash equivalents                      |   | $         | 81,043  |          |   | $       | 118,478 | 
|                                       | Receivables                                    |   |           | 26,500  |          |   |         | 25,367  | 
|                                       | Income tax receivables                         |   |           | 7,061   |          |   |         | 1,212   | 
|                                       | Inventories                                    |   |           | 175,404 |          |   |         | 170,258 | 
|                                       | Prepaid expenses                               |   |           | 7,860   |          |   |         | 8,926   | 
|                                       | Deferred income taxes                          |   |           | 15,281  |          |   |         | 15,281  | 
|                                       |                                                |   |           |         |          |   |         |        
|Total current assets                   |                                                |   | 313,149   |         |          |   | 339,522 |        
|Investment in unconsolidated affiliate |                                                |   | 15,580    |         |          |   | 16,776  |        
|Property and equipment                 |                                                |   |           |         |          |   |         |        
|                                       | Land                                           |   |           | 50,930  |          |   |         | 50,930  | 
|                                       | Buildings and improvements                     |   |           | 191,514 |          |   |         | 197,970 | 
|                                       | Store fixtures and equipment                   |   |           | 212,741 |          |   |         | 233,252 | 
|                                       | Property subject to capital leases             |   |           | 24,670  |          |   |         | 24,670  | 
|                                       |                                                |   |           |         |          |   |         |        
|                                       |                                                |   | 479,855   |         |          |   | 506,822 |        
|                                       | Less accumulated depreciation and amortization |   |           | 194,039 |          |   |         | 209,420 | 
|                                       |                                                |   |           |         |          |   |         |        
|                                       |                                                |   | 285,816   |         |          |   | 297,402 |        
|Deferred debt issuance costs, net      |                                                |   | 13,936    |         |          |   | 11,349  |        
|Other assets                           |                                                |   | 5,649     |         |          |   | 5,512   |        
|                                       |                                                |   |           |         |          |   |         |        
|                                       |                                                |   | 19,585    |         |          |   | 16,861  |        
|                                       |                                                |   |           |         |          |   |         |        
|Total assets                           |                                                | $ | 634,130   |         |          | $ | 670,561 |        
|                                       |                                                |   |           |         |          |   |         |        

See accompanying notes to unaudited consolidated financial statements

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STATER BROS. HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS(Continued)
(Unaudited)
(In thousands, except share amounts)

LIABILITIES AND STOCKHOLDERS DEFICIT

|                                                       |                                              |                                                                    |         |           |   |          |         |         |   | 
|------------------------------------------------------ | -------------------------------------------- | ------------------------------------------------------------------ | ------- | --------- | - | -------- | ------- | ------- | - | 
|                                                       |                                              |                                                                    |         | Sept. 29, |   | June 29,
|                                                       |                                              |                                                                    |         | 2002      |   | 2003    
|                                                       |                                              |                                                                    |         |           |   |         
|Current liabilities                                    |                                              |                                                                    |         |           |   |          |         |        
|                                                       | Accounts payable                             |                                                                    | $       | 104,166   |   |          | $       | 111,652 |  
|                                                       | Accrued payroll and related expenses         |                                                                    |         | 41,567    |   |          |         | 42,528  |  
|                                                       | Other accrued liabilities                    |                                                                    |         | 46,656    |   |          |         | 57,909  |  
|                                                       | Current portion of capital lease obligations |                                                                    |         | 1,117     |   |          |         | 1,049   |  
|                                                       |                                              |                                                                    |         |           |   |          |         |        
|Total current liabilities                              |                                              |                                                                    | 193,506 |           |   |          | 213,138 |        
|Deferred income taxes, long-term                       |                                              |                                                                    | 6,500   |           |   |          | 6,500   |        
|Long-term debt                                         |                                              |                                                                    | 458,750 |           |   |          | 458,750 |        
|Capital lease obligations, less current portion        |                                              |                                                                    | 10,981  |           |   |          | 10,190  |        
|Long-term portion of self-insurance and other reserves |                                              |                                                                    | 23,855  |           |   |          | 30,055  |        
|Other long-term liabilities                            |                                              |                                                                    | 14,659  |           |   |          | 18,521  |        
|                                                       |                                              |                                                                    |         |           |   |          |         |        
|Total liabilities                                      |                                              |                                                                    | 708,251 |           |   |          | 737,154 |        
|Stockholders deficit                                  |                                              |                                                                    |         |           |   |          |         |        
|                                                       | Common Stock, $.01 par value:                |                                                                    |         |           |   |          |         |         |  
|                                                       |                                              | Authorized shares - 100,000
Issued and outstanding shares - 0      |         |           |  |          |         |         |  | 
|                                                       | Class A Common Stock, $.01 par value:        |                                                                    |         |           |   |          |         |         |  
|                                                       |                                              | Authorized shares - 100,000
Issued and outstanding shares - 38,301 |         |           |  |          |         |         |  | 
|                                                       | Additional paid-in capital                   |                                                                    |         | 9,740     |   |          |         | 9,740   |  
|                                                       | Retained deficit                             |                                                                    |         | (83,861   | ) |          |         | (76,333 | )
|                                                       |                                              |                                                                    |         |           |   |          |         |        
|Total stockholders deficit                            |                                              |                                                                    | (74,121 | )         |   |          | (66,593 | )      
|                                                       |                                              |                                                                    |         |           |   |          |         |        
|Total liabilities and stockholders deficit            |                                              | $                                                                  | 634,130 |           |   | $        | 670,561 |        
|                                                       |                                              |                                                                    |         |           |   |          |         |        

See accompanying notes to unaudited consolidated financial statements

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STATER BROS. HOLDINGS INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share and share amounts)

|                                                 |                                              |   |                |         |          |   |           |         | 
|------------------------------------------------ | -------------------------------------------- | - | -------------- | ------- | -------- | - | --------- | ------- | 
|                                                 |                                              |   | 39 Weeks Ended
|                                                 |                                              |   |               
|                                                 |                                              |   | June 30,       |         | June 29,
|                                                 |                                              |   | 2002           |         | 2003    
|                                                 |                                              |   |                |         |         
|Sales                                            |                                              | $ | 1,989,579      |         |          | $ | 2,046,776 |        
|Cost of goods sold                               |                                              |   | 1,463,461      |         |          |   | 1,488,105 |        
|                                                 |                                              |   |                |         |          |   |           |        
|Gross profit                                     |                                              |   | 526,118        |         |          |   | 558,671   |        
|Operating expenses:                              |                                              |   |                |         |          |   |           |        
|                                                 | Selling, general and administrative expenses |   |                | 447,052 |          |   |           | 482,420 | 
|                                                 | Depreciation and amortization                |   |                | 23,160  |          |   |           | 25,237  | 
|                                                 |                                              |   |                |         |          |   |           |        
|Total operating expenses                         |                                              |   | 470,212        |         |          |   | 507,657   |        
|                                                 |                                              |   |                |         |          |   |           |        
|Operating profit                                 |                                              |   | 55,906         |         |          |   | 51,014    |        
|Interest income                                  |                                              |   | 1,345          |         |          |   | 770       |        
|Interest expense                                 |                                              |   | (39,441        | )       |          |   | (39,898   | )      
|Equity in earnings from unconsolidated affiliate |                                              |   | 2,555          |         |          |   | 1,196     |        
|Other expenses  net                             |                                              |   | (1,488         | )       |          |   | (756      | )      
|                                                 |                                              |   |                |         |          |   |           |        
|Income before income taxes                       |                                              |   | 18,877         |         |          |   | 12,326    |        
|Income taxes                                     |                                              |   | 7,740          |         |          |   | 4,798     |        
|                                                 |                                              |   |                |         |          |   |           |        
|Net income                                       |                                              | $ | 11,137         |         |          | $ | 7,528     |        
|                                                 |                                              |   |                |         |          |   |           |        
|Earnings per share                               |                                              | $ | 257.88         |         |          | $ | 196.55    |        
|                                                 |                                              |   |                |         |          |   |           |        
|Average common shares outstanding                |                                              |   | 43,186         |         |          |   | 38,301    |        
|                                                 |                                              |   |                |         |          |   |           |        
|Shares outstanding at end of period              |                                              |   | 38,301         |         |          |   | 38,301    |        
|                                                 |                                              |   |                |         |          |   |           |        

See accompanying notes to unaudited consolidated financial statements

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STATER BROS. HOLDINGS INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share and share amounts)

|                                                 |                                              |   |                |         |          |   |         |         | 
|------------------------------------------------ | -------------------------------------------- | - | -------------- | ------- | -------- | - | ------- | ------- | 
|                                                 |                                              |   | 13 Weeks Ended
|                                                 |                                              |   |               
|                                                 |                                              |   | June 30,       |         | June 29,
|                                                 |                                              |   | 2002           |         | 2003    
|                                                 |                                              |   |                |         |         
|Sales                                            |                                              | $ | 672,779        |         |          | $ | 688,071 |        
|Cost of goods sold                               |                                              |   | 495,637        |         |          |   | 499,788 |        
|                                                 |                                              |   |                |         |          |   |         |        
|Gross profit                                     |                                              |   | 177,142        |         |          |   | 188,283 |        
|Operating expenses:                              |                                              |   |                |         |          |   |         |        
|                                                 | Selling, general and administrative expenses |   |                | 151,459 |          |   |         | 165,325 | 
|                                                 | Depreciation and amortization                |   |                | 7,976   |          |   |         | 8,788   | 
|                                                 |                                              |   |                |         |          |   |         |        
|Total operating expenses                         |                                              |   | 159,435        |         |          |   | 174,113 |        
|                                                 |                                              |   |                |         |          |   |         |        
|Operating profit                                 |                                              |   | 17,707         |         |          |   | 14,170  |        
|Interest income                                  |                                              |   | 319            |         |          |   | 244     |        
|Interest expense                                 |                                              |   | (13,444        | )       |          |   | (13,339 | )      
|Equity in earnings from unconsolidated affiliate |                                              |   | 532            |         |          |   | 217     |        
|Other expenses  net                             |                                              |   | (179           | )       |          |   | (129    | )      
|                                                 |                                              |   |                |         |          |   |         |        
|Income before income taxes                       |                                              |   | 4,935          |         |          |   | 1,163   |        
|Income taxes                                     |                                              |   | 2,024          |         |          |   | 394     |        
|                                                 |                                              |   |                |         |          |   |         |        
|Net income                                       |                                              | $ | 2,911          |         |          | $ | 769     |        
|                                                 |                                              |   |                |         |          |   |         |        
|Earnings per share                               |                                              | $ | 76.00          |         |          | $ | 20.08   |        
|                                                 |                                              |   |                |         |          |   |         |        
|Average common shares outstanding                |                                              |   | 38,301         |         |          |   | 38,301  |        
|                                                 |                                              |   |                |         |          |   |         |        
|Shares outstanding at end of period              |                                              |   | 38,301         |         |          |   | 38,301  |        
|                                                 |                                              |   |                |         |          |   |         |        

See accompanying notes to unaudited consolidated financial statements

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STATER BROS. HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)

|                                                                                  |                                                                  |                                                                                                     |         |                |        |          |         |        |        |  
|--------------------------------------------------------------------------------- | ---------------------------------------------------------------- | --------------------------------------------------------------------------------------------------- | ------- | -------------- | ------ | -------- | ------- | ------ | ------ | -
|                                                                                  |                                                                  |                                                                                                     |         | 39 Weeks Ended
|                                                                                  |                                                                  |                                                                                                     |         |               
|                                                                                  |                                                                  |                                                                                                     |         | June 30,       |        | June 29,
|                                                                                  |                                                                  |                                                                                                     |         | 2002           |        | 2003    
|                                                                                  |                                                                  |                                                                                                     |         |                |        |         
|Operating activities:                                                             |                                                                  |                                                                                                     |         |                |        |          |         |       
|Net income                                                                        |                                                                  | $                                                                                                   | 11,137  |                |        | $        | 7,528   |       
|Adjustments to reconcile net income to net cash provided
by operating activities: |                                                                  |                                                                                                     |         |                |        |          |         |       
|                                                                                  | Depreciation and amortization                                    |                                                                                                     |         | 23,160         |        |          |         | 25,237 |       
|                                                                                  | Provision for deferred income taxes                              |                                                                                                     |         | (1,813         | )      |          |         |       |       
|                                                                                  | Loss on disposals of assets                                      |                                                                                                     |         | 1,489          |        |          |         | 756    |       
|                                                                                  | Net undistributed gain in investment in unconsolidated affiliate |                                                                                                     |         | (2,555         | )      |          |         | (1,196 | )     
|                                                                                  | Changes in operating assets and liabilities:                     |                                                                                                     |         |                |        |          |         |        |       
|                                                                                  |                                                                  | (Increase) decrease in receivables                                                                  |         |                | (3,465 | )        |         |        | 1,133  |  
|                                                                                  |                                                                  | (Increase) decrease in income tax receivables                                                       |         |                | (905   | )        |         |        | 5,849  |  
|                                                                                  |                                                                  | (Increase) decrease in inventories                                                                  |         |                | (4,049 | )        |         |        | 5,146  |  
|                                                                                  |                                                                  | Increase in prepaid expenses                                                                        |         |                | (898   | )        |         |        | (1,071 | )
|                                                                                  |                                                                  | Decrease in other assets                                                                            |         |                | 1,621  |          |         |        | 2,724  |  
|                                                                                  |                                                                  | Increase in accounts payable                                                                        |         |                | 6,811  |          |         |        | 7,486  |  
|                                                                                  |                                                                  | Increase in accrued liabilities, long-term portion
of self-insurance reserves and other liabilities |         |                | 21,205 |          |         |        | 22,276 |  
|                                                                                  |                                                                  |                                                                                                     |         |                |        |          |         |       
|Net cash provided by operating activities                                         |                                                                  |                                                                                                     | 51,738  |                |        |          | 75,868  |       
|                                                                                  |                                                                  |                                                                                                     |         |                |        |          |         |       
|Investing activities:                                                             |                                                                  |                                                                                                     |         |                |        |          |         |       
|Purchase of property and equipment                                                |                                                                  |                                                                                                     | (31,032 | )              |        |          | (37,659 | )     
|Proceeds from sale of property and equipment                                      |                                                                  |                                                                                                     | 76      |                |        |          | 85      |       
|                                                                                  |                                                                  |                                                                                                     |         |                |        |          |         |       
|Net cash used in investing activities                                             |                                                                  |                                                                                                     | (30,956 | )              |        |          | (37,574 | )     
|                                                                                  |                                                                  |                                                                                                     |         |                |        |          |         |       
|Financing activities:                                                             |                                                                  |                                                                                                     |         |                |        |          |         |       
|Debt issuance cost                                                                |                                                                  |                                                                                                     | (5,033  | )              |        |          |        |       
|Stock redemption                                                                  |                                                                  |                                                                                                     | (20,000 | )              |        |          |        |       
|Dividends paid                                                                    |                                                                  |                                                                                                     | (4,500  | )              |        |          |        |       
|Principal payments on long-term debt                                              |                                                                  |                                                                                                     | (250    | )              |        |          |        |       
|Principal payments on capital lease obligations                                   |                                                                  |                                                                                                     | (1,104  | )              |        |          | (859    | )     
|                                                                                  |                                                                  |                                                                                                     |         |                |        |          |         |       
|Net cash used in financing activities                                             |                                                                  |                                                                                                     | (30,887 | )              |        |          | (859    | )     
|                                                                                  |                                                                  |                                                                                                     |         |                |        |          |         |       
|Net increase (decrease) in cash and cash equivalents                              |                                                                  |                                                                                                     | (10,105 | )              |        |          | 37,435  |       
|Cash and cash equivalents at beginning of period                                  |                                                                  |                                                                                                     | 101,636 |                |        |          | 81,043  |       
|                                                                                  |                                                                  |                                                                                                     |         |                |        |          |         |       
|Cash and cash equivalents at end of period                                        |                                                                  | $                                                                                                   | 91,531  |                |        | $        | 118,478 |       
|                                                                                  |                                                                  |                                                                                                     |         |                |        |          |         |       
|Interest paid                                                                     |                                                                  | $                                                                                                   | 25,351  |                |        | $        | 25,519  |       
|Income taxes paid                                                                 |                                                                  | $                                                                                                   | 10,459  |                |        | $        | 750     |       

See accompanying notes to unaudited consolidated financial statements

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STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)JUNE 29, 2003

Note 1  Basis of Presentation

In the opinion of management, the accompanying unaudited consolidated
financial statements contain all normal recurring adjustments necessary to
present fairly the financial position of Stater Bros. Holdings Inc. (the
Company) and its subsidiaries as of September 29, 2002 and June 29, 2003 and
the results of its operations and cash flows for the thirty-nine and thirteen
weeks ended June 30, 2002 and June 29, 2003. These consolidated financial
statements should be read in conjunction with the audited consolidated
financial statements and notes thereto included in the Companys latest annual
report filed on Form 10-K. The operating results for the thirty-nine and
thirteen weeks ended June 29, 2003 are not necessarily indicative of the
results of operations for a full year.

Note 2  Income Taxes

The provision for income taxes for the thirty-nine weeks ended June 30,
2002 and June 29, 2003 consists of the following:

|                     |  |                |        |               |  |   |       | 
|-------------------- |  | -------------- | ------ | ------------- |  | - | ----- | 
|                     |  | 39 Weeks Ended
|                     |  |               
|                     |  | June 30, 2002  |        | June 29, 2003
|                     |  |                |        |              
|                     |  | (In thousands)
|Current              |  |                |        |               |  |   |       | 
|Federal income taxes |  | $              | 7,155  |               |  | $ | 3,694 | 
|State income taxes   |  |                | 2,398  |               |  |   | 1,104 | 
|                     |  |                |        |               |  |   |       | 
|                     |  |                | 9,553  |               |  |   | 4,798 | 
|Deferred             |  |                |        |               |  |   |       | 
|Federal income taxes |  |                | (1,084 | )             |  |   |      | 
|State income taxes   |  |                | (729   | )             |  |   |      | 
|                     |  |                |        |               |  |   |       | 
|                     |  |                | (1,813 | )             |  |   |      | 
|                     |  |                |        |               |  |   |       | 
|                     |  | $              | 7,740  |               |  | $ | 4,798 | 
|                     |  |                |        |               |  |   |       | 

Note 3  Unconsolidated Affiliate

The Company owns 50% of Santee Dairies LLC. Through its wholly owned
subsidiary, Santee Dairies, Inc. (Santee), it operates a fluid milk
processing plant located in City of Industry, California, and the Company is
not the controlling stockholder. Accordingly, the Company accounts for its
investment in Santee Dairies LLC using the equity method of accounting and
recognized income of $2.6 million and $1.2 million for the thirty-nine weeks
ended June 30, 2002 and June 29, 2003, respectively. The Company is a
significant customer of Santee, which supplies the Company with a substantial
portion of its fluid milk and dairy products.

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##### Table of Contents



STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)JUNE 29, 2003

Note 3  Unconsolidated Affiliate (contd.)

Summary of unaudited financial information for Santee Dairies LLC is as
follows:

|                        |  |                |  |               |  |   |         |  |  |   |         | 
|----------------------- |  | -------------- |  | ------------- |  | - | ------- |  |  | - | ------- | 
|                        |  | 39 Weeks Ended
|                        |  |               
|                        |  | June 30, 2002  |  | June 29, 2003
|                        |  |                |  |              
|                        |  | (In thousands)
|Current assets          |  |                |  |               |  | $ | 23,214  |  |  | $ | 24,081  | 
|Non-current assets      |  |                |  |               |  |   | 92,388  |  |  |   | 90,477  | 
|Current liabilities     |  |                |  |               |  |   | 21,331  |  |  |   | 22,864  | 
|Non-current liabilities |  |                |  |               |  |   | 63,666  |  |  |   | 58,262  | 
|                       
|                       
|                       
|                       
|                       
|                       
|Shareholders equity    |  |                |  |               |  |   | 30,605  |  |  |   | 33,432  | 
|Sales                   |  |                |  |               |  |   | 138,614 |  |  |   | 128,505 | 
|Gross profit            |  |                |  |               |  |   | 23,018  |  |  |   | 21,434  | 
|Net income              |  |                |  |               |  | $ | 5,109   |  |  | $ | 2,392   | 

Note 4  Reclassifications

Certain amounts in the prior period have been reclassified to conform to
the current period financial statements presentation.

Note 5  Use of Estimates

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

Note 6  Stock Redemption

During the second quarter of fiscal 2002, the Company obtained consent of
the holders of its 10.75% Senior Notes due 2006 to make a distribution and
payment to partners of the stockholder consisting of $25.0 million in cash and
a subordinated note in the principal amount of $20.0 million. On January 22,
2002, the Company redeemed 11,699 shares of the Companys stock previously held
by La Cadena Investments and made a cash payment of $20.0 million and executed
a $20.0 million subordinated note due March 31, 2007 to a former partner of La
Cadena Investments. The subordinated note bears interest at a rate of 5.0% per
annum, payable semi-annually. On February 1, 2002, the Company paid a $4.5
million dividend to La Cadena Investments. Fees for consent of the holders of
its 10.75% Senior Notes and fees and expenses of the transaction, including a
$500,000 financial advisory service fee to La Cadena Investments, were
approximately $5.0 million.

Note 7  Redemption of Notes

During the second quarter of fiscal 2002, the Company redeemed $250,000 of
its 10.75% Senior Notes due 2006. The Notes were restricted and unregistered.
The Notes were redeemed for $250,000 plus accrued interest.

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##### Table of Contents



STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)JUNE 29, 2003

Note 8  Long-Lived Assets

Financial Accounting Standards Board Statements No. 144 (SFAS No. 144),
Accounting for the Impairment or Disposal of Long-Lived Assets became
effective for the Company on September 30, 2002. This standard replaces SFAS
No. 121 and APB No. 30 and amends APB No. 51, among others. Adoption of this
standard did not have a material effect on the Companys financial statements.
As part of the adoption of this standard, assets previously classified as
Properties held for sale on the consolidated balance sheets were reclassified
to Property and equipment.

Note 9  Litigation Settlement

On July 9, 2003, the Companys principal operating subsidiary Stater Bros.
Markets (Markets) agreed to a settlement of two lawsuits which had been filed
on behalf of certain of Markets existing and former store managers and
assistant managers which alleged that such workers are non-exempt under
California labor laws and are therefore entitled to overtime wages. Markets
admitted no wrong doing under the settlement and it believes it has
appropriately followed California law in the classification and payment of its
employees. Markets believes that the store managers and assistant managers are
highly compensated employees with duties and responsibilities which place them
in the exempt category under California law and that such employees are not
entitled to overtime wages. Markets continues to feel the case was without
merit; however, because of escalating litigation expenses, Markets has
determined a settlement was the best solution. The maximum amount to be paid
by Markets under the settlement is $4.0 million, which includes the plaintiffs
legal fees. The ultimate amount to be paid will depend upon the number of
existing and former store managers and assistant managers who elect to
participate in the settlement, and could be less than $4.0 million. As of the
date of this filing, the number of individuals participating in the settlement
is unknown. Management estimates that the minimum amount to be paid under the
settlement is $3.1 million and a liability has been recorded for this amount.
$1.1 million of this estimate has been recorded in the thirteen
weeks and thirty-nine weeks ended June 29, 2003.

Note 10 Recent Accounting Pronouncements

In April 2003, the FASB issued Statement 149, Amendment of Statement 133,
Accounting for Derivative Instruments and Hedging Activities. Statement 149
requires that contracts with comparable characteristics be accounted for
similarly. The Company does not expect the adoption of this pronouncement to
have a material impact on the results of its operations, financial position or
liquidity.

In May 2003, the FASB issued Statement 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity.
Statement 150 establishes standards for classifying and measuring certain
financial instruments with characteristics of both liabilities and equity. The
Company does not expect the adoption of this pronouncement to have a material
impact on the results of its operations, financial position, or liquidity.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities (Interpretation 46), an interpretation of ARB No.
51. The Company is in the initial stages of reviewing this interpretation, but
does not believe it has any variable interest entities to which Interpretation
46 would apply.

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##### Table of Contents



STATER BROS. HOLDINGS INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

PART I  FINANCIAL INFORMATION (contd.)




Item 2. MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



| |  | CRITICAL ACCOUNTING POLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The Companys discussion and analysis of financial condition and
results of operations are based upon the Companys unaudited
consolidated financial statements prepared in accordance with
accounting principals generally accepted in the United States. The
preparation of the financial statements requires the use of estimates
and judgements on the part of management. The Company based its
estimates on the Companys historical experience combined with
managements understanding of current facts and circumstances. The
Company believes that the following critical accounting policies are
the most important to the Companys financial statement presentation
and require the most difficult, subjective and complex judgements on
the part of management.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  | Vendor Rebates and Allowances                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  | The Company receives certain rebates and allowances (allowances)
from its vendors. The Company recognizes these allowances as a
reduction in cost of goods sold as the allowances are earned. These
allowances are earned by promoting certain products or by purchasing
specific amounts of product. The Company records a liability for
allowance funds that have been received but not yet earned.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | Self-Insurance                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | The Company is primarily self-insured, subject to certain retention
levels, for workers compensation, automobile and general liability
costs. The Company records its self-insurance liability based on the
claims filed and an estimate of claims incurred but not yet reported.
The estimates used by management are based on the Companys historical
experiences as well as current facts and circumstances. The Company
uses third party actuarial analysis in making its estimates.
Actuarial projections and the Companys estimate of ultimate losses
are subject to a high degree of variability. The variability in the
projections and estimates are subject to, but not limited to, such
factors as judicial and administrative rulings, legislative actions,
and changes in the structure of compensation benefits. In recent
years, the Company and employers within the State of California as a
whole have seen significant increases in the severity of workers
compensation claims. While the Company has factored these increases
into its estimates of ultimate loss, no assurance can be given that
future events will not require a change in these estimates. The
Company discounts its insurance reserves for workers compensation,
automobile and general liability insurance at a discount rate of
approximately 7.5%.
|
| |  | Inventories                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  | Inventories are stated at the lower of cost (first-in, first-out) or
market. Management believes that its inventory turns and inventory
controls are sufficient and that reserves are not needed for excess,
obsolete or discontinued inventory.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

11



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##### Table of Contents



STATER BROS. HOLDINGS INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS



| |  | CRITICAL ACCOUNTING POLICIES (contd.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Investment in Affiliate                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | The Company owns 50% of Santee. The Company is not the controlling
stockholder and accordingly accounts for its investment using the
equity method of accounting.                                                                                                                                                                                                                                                                                                                                                                
|
| |  | Deferred Debt Issuance Costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | Direct costs incurred as a result of financing transactions are
capitalized and amortized to expense over the terms of the applicable
debt agreements.                                                                                                                                                                                                                                                                                                                                                                           
|
| |  | Deferred Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | Although there can be no assurances as to future taxable income of the
Company, the Company believes that its expectations of future taxable
income, when combined with the income taxes paid in prior years, will
be adequate to realize its deferred tax assets.                                                                                                                                                                                                                                                               
|
| |  | Phantom Stock Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | It is the Companys policy to expense phantom stock units to the
extent that they vest and appreciate during the accounting period.                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | OWNERSHIP OF THE COMPANY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  | La Cadena Investments (La Cadena) is the sole shareholder of the
Company and holds all of the shares of the Companys Class A Common
Stock. La Cadena is a California General Partnership whose partners
include Jack H. Brown, Chairman of the Board, President and Chief
Executive Officer of the Company and a former member of senior
management of the Company. Jack H. Brown has a majority interest in
La Cadena and is the managing general partner with the power to vote
the shares of the Company held by La Cadena.
|
| |  | RESULTS OF OPERATIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | The following table sets forth certain income statement components
expressed as a percent of sales for the thirteen and thirty-nine weeks
ended June 29, 2003 and June 30, 2002.                                                                                                                                                                                                                                                                                                                                                 

|                                   |                                              |  |                |       |                   |  |        |       |      |  |        |       |  |  |        |       | 
|---------------------------------- | -------------------------------------------- |  | -------------- | ----- | ----------------- |  | ------ | ----- | ---- |  | ------ | ----- |  |  | ------ | ----- | 
|                                   |                                              |  | Thirteen Weeks |       | Thirty-Nine Weeks
|                                   |                                              |  |                |       |                  
|                                   |                                              |  | 2003           |       | 2002              |  | 2003   |       | 2002
|                                   |                                              |  |                |       |                   |  |        |       |     
|Sales                              |                                              |  | 100.00         | %     |                   |  | 100.00 | %     |      |  | 100.00 | %     |  |  | 100.00 | %    
|Gross profit                       |                                              |  | 27.36          |       |                   |  | 26.33  |       |      |  | 27.30  |       |  |  | 26.44  |      
|Operating expenses:                |                                              |  |                |       |                   |  |        |       |      |  |        |       |  |  |        |      
|                                   | Selling, general and
administrative expenses |  |                | 24.03 |                   |  |        | 22.51 |      |  |        | 23.57 |  |  |        | 22.47 | 
|                                   | Depreciation and amortization                |  |                | 1.27  |                   |  |        | 1.19  |      |  |        | 1.24  |  |  |        | 1.16  | 
|Operating profit                   |                                              |  | 2.06           |       |                   |  | 2.63   |       |      |  | 2.49   |       |  |  | 2.81   |      
|Interest income                    |                                              |  | 0.04           |       |                   |  | 0.05   |       |      |  | 0.04   |       |  |  | 0.07   |      
|Interest expense                   |                                              |  | (1.94          | )     |                   |  | (2.00  | )     |      |  | (1.95  | )     |  |  | (1.98  | )    
|Equity in unconsolidated affiliate |                                              |  | 0.03           |       |                   |  | 0.08   |       |      |  | 0.06   |       |  |  | 0.13   |      
|Other expenses  net               |                                              |  | (0.02          | )     |                   |  | (0.03  | )     |      |  | (0.04  | )     |  |  | (0.08  | )    
|Income before income taxes         |                                              |  | 0.17           | %     |                   |  | 0.73   | %     |      |  | 0.60   | %     |  |  | 0.95   | %    

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STATER BROS. HOLDINGS INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS



| |  | RESULTS OF OPERATIONS (contd.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Sales for the thirteen weeks ended June 29, 2003, the third quarter of
fiscal 2003, increased 2.27% and amounted to $688.1 million compared
to $672.8 million for the same period in the prior year. Sales for the
thirty-nine weeks ended June 29, 2003, increased 2.87% and amounted to
$2.047 billion compared to $1.990 billion for the same period in the
prior year. The increase in sales in the third quarter of fiscal 2003
and fiscal year to date of 2003 was due primarily to favorable
customer response to the Companys marketing plan, which emphasizes
high quality, large product selections and customer service. Like
store sales increased 1.84% and 2.37% for the thirteen-week and
thirty-nine week periods ended June 29, 2003, respectively. During
the third quarter of fiscal 2003, the Company opened a new store
location in Corona, California. The Company operated 157 supermarkets
at June 29, 2003 and 156 supermarkets at June 30, 2002.
|
| |  | Gross profit for the thirteen weeks ended June 29, 2003, amounted to
$188.3 million or 27.36% of sales compared to $177.1 million or 26.33%
of sales in the same period of the prior year. Gross profit for the
thirty-nine weeks ended June 29, 2003, amounted to $558.7 million or
27.30% of sales compared to $526.1 million or 26.44% of sales in the
same period of the prior year. The increase in gross profit, as a
percentage of sales, in both the third quarter of 2003 and for the
fiscal year to date of 2003, was due primarily to an increase in the
sales of higher margin items.                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | Operating expenses include selling, general and administrative
expenses, and depreciation and amortization. For the thirteen weeks
ended June 29, 2003, selling, general and administrative expenses
amounted to $165.3 million or 24.03% of sales compared to $151.5
million or 22.51% of sales for the thirteen weeks ended June 30, 2002.
For the thirty-nine weeks ended June 29, 2003, selling, general and
administrative expenses amounted to $482.4 million or 23.57% of sales
compared to $447.1 million or 22.47% of sales for the thirty-nine
weeks ended June 30, 2002. The increase in selling, general and
administrative expenses as a percentage of sales during the third
quarter of fiscal 2003 and for the year to date of fiscal 2003, was
due primarily to increases in payroll related expenses.                                                                                                                                                     
|
| |  | Depreciation and amortization expenses amounted to $8.8 million and
$25.2 million for the third quarter and year to date periods ended
June 29, 2003, respectively. Depreciation and amortization expenses
amounted to $8.0 million and $23.2 million for the quarter and year to
date periods of the prior year. The increase in depreciation and
amortization expenses in fiscal 2003 was primarily due to the increase
in fixed assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | Operating profit for the third quarter of 2003 amounted to $14.2
million or 2.06% of sales compared to $17.7 million or 2.63% of sales
for the third quarter of 2002. Operating profit for the fiscal year to
date of 2003 amounted to $51.0 million or 2.49% of sales compared to
$55.9 million or 2.81% of sales for the fiscal year to date of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

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STATER BROS. HOLDINGS INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS



| |  | RESULTS OF OPERATIONS (contd.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Interest expense amounted to $13.3 million for the third quarter of
2003 compared to $13.4 million for the third quarter of 2002. For the
fiscal year to date of 2003 and 2002, interest expense amounted to
$39.9 million and $39.4 million, respectively. The increase in
interest expense over the prior year was primarily due to the
issuance, in January 2002, of a $20.0 million subordinated note in
connection with the redemption of the Companys stock.                                                                                                                                                                                                                                                                                                                                         
|
| |  | The Companys equity in earnings from unconsolidated affiliate,
amounted to $217,000 for the third quarter of fiscal 2003 compared to
$532,000 in the third quarter of the prior year. For the fiscal year
to date periods of 2003 and 2002, the Companys equity in earnings
from unconsolidated affiliate amounted to $1.2 million and $2.6
million, respectively. The difference in equity in earnings from
unconsolidated affiliate for the fiscal quarter 2003 over 2002 was due
to decreased sales volumes and margins at the affiliate. The
difference in equity in earnings in the year to date fiscal 2003 versus
fiscal 2002 is due primarily to the revaluation, by the affiliate in
fiscal 2002, of deferred tax benefits arising from past net operating
losses.                               
|
| |  | Income before income taxes amounted to $1.2 million and $4.9
million for the third quarter of 2003 and 2002, respectively. Income
before income taxes amounted to $12.3 million and $18.9 million for
the thirty-nine weeks year to date periods of 2003 and 2002,
respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | Net income for the third quarter amounted to $0.8
million and $2.9 million for 2003 and 2002, respectively. Net income
for the fiscal year to date periods amounted to $7.5 million and
$11.1 million for 2003 and 2002, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  | LIQUIDITY AND CAPITAL RESOURCES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | The Company historically has
funded its daily cash flow requirements through funds provided by
operations and through borrowings from short-term revolving credit
facilities. The Companys credit agreement, as amended, became
effective August 6, 1999 and expires in March 2005 and consists of a
revolving loan facility for working capital of $75.0 million which
includes a Letter of Credit Sublimit with a maximum availability of
$50 million. As of June 29, 2003, the Company had $47.7 million of
outstanding letters of credit and had $27.3 million available under
the revolving loan facility. The letter of credit facility is
maintained pursuant to the Companys workers compensation and general
liability self-insurance requirements and as security for certain rent
obligations.

14



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##### Table of Contents



STATER BROS. HOLDINGS INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

LIQUIDITY AND CAPITAL RESOURCES (contd.)

The following table sets forth the
Companys contractual cash obligations and commercial commitments as of June 29, 2003.

|                                      |  |                                             |         |        |  |           |        |           |  |         |         |  |  |   |         |       |  |   |         | 
|------------------------------------- |  | ------------------------------------------- | ------- | ------ |  | --------- | ------ | --------- |  | ------- | ------- |  |  | - | ------- | ----- |  | - | ------- | 
|                                      |  | Contractual Cash Obligations (In thousands)
|                                      |  |                                            
|                                      |  |                                             |         |        |  | Less than |        |           |  |         |         |  |  |   |         | After
|                                      |  | Total                                       |         | 1 Year |  | 1-3 Years |        | 4-5 Years |  | 5 Years
|                                      |  |                                             |         |        |  |           |        |           |  |        
|10.75% Senior Notes due August 2006   |  |                                             |         |        |  |           |        |           |  |         |         |  |  |   |         |       |  |   |         | 
|Principal                             |  | $                                           | 438,750 |        |  | $         |       |           |  | $       |        |  |  | $ | 438,750 |       |  | $ |        | 
|Interest                              |  |                                             | 161,149 |        |  |           | 47,166 |           |  |         | 94,331  |  |  |   | 19,652  |       |  |   |        | 
|                                      |  |                                             |         |        |  |           |        |           |  |         |         |  |  |   |         |       |  |   |         | 
|                                      |  |                                             | 599,899 |        |  |           | 47,166 |           |  |         | 94,331  |  |  |   | 458,402 |       |  |   |        | 
|5.0% Subordinated Note due March 2007 |  |                                             |         |        |  |           |        |           |  |         |         |  |  |   |         |       |  |   |         | 
|Principal                             |  |                                             | 20,000  |        |  |           |       |           |  |         |        |  |  |   | 20,000  |       |  |   |        | 
|Interest                              |  |                                             | 4,000   |        |  |           | 1,000  |           |  |         | 2,000   |  |  |   | 1,000   |       |  |   |        | 
|                                      |  |                                             |         |        |  |           |        |           |  |         |         |  |  |   |         |       |  |   |         | 
|                                      |  |                                             | 24,000  |        |  |           | 1,000  |           |  |         | 2,000   |  |  |   | 21,000  |       |  |   |        | 
|Capital
Lease Obligations(1)          |  |                                             |         |        |  |           |        |           |  |         |         |  |  |   |         |       |  |   |         | 
|Principal                             |  |                                             | 11,239  |        |  |           | 1,049  |           |  |         | 1,819   |  |  |   | 1,857   |       |  |   | 6,514   | 
|Interest                              |  |                                             | 10,116  |        |  |           | 1,770  |           |  |         | 2,981   |  |  |   | 2,409   |       |  |   | 2,956   | 
|                                      |  |                                             |         |        |  |           |        |           |  |         |         |  |  |   |         |       |  |   |         | 
|                                      |  |                                             | 21,355  |        |  |           | 2,819  |           |  |         | 4,800   |  |  |   | 4,266   |       |  |   | 9,470   | 
|Operating
Leases(1)                   |  |                                             | 229,613 |        |  |           | 31,504 |           |  |         | 57,800  |  |  |   | 45,642  |       |  |   | 94,667  | 
|                                      |  |                                             |         |        |  |           |        |           |  |         |         |  |  |   |         |       |  |   |         | 
|Total Contractual Cash Obligations    |  | $                                           | 874,867 |        |  | $         | 82,489 |           |  | $       | 158,931 |  |  | $ | 529,310 |       |  | $ | 104,137 | 
|                                      |  |                                             |         |        |  |           |        |           |  |         |         |  |  |   |         |       |  |   |         | 

|                                   |  |                                             |        |        |  |           |        |           |  |         |   |  |  |   |   |       |  |   |   | 
|---------------------------------- |  | ------------------------------------------- | ------ | ------ |  | --------- | ------ | --------- |  | ------- | - |  |  | - | - | ----- |  | - | - | 
|                                   |  | Other Commercial Commitments (In thousands)
|                                   |  |                                            
|                                   |  |                                             |        |        |  | Less than |        |           |  |         |   |  |  |   |   | After
|                                   |  | Total                                       |        | 1 Year |  | 1-3 Years |        | 4-5 Years |  | 5 Years
|                                   |  |                                             |        |        |  |           |        |           |  |        
|Standby Letters of Credit(2)       |  | $                                           | 47,702 |        |  | $         | 47,702 |           |  | $       |  |  |  | $ |  |       |  | $ |  | 
|                                   |  |                                             |        |        |  |           |        |           |  |         |   |  |  |   |   |       |  |   |   | 
|Total Other Commercial Commitments |  | $                                           | 47,702 |        |  | $         | 47,702 |           |  | $       |  |  |  | $ |  |       |  | $ |  | 
|                                   |  |                                             |        |        |  |           |        |           |  |         |   |  |  |   |   |       |  |   |   | 



| |  | (1) The Company leases the majority of its retail stores, offices,
warehouses and distribution facilities. Certain leases provide for
additional rents based on sales. Primary lease terms range from 10 to
99 years and substantially all leases provide for renewal options.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | (2) Standby letters of credit are committed as security for workers
compensation obligations and as security for current rent obligations.
Outstanding letters of credit expire between December 2003 and
October 2004.                                                      

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STATER BROS. HOLDINGS INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS



| |  | LIQUIDITY AND CAPITAL RESOURCES (contd.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Working capital amounted to $126.4 million at June 29, 2003 and $119.6
million at September 29, 2002, and the Companys current ratios were
1.59:1, and 1.62:1, respectively. Fluctuations in working capital and
current ratios are not unusual in the industry.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | Net cash provided by operating activities in the thirty-nine weeks
ended June 29, 2003 amounted to $75.9 million compared to $51.7
million for the thirty-nine weeks ended June 30, 2002. Fluctuations
in net cash provided by operating activities are not unusual in the
industry. Cash provided by operating activities in fiscal 2003 of
$75.9 million consisted of a $22.3 million increase in accrued
liabilities, self-insurance reserves and other liabilities, an
increase of $7.5 million in accounts payable, a decrease in income tax
receivables of $5.8 million, a decrease of $5.1 million in inventory
and $25.2 million of depreciation and amortization. Cash provided by
operating activities in fiscal 2002 of $51.7 million consisted of a
$21.2 million increase in accrued liabilities, self-insurance reserves
and other liabilities, an increase of $6.8 million in accounts payable
and $23.2 million of depreciation and amortization offset by an
increase in inventories of $4.0 million and an increase in receivables
of $3.5 million.                                                                                                               
|
| |  | Net cash used in investing activities for the thirty-nine weeks ended
June 29, 2003, amounted to $37.6 million compared to $31.0 million for
the thirty-nine weeks ended June 30, 2002. The difference in net cash
used in investing activities between the comparable periods is due to
the Companys capital expenditures during such periods, net of
proceeds from asset disposals. Capital expenditures amounted to $37.7
million in the fiscal year to date of 2003 compared to $31.0 million
in the fiscal year to date of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | Net cash used by financing activities amounted to $0.9 million and
$30.9 million for the thirty-nine weeks ended June 29, 2003 and June
30, 2002, respectively. The $0.9 million used in financing activities
in fiscal 2003 was for principal payments on capital lease
obligations. The $30.9 million cash used in financing activities in
fiscal 2002 included the redemption of 11,699 shares of the Companys
stock previously held by La Cadena, for $20 million in cash and the
issuance of a $20.0 million subordinated note, which bears interest at
a rate of 5.0% per annum, payable semi-annually; $4.5 million for the
payment of a dividend to La Cadena; and fees of approximately $5.0
million for the consent of the holders of its 10.75% Senior Notes and
fees and expenses of the transaction, including a $500,000 financial
advisory service fee to La Cadena. The Company redeemed $250,000 of
its 10.75% Senior Notes due 2006 for $250,000 plus accrued interest.
These Notes were restricted and unregistered. The remaining financing
activities in the prior year was for principal payment of long-term
debt and payments on capital lease obligations.

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STATER BROS. HOLDINGS INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS



| |  | LIQUIDITY AND CAPITAL RESOURCES (contd.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The Credit Facilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  | The Companys principal operating subsidiary,
Markets, signed a credit facility with Bank of America N.A. on August
6, 1999, and subsequently signed the First Amendment dated September
15, 2000, the Second Amendment dated December 13, 2001, the Third
Amendment dated January 18, 2002 and the Fourth Amendment dated
February 4, 2003. The current provisions of the original credit
agreement and subsequent amendments are collectively referred to
herein as the credit facility. The credit facility provides for (i)
a $75.0 million revolving loan facility and (ii) a Letter of Credit
Sublimit which is defined as an amount equal to the lesser of (a) the
Revolving Loan Commitment and (b) $50,000,000. The Letter of Credit
Sublimit is part of, and not in addition to, the Revolving Loan
Commitment. Borrowings under the revolving loan facility are
unsecured and expected to be used for certain working capital and
corporate purposes. Letters of credit under the letter of credit
facility are expected to be used to support obligations incurred in
connection with the construction of stores, workers compensation
insurance obligations and as security for certain rent obligations.
|
| |  | The availability of the loans and letters of credit are subject to
certain sublimits and other borrowing restrictions. Indebtedness of
Markets under the credit facility is guaranteed by Stater Bros.
Development, Inc., a subsidiary of the Company, and any subsidiaries
that Markets or Stater Bros. Development, Inc. acquires or forms after
the date of the credit facility.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  | Loans under the credit facility bear interest at a rate based upon
either (i) the Base Rate (defined as the higher of (a) the federal
funds rate plus 0.50% and (b) the rate of interest publicly announced
by Bank of America as its reference rate), plus 1.00%, or (ii) the
Offshore Rate (defined as the average British Bankers Association
Interest Settlement Rate for deposits in dollars, adjusted for the
maximum reserve requirement for Eurocurrency funding), plus 1.75%.
For Offshore Rate Loans, the Offshore Rate will be applied in
consecutive periods of the earlier of (a) the maturity date of the
loan or (b) periods, as selected by Markets of one, two, three or six
months.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | The revolving loan facility will cease to be available and will be
payable in full on March 31, 2005. Letters of credit under the credit
facility can be issued until March 31, 2006. The loans under the
revolving loan facility must be repaid for a period of ten consecutive
days semi-annually.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | Loans under the revolving loan facility may be repaid and re-borrowed.
The loans under the revolving loan facility may be prepaid at any
time without penalty, subject to certain minimums and payment of any
breakage and re-deployment costs in the case of loans based on the
offshore rate. The commitments under the credit facility may be
reduced by Markets. Markets will be required to pay a commitment fee
equal to 0.25% per annum on the actual daily unused portion of the
revolving loan facility and the letter of credit facility, payable
quarterly in arrears. Outstanding letters of credit under the credit
facility are subject to a fee of 1.25% per annum on the face amount of
such letters of credit, payable quarterly in arrears. Markets will be
required to pay standard fees charged by Bank of America with respect
to the issuance, negotiation, and amendment of commercial letters of
credit issued under the letter of credit facility.                                                                                                                                                                                                                                                

17



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STATER BROS. HOLDINGS INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS



| |  | LIQUIDITY AND CAPITAL RESOURCES (contd.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The Credit Facilities (contd.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  | Availability of the loans and letters of
credit under the credit facility is subject to a monthly borrowing
base test based on inventory. The credit facility requires Markets to
meet certain financial tests, including minimum net worth and minimum
EBITDA tests. The credit facility contains covenants which, among
other things, will limit indebtedness, liens, guarantee obligations,
mergers, consolidations, liquidations and dissolutions, asset sales,
leases, investments, loans and advances, transactions with affiliates,
sale and leasebacks, other matters customarily restricted in such
agreements and modifications to the holding company status of the
Company.
|
| |  | The credit facility also contains covenants that apply to the Company
and the Company is a party to the credit facility for purposes of
these covenants. These covenants, among other things, limit dividends
and other payments in respect to the Companys capital stock,
prepayments and redemptions of the exchange notes and other debt, and
limit indebtedness, investments, loans and advances by the Company.                                                                                                                                                                                                                                                                  
|
| |  | The credit facility requires the Company and Markets to comply with
certain covenants intended to ensure that their legal identities
remain separate.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | The credit facility contains customary events of default, including
payment defaults; material inaccuracies in representations and
warranties; covenant defaults; cross-defaults to certain other
indebtedness; certain bankruptcy events; certain ERISA events;
judgments; defaults; invalidity of any guaranty; failure of Jack H.
Brown to be Chairman of the Board and Chief Executive Officer of
Stater Bros. Markets; and change of control.                                                                                                                                                                                                                                     
|
| |  | As of June 29, 2003, for purposes of the credit facility with Bank of
America, both Markets and the Company were in compliance with all
restrictive covenants. The Company is also subject to certain
covenants associated with its 10.75% Senior Notes due 2006. As of
June 29, 2003, the Company was in compliance with all such covenants.
However, there can be no assurance that Markets or the Company will be
able to achieve the expected operating results or implement the
capital expenditure strategy upon which future compliance with such
covenants is based.                                                                                                           
|
| |  | Labor Relations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  | The Company and other major supermarket employers in Southern
California negotiated a four-year contract, beginning October 1999 and
expiring in October 2003, with the United Food and Commercial Workers
Union. The Companys collective bargaining agreement with the
International Brotherhood of Teamsters was renewed in September 2002
and expires in September 2005. Management believes it has good
relations with its employees.                                                                                                                                                                                                                                             

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STATER BROS. HOLDINGS INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS



| |  | EFFECT OF INFLATION AND COMPETITION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The Companys performance is
affected by inflation. In recent years the impact of inflation on the
operations of the Company has been moderate. As inflation has
increased expenses, the Company has recovered, to the extent permitted
by competition, the increase in expenses by increasing prices over
time. However, the economic and competitive environment in Southern
California continues to challenge the Company to become more cost
efficient as its ability to recover increases in expenses through
price increases is diminished. The future results of operations of
the Company will depend upon the ability of the Company to adapt to
the current economic environment as well as the current competitive
conditions.                                                                                                                                                                                                                                                                                            
|
| |  | The Company conducts business in one industry segment, the
operation of retail food supermarkets, which offer for sale to the
public most merchandise typically found in supermarkets. The
supermarket industry is highly competitive and is characterized by low
profit margins. The Companys primary competitors include Vons,
Albertsons, Ralphs and a number of independent supermarket operators.
Competitive factors typically include the price, quality and
selection of products offered for sale, customer service, and the
convenience and location of retail facilities. The Company monitors
competitive activity and Senior Management regularly reviews the
Companys marketing and business strategy and periodically adjusts
them to adapt to changes in the Companys primary trading area.                                                                                                                                                                                                                      
|
| |  | CAUTIONARY STATEMENT FOR PURPOSES OF SAFE HARBOR PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | The Private
Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements. Certain information contained in the
Companys filings with the Securities and Exchange Commission (as well
as information included in oral statements or other written statements
made or to be made by the Company) includes statements that are
forward-looking, such as statements relating to plans for future
activities. Such forward-looking information involves important risks
and uncertainties that could significantly affect results in the
future and, accordingly, such results may differ from those expressed
in any forward-looking statements made by or on behalf of the Company.
These risks and uncertainties include, but are not limited to, those
relating to domestic economic conditions, seasonal and weather
fluctuations, expansion and other activities of competitors, changes
in federal or state laws and the administration of such laws and the
general condition of the economy.




Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK



| |  | Not
Applicable.
| |  | ---------------

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STATER BROS. HOLDINGS INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS




Item 4. CONTROLS AND PROCEDURES



| |  | As of the quarter ended June 29, 2003, the Company carried out an
evaluation, under the supervision of the Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the Companys
disclosure controls and procedures. Based on that evaluation, the
Chief Executive Officer and Chief Financial Officer have each
concluded that those controls and procedures were effective in making
known to them, on a timely basis, the material information needed for
the preparation of this Report on Form 10-Q. During the quarter and
fiscal year to date periods ended June 29, 2003, there were no
significant changes in the Companys internal control over financial
reporting or in other factors that could significantly affect the
internal control over financial reporting since the date of their
evaluation, nor did they find any significant deficiencies or material
weaknesses that would have required corrective actions to be taken.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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STATER BROS. HOLDINGS INC.
JUNE 29, 2003




PART II  OTHER INFORMATION




Item 1. LEGAL PROCEEDINGS



| |  | Various legal actions and claims are pending against the Company in the
ordinary course of business. In the opinion of management and its general
legal counsel, the ultimate resolution of such pending legal actions and
claims will not have a material adverse effect on the Companys
consolidated financial position or its results of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | For a description of legal proceedings, please refer to the footnote
entitled Litigation Matters contained in the Notes to Consolidated
Financial Statements section of the Companys Form 10-K for the fiscal
year ended September 29, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | On July 9, 2003, the Companys principal operating subsidiary Markets,
agreed to a settlement of two lawsuits which had been filed on behalf of
certain of Markets existing and former store managers and assistant
managers which alleged that such workers are non-exempt under California
labor laws and are therefore entitled to overtime wages. Markets
admitted no wrong doing under the settlement and it believes it has
appropriately followed California law in the classification and payment
of its employees. Markets believes that the store manages and assistant
managers are highly compensated employees with duties and
responsibilities which place them in the exempt category under California
law and that such employees are not entitled to overtime wages. Markets
continues to feel the case was without merit; however, because of
escalating litigation expenses, Markets determined a settlement was the
best solution. The maximum amount to be paid by Markets under the
settlement is $4.0 million, which includes the plaintiffs legal fees.
The ultimate amount to be paid will depend upon the number of existing
and former store managers and assistant managers who elect to participate
in the settlement, and could be less than $4.0 million. As of the date
of this filing, the number of individuals participating in the settlement
is unknown. Management estimates that the minimum amount to be paid
under the settlement is $3.1 million and a liability has been recorded
for this amount. $1.1 million of this estimate has been recorded
in the thirteen weeks and thirty-nine weeks ended June 29, 2003.




Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS



| |  | None
| |  | ----




Item 3. DEFAULTS UPON SENIOR SECURITIES



| |  | None
| |  | ----

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



| |  | None
| |  | ----




Item 5. OTHER INFORMATION

|     |  |                                                                                                                                                                                       
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|31.1 |  | Certification of Principal Executive Officer pursuant to Section 302 (a)
of the Sarbanes-Oxley Act of 2002.                                                                           
|31.2 |  | Certification of Principal Financial Officer pursuant to Section 302 (a)
of the Sarbanes-Oxley Act of 2002.                                                                           
|32.1 |  | Certification of Principal Executive Officer and Principal
Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.

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STATER BROS. HOLDINGS INC.
JUNE 29, 2003




Item 6. EXHIBITS AND REPORTS ON FORM 8-K



|(a) |  | Exhibits
|--- |  | --------



| |  |  | None
| |  |  | ----



|(b) |  | Reports on Form 8-K
|--- |  | -------------------



| |  |  | Current Report on Form 8-K dated July 11, 2003.
| |  |  | -----------------------------------------------

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STATER BROS. HOLDINGS INC.




Signatures

Pursuant to the requirements of the
Securities Exchange Act of 1934, Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.

|                      |  |                                                                                                          
|--------------------- |  | ---------------------------------------------------------------------------------------------------------
|Date: August 13, 2003 |  | /s/ Jack H. Brown                                                                                        
|                      |  |                                                                                                          
|                      |  | Jack H. Brown
Chairman of the Board, President,
and Chief Executive Officer
(Principal Executive Officer)
|                      |  |                                                                                                          
|Date: August 13, 2003 |  | /s/ Phillip J. Smith                                                                                     
|                      |  |                                                                                                          
|                      |  | Phillip J. Smith
Senior Vice President
and Chief Financial Officer
(Principal Financial Officer)         

23