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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 March 31, 2002

OR

|      |  |                                                                                         
|----- |  | ----------------------------------------------------------------------------------------
|[   ] |  | 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

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(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  [   ] | 

As of April 30, 2002, 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         
|                               |                                                                                               | 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                            
|PART II  OTHER INFORMATION   
|                               | Item 1. LEGAL PROCEEDINGS                                                                    
|                               | Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS                                            
|                               | Item 3. DEFAULTS UPON SENIOR SECURITIES                                                      
|                               | Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|                               | Item 5. OTHER INFORMATION                                                                    
|                               | Item 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|Signatures                    



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STATER BROS. HOLDINGS INC.
MARCH 31, 2002

INDEX

|           |  |                                                                                                            |  |      |    | 
|---------- |  | ---------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|PART I     |  | FINANCIAL INFORMATION (Unaudited)                                                                          |  | Page
|           |  |                                                                                                            |  |     
|Item 1.    |  | Financial Statements                                                                                       |  |      |    | 
|          
|           |  | Consolidated Balance Sheets (Unaudited) as of September 30, 2001
and March 31, 2002                        |  |      | 3  | 
|          
|           |  | Consolidated Statements of Income (Unaudited) for the 26 weeks ended
March 25, 2001 and March 31, 2002     |  |      | 5  | 
|          
|           |  | Consolidated Statements of Income (Unaudited) for the 13 weeks ended
March 25, 2001 and March 31, 2002     |  |      | 6  | 
|          
|           |  | Consolidated Statements of Cash Flows (Unaudited) for the 26 weeks ended
March 25, 2001 and March 31, 2002 |  |      | 7  | 
|          
|           |  | Notes to Consolidated Financial Statements (Unaudited)                                                     |  |      | 8  | 
|          
|Item 2.    |  | Managements Discussion and Analysis of Financial
Condition and Results of Operations                      |  |      | 10 | 
|          
|Item 3.    |  | Quantitative and Qualitative Disclosure About Market Risk                                                  |  |      | 17 | 
|          
|PART II    |  | OTHER INFORMATION                                                                                          |  |      |    | 
|          
|Item 1.    |  | Legal Proceedings                                                                                          |  |      | 18 | 
|          
|Item 2.    |  | Changes in Securities and Use of Proceeds                                                                  |  |      | 18 | 
|          
|Item 3.    |  | Defaults Upon Senior Securities                                                                            |  |      | 18 | 
|          
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                                        |  |      | 18 | 
|          
|Item 5.    |  | Other Information                                                                                          |  |      | 18 | 
|          
|Item 6.    |  | Exhibits and Reports on Form 8-K                                                                           |  |      | 18 | 
|          
|SIGNATURES |  |                                                                                                            |  | 19   |   

2



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PART I  FINANCIAL INFORMATION




Item 1.   FINANCIAL STATEMENTS




STATER BROS. HOLDINGS INC.CONSOLIDATED BALANCE SHEETS

(Unaudited)
(In thousands)


ASSETS

|                                       |                                                |   |           |         |          |   |         |         | 
|-------------------------------------- | ---------------------------------------------- | - | --------- | ------- | -------- | - | ------- | ------- | 
|                                       |                                                |   | Sept. 30, |         | Mar. 31,
|                                       |                                                |   | 2001      |         | 2002    
|                                       |                                                |   |           |         |         
|Current assets                         |                                                |   |           |         |          |   |         |        
|                                       | Cash and cash equivalents                      |   | $         | 101,636 |          |   | $       | 74,641  | 
|                                       | Receivables                                    |   |           | 29,894  |          |   |         | 30,768  | 
|                                       | Income tax receivables                         |   |           | 358     |          |   |         | 681     | 
|                                       | Inventories                                    |   |           | 170,189 |          |   |         | 165,773 | 
|                                       | Prepaid expenses                               |   |           | 6,743   |          |   |         | 8,696   | 
|                                       | Deferred income taxes                          |   |           | 6,634   |          |   |         | 6,634   | 
|                                       | Properties held for sale                       |   |           | 3,840   |          |   |         | 3,828   | 
|                                       |                                                |   |           |         |          |   |         |        
|Total current assets                   |                                                |   | 319,294   |         |          |   | 291,021 |        
|Investment in unconsolidated affiliate |                                                |   | 12,666    |         |          |   | 14,689  |        
|Property and equipment                 |                                                |   |           |         |          |   |         |        
|                                       | Land                                           |   |           | 47,574  |          |   |         | 47,574  | 
|                                       | Buildings and improvements                     |   |           | 181,641 |          |   |         | 187,932 | 
|                                       | Store fixtures and equipment                   |   |           | 190,581 |          |   |         | 199,350 | 
|                                       | Property subject to capital leases             |   |           | 24,670  |          |   |         | 24,670  | 
|                                       |                                                |   |           |         |          |   |         |        
|                                       |                                                |   | 444,466   |         |          |   | 459,526 |        
|                                       | Less accumulated depreciation and amortization |   |           | 169,979 |          |   |         | 179,353 | 
|                                       |                                                |   |           |         |          |   |         |        
|                                       |                                                |   | 274,487   |         |          |   | 280,173 |        
|Deferred income taxes                  |                                                |   | 4,897     |         |          |   | 4,897   |        
|Deferred debt issuance costs, net      |                                                |   | 12,042    |         |          |   | 15,646  |        
|Other assets                           |                                                |   | 5,908     |         |          |   | 6,608   |        
|                                       |                                                |   |           |         |          |   |         |        
|                                       |                                                |   | 22,847    |         |          |   | 27,151  |        
|Total assets                           |                                                | $ | 629,294   |         |          | $ | 613,034 |        
|                                       |                                                |   |           |         |          |   |         |        

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 STOCKHOLDERS DEFICIT

|                                                       |                                              |                                                                                   |         |           |   |          |         |         |   | 
|------------------------------------------------------ | -------------------------------------------- | --------------------------------------------------------------------------------- | ------- | --------- | - | -------- | ------- | ------- | - | 
|                                                       |                                              |                                                                                   |         | Sept. 30, |   | Mar. 31,
|                                                       |                                              |                                                                                   |         | 2001      |   | 2002    
|                                                       |                                              |                                                                                   |         |           |   |         
|Current liabilities                                    |                                              |                                                                                   |         |           |   |          |         |        
|                                                       | Accounts payable                             |                                                                                   | $       | 107,485   |   |          | $       | 97,819  |  
|                                                       | Accrued payroll and related expenses         |                                                                                   |         | 41,737    |   |          |         | 41,474  |  
|                                                       | Other accrued liabilities                    |                                                                                   |         | 44,340    |   |          |         | 51,578  |  
|                                                       | Current portion of capital lease obligations |                                                                                   |         | 1,435     |   |          |         | 1,253   |  
|                                                       |                                              |                                                                                   |         |           |   |          |         |        
|Total current liabilities                              |                                              |                                                                                   | 194,997 |           |   |          | 192,124 |        
|Long-term debt                                         |                                              |                                                                                   | 439,000 |           |   |          | 458,750 |        
|Capital lease obligations, less current portion        |                                              |                                                                                   | 12,098  |           |   |          | 11,518  |        
|Long-term portion of self-insurance and other reserves |                                              |                                                                                   | 15,852  |           |   |          | 15,852  |        
|Other long-term liabilities                            |                                              |                                                                                   | 8,756   |           |   |          | 12,474  |        
|                                                       |                                              |                                                                                   |         |           |   |          |         |        
|Total liabilities                                      |                                              |                                                                                   | 670,703 |           |   |          | 690,718 |        
|Stockholders 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 - 50,000 at Sept. 30,
2001,38,301 at March 31, 2002 |         |           | 1 |          |         |         |  | 
|                                                       | Additional paid-in capital                   |                                                                                   |         | 12,715    |   |          |         | 9,740   |  
|                                                       | Retained deficit                             |                                                                                   |         | (54,125   | ) |          |         | (87,424 | )
|                                                       |                                              |                                                                                   |         |           |   |          |         |        
|Total stockholders deficit                            |                                              |                                                                                   | (41,409 | )         |   |          | (77,684 | )      
|                                                       |                                              |                                                                                   |         |           |   |          |         |        
|Total liabilities and stockholders deficit            |                                              | $                                                                                 | 629,294 |           |   | $        | 613,034 |        
|                                                       |                                              |                                                                                   |         |           |   |          |         |        

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)


|                                                 |                                              |   |                |         |          |   |           |         | 
|------------------------------------------------ | -------------------------------------------- | - | -------------- | ------- | -------- | - | --------- | ------- | 
|                                                 |                                              |   | 26 Weeks Ended
|                                                 |                                              |   |               
|                                                 |                                              |   | Mar. 25,       |         | Mar. 31,
|                                                 |                                              |   | 2001           |         | 2002    
|                                                 |                                              |   |                |         |         
|Sales                                            |                                              | $ | 1,237,154      |         |          | $ | 1,316,800 |        
|Cost of goods sold                               |                                              |   | 923,592        |         |          |   | 967,824   |        
|                                                 |                                              |   |                |         |          |   |           |        
|Gross profit                                     |                                              |   | 313,562        |         |          |   | 348,976   |        
|Operating expenses:                              |                                              |   |                |         |          |   |           |        
|                                                 | Selling, general and administrative expenses |   |                | 271,542 |          |   |           | 295,593 | 
|                                                 | Depreciation and amortization                |   |                | 13,908  |          |   |           | 15,184  | 
|                                                 |                                              |   |                |         |          |   |           |        
|Total operating expenses                         |                                              |   | 285,450        |         |          |   | 310,777   |        
|                                                 |                                              |   |                |         |          |   |           |        
|Operating profit                                 |                                              |   | 28,112         |         |          |   | 38,199    |        
|Interest income                                  |                                              |   | 1,904          |         |          |   | 1,026     |        
|Interest expense                                 |                                              |   | (25,659        | )       |          |   | (25,997   | )      
|Equity in earnings from unconsolidated affiliate |                                              |   | 958            |         |          |   | 2,023     |        
|Other income (loss)  net                        |                                              |   | 79             |         |          |   | (1,309    | )      
|                                                 |                                              |   |                |         |          |   |           |        
|Income before income taxes                       |                                              |   | 5,394          |         |          |   | 13,942    |        
|Income taxes                                     |                                              |   | 2,212          |         |          |   | 5,716     |        
|                                                 |                                              |   |                |         |          |   |           |        
|Net income                                       |                                              | $ | 3,182          |         |          | $ | 8,226     |        
|                                                 |                                              |   |                |         |          |   |           |        
|Earnings per share                               |                                              | $ | 63.64          |         |          | $ | 180.28    |        
|                                                 |                                              |   |                |         |          |   |           |        
|Average common shares outstanding                |                                              |   | 50,000         |         |          |   | 45,629    |        
|                                                 |                                              |   |                |         |          |   |           |        
|Shares outstanding at end of period              |                                              |   | 50,000         |         |          |   | 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
|                                                 |                                              |   |               
|                                                 |                                              |   | Mar. 25,       |         | Mar. 31,
|                                                 |                                              |   | 2001           |         | 2002    
|                                                 |                                              |   |                |         |         
|Sales                                            |                                              | $ | 612,305        |         |          | $ | 654,213 |        
|Cost of goods sold                               |                                              |   | 456,635        |         |          |   | 481,400 |        
|                                                 |                                              |   |                |         |          |   |         |        
|Gross profit                                     |                                              |   | 155,670        |         |          |   | 172,813 |        
|Operating expenses:                              |                                              |   |                |         |          |   |         |        
|                                                 | Selling, general and administrative expenses |   |                | 135,010 |          |   |         | 145,657 | 
|                                                 | Depreciation and amortization                |   |                | 6,980   |          |   |         | 7,680   | 
|                                                 |                                              |   |                |         |          |   |         |        
|Total operating expenses                         |                                              |   | 141,990        |         |          |   | 153,337 |        
|                                                 |                                              |   |                |         |          |   |         |        
|Operating profit                                 |                                              |   | 13,680         |         |          |   | 19,476  |        
|Interest income                                  |                                              |   | 924            |         |          |   | 322     |        
|Interest expense                                 |                                              |   | (12,771        | )       |          |   | (13,201 | )      
|Equity in earnings from unconsolidated affiliate |                                              |   | 476            |         |          |   | 1,375   |        
|Other loss  net                                 |                                              |   | (4             | )       |          |   | (695    | )      
|                                                 |                                              |   |                |         |          |   |         |        
|Income before income taxes                       |                                              |   | 2,305          |         |          |   | 7,277   |        
|Income taxes                                     |                                              |   | 945            |         |          |   | 2,983   |        
|                                                 |                                              |   |                |         |          |   |         |        
|Net income                                       |                                              | $ | 1,360          |         |          | $ | 4,294   |        
|                                                 |                                              |   |                |         |          |   |         |        
|Earnings per share                               |                                              | $ | 27.20          |         |          | $ | 104.08  |        
|                                                 |                                              |   |                |         |          |   |         |        
|Average common shares outstanding                |                                              |   | 50,000         |         |          |   | 41,258  |        
|                                                 |                                              |   |                |         |          |   |         |        
|Shares outstanding at end of period              |                                              |   | 50,000         |         |          |   | 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)


|                                                                                  |                                                                  |                                                                                  |         |                |        |          |         |        |        |  
|--------------------------------------------------------------------------------- | ---------------------------------------------------------------- | -------------------------------------------------------------------------------- | ------- | -------------- | ------ | -------- | ------- | ------ | ------ | -
|                                                                                  |                                                                  |                                                                                  |         | 26 Weeks Ended
|                                                                                  |                                                                  |                                                                                  |         |               
|                                                                                  |                                                                  |                                                                                  |         | Mar. 25,       |        | Mar. 31,
|                                                                                  |                                                                  |                                                                                  |         | 2001           |        | 2002    
|                                                                                  |                                                                  |                                                                                  |         |                |        |         
|Operating activities:                                                             |                                                                  |                                                                                  |         |                |        |          |         |       
|Net income                                                                        |                                                                  | $                                                                                | 3,182   |                |        | $        | 8,226   |       
|Adjustments to reconcile net income to net cash provided
by operating activities: |                                                                  |                                                                                  |         |                |        |          |         |       
|                                                                                  | Depreciation and amortization                                    |                                                                                  |         | 13,908         |        |          |         | 15,184 |       
|                                                                                  | Provision for deferred income taxes                              |                                                                                  |         | 2,207          |        |          |         |       |       
|                                                                                  | (Gain) loss on disposals of assets                               |                                                                                  |         | (79            | )      |          |         | 1,309  |       
|                                                                                  | Net undistributed gain in investment in unconsolidated affiliate |                                                                                  |         | (958           | )      |          |         | (2,023 | )     
|                                                                                  | Changes in operating assets and liabilities:                     |                                                                                  |         |                |        |          |         |        |       
|                                                                                  |                                                                  | Decrease in lease guarantee escrow                                               |         |                | 13,180 |          |         |        |       |  
|                                                                                  |                                                                  | Increase in receivables                                                          |         |                | (3,107 | )        |         |        | (874   | )
|                                                                                  |                                                                  | (Increase) decrease in income tax receivables                                    |         |                | 263    |          |         |        | (323   | )
|                                                                                  |                                                                  | Decrease in inventories                                                          |         |                | 1,591  |          |         |        | 4,416  |  
|                                                                                  |                                                                  | Increase in prepaid expenses                                                     |         |                | (3,645 | )        |         |        | (1,963 | )
|                                                                                  |                                                                  | Decrease in other assets                                                         |         |                | 765    |          |         |        | 729    |  
|                                                                                  |                                                                  | Decrease in accounts payable                                                     |         |                | (4,266 | )        |         |        | (9,666 | )
|                                                                                  |                                                                  | Increase in accrued liabilities and long-term
portion of self-insurance reserves |         |                | 4,387  |          |         |        | 10,693 |  
|                                                                                  |                                                                  |                                                                                  |         |                |        |          |         |       
|Net cash provided by operating activities                                         |                                                                  |                                                                                  | 27,428  |                |        |          | 25,708  |       
|                                                                                  |                                                                  |                                                                                  |         |                |        |          |         |       
|Investing activities:                                                             |                                                                  |                                                                                  |         |                |        |          |         |       
|Purchase of property and equipment                                                |                                                                  |                                                                                  | (17,967 | )              |        |          | (22,208 | )     
|Proceeds from sale of property and equipment and properties
held for sale         |                                                                  |                                                                                  | 223     |                |        |          | 50      |       
|                                                                                  |                                                                  |                                                                                  |         |                |        |          |         |       
|Net cash used in investing activities                                             |                                                                  |                                                                                  | (17,744 | )              |        |          | (22,158 | )     
|                                                                                  |                                                                  |                                                                                  |         |                |        |          |         |       
|Financing activities:                                                             |                                                                  |                                                                                  |         |                |        |          |         |       
|Debt issuance cost                                                                |                                                                  |                                                                                  |        |                |        |          | (5,033  | )     
|Stock redemption                                                                  |                                                                  |                                                                                  |        |                |        |          | (20,000 | )     
|Dividends paid                                                                    |                                                                  |                                                                                  |        |                |        |          | (4,500  | )     
|Principal payments on long-term debt                                              |                                                                  |                                                                                  | (5,048  | )              |        |          | (250    | )     
|Principal payments on capital lease obligations                                   |                                                                  |                                                                                  | (1,148  | )              |        |          | (762    | )     
|                                                                                  |                                                                  |                                                                                  |         |                |        |          |         |       
|Net cash used in financing activities                                             |                                                                  |                                                                                  | (6,196  | )              |        |          | (30,545 | )     
|                                                                                  |                                                                  |                                                                                  |         |                |        |          |         |       
|Net increase (decrease) in cash and cash equivalents                              |                                                                  |                                                                                  | 3,488   |                |        |          | (26,995 | )     
|Cash and cash equivalents at beginning of period                                  |                                                                  |                                                                                  | 62,631  |                |        |          | 101,636 |       
|                                                                                  |                                                                  |                                                                                  |         |                |        |          |         |       
|Cash and cash equivalents at end of period                                        |                                                                  | $                                                                                | 66,119  |                |        | $        | 74,641  |       
|                                                                                  |                                                                  |                                                                                  |         |                |        |          |         |       
|Interest paid                                                                     |                                                                  | $                                                                                | 25,107  |                |        | $        | 25,009  |       
|Income taxes paid                                                                 |                                                                  | $                                                                                | 5       |                |        | $        | 6,039   |       

See accompanying notes to unaudited consolidated financial statements.

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STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)MARCH 31, 2002


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 30, 2001 and March 31, 2002 and
the results of its operations and cash flows for the twenty-six and thirteen
weeks ended March 25, 2001 and March 31, 2002. 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 twenty-six and
thirteen weeks ended March 31, 2002 are not necessarily indicative of the
results of operations for a full year.

Note 2  Income Taxes

The provision for income taxes for the twenty-six weeks ended March 25,
2001 and March 31, 2002 consists of the following:

|                     |  |                |       |               |  |   |       | 
|-------------------- |  | -------------- | ----- | ------------- |  | - | ----- | 
|                     |  | 26 Weeks Ended
|                     |  |               
|                     |  | Mar. 25, 2001  |       | Mar. 31, 2002
|                     |  |                |       |              
|                     |  | (In thousands)
|Federal income taxes |  | $              | 1,735 |               |  | $ | 4,484 | 
|State income taxes   |  |                | 477   |               |  |   | 1,232 | 
|                     |  |                |       |               |  |   |       | 
|                     |  | $              | 2,212 |               |  | $ | 5,716 | 
|                     |  |                |       |               |  |   |       | 

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 $958,000 and $2.0 million for the twenty-six weeks ended
March 25, 2001 and March 31, 2002, respectively. The Company is a significant
customer of Santee, which supplies the Company with a substantial portion of
its fluid milk and dairy products.

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

|                        |  |                |        |               |  |   |        | 
|----------------------- |  | -------------- | ------ | ------------- |  | - | ------ | 
|                        |  | 26 Weeks Ended
|                        |  |               
|                        |  | Mar. 25, 2001  |        | Mar. 31, 2002
|                        |  |                |        |              
|                        |  | (In thousands)
|Current assets          |  | $              | 19,216 |               |  | $ | 25,579 | 
|Non-current assets      |  |                | 97,328 |               |  |   | 93,330 | 
|Current liabilities     |  |                | 23,148 |               |  |   | 23,987 | 
|Non-current liabilities |  |                | 69,316 |               |  |   | 65,383 | 
|Shareholders equity    |  |                | 24,080 |               |  |   | 29,539 | 
|                       
|Sales                   |  |                | 93,529 |               |  |   | 94,295 | 
|Gross profit            |  |                | 15,097 |               |  |   | 23,114 | 
|Net income              |  | $              | 1,916  |               |  | $ | 4,043  | 

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##### Table of Contents



STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)MARCH 31, 2002

Note 4  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 5  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 stockholders 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 6  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.

Note 7  New Accounting Pronouncement

Effective January 1, 2002, the Company adopted the provisions of Financial
Accounting Standards Board Statement No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets(FAS 144), which supersedes prior accounting
standards concerning the financial accounting and reporting for the impairment
or the disposal of long-lived assets and for the disposition of a segment of a
business. The adoption of FAS 144 did not have an effect on the Companys
results of operations or financial condition and is effective for fiscal years
beginning after December 15, 2001.

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##### Table of Contents



STATER BROS. HOLDINGS INC.
MARCH 31, 2002

PART I  FINANCIAL INFORMATION (contd.)




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

OWNERSHIP OF THE COMPANY

La Cadena Investments is the sole shareholder of the Company and holds
all of the shares of the Companys Class A Common Stock which are
entitled to 1.1 votes per share. La Cadena Investments 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 Investments and is the managing
general partner with the power to vote the shares of the Company held
by La Cadena Investments.

ACQUISITION

On May 7, 1999, Stater Bros. Markets entered into an agreement with
Albertsons, Inc. (Albertsons) to purchase 43 supermarkets and one
future store site in Stater Bros. Markets existing and contiguous
market areas. The stores were formerly operated by Albertsons or
Lucky Stores and were divested in connection with the merger of
Albertsons and American Store Company, the parent of Lucky Stores.
The purchase price was $94.4 million for land, buildings and
equipment, $39.6 million for inventories on hand at closing, and the
assumption of $13.3 million of capitalized lease obligations. The
supermarkets were acquired sequentially over a twenty-four day period,
which began on August 9, 1999. Each acquired store was reopened under
the Stater Bros. Markets name within two days of its acquisition and
was fully integrated into the Stater Bros. Markets operating systems.

LEASE GUARANTEE ESCROW

As of September 24, 2000, a portion of the Companys lease obligations
were guaranteed by Petrolane Incorporated (Petrolane) or its
successor. The leases guaranteed by Petrolane had initial terms of 20
years and were to expire in 2003. Lease payments for the properties
subject to the Petrolane guarantees were approximately $10.0 million
per year. Under the terms of the agreement related to the Companys
acquisition of Stater Bros. Markets from Petrolane in 1983, as amended
in 1985, Stater Bros. Markets was required to make annual deposits
into a lease guarantee escrow account. In addition, 10 shares of
Stater Bros. Markets $11.00 Cumulative Redeemable Preferred Stock due
2003 were held by Petrolane in connection with the lease guarantees.

During the first quarter of fiscal 2001, Stater Bros. Markets redeemed
all 10 outstanding shares of its $11.00 Cumulative Redeemable
Preferred Stock due 2003 from Texas Eastern Corporation, Petrolanes
assignee of such preferred stock. The Petrolane lease guarantees were
terminated in exchange for a $400,000 fee and a letter of credit was
issued in favor of Texas Eastern to secure a portion of the remaining
lease payments through 2003. As part of these transactions, the lease
guarantee escrow account was terminated and the $13.2 million in such
account was released to Stater Bros. Markets. All of the store leases
that had been guaranteed by Petrolane were extended for an additional
five years following expiration of their respective initial terms in
2003.

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##### Table of Contents



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

RESULTS OF OPERATIONS

The following table sets forth certain income statement components
expressed as a percent of sales for the thirteen and twenty-six weeks
ended March 31, 2002 and March 25, 2001.

|                                   |                                              |  |                |       |                  |  |        |       |      |  |        |       |  |  |        |       | 
|---------------------------------- | -------------------------------------------- |  | -------------- | ----- | ---------------- |  | ------ | ----- | ---- |  | ------ | ----- |  |  | ------ | ----- | 
|                                   |                                              |  | Thirteen Weeks |       | Twenty-Six Weeks
|                                   |                                              |  |                |       |                 
|                                   |                                              |  | 2002           |       | 2001             |  | 2002   |       | 2001
|                                   |                                              |  |                |       |                  |  |        |       |     
|Sales                              |                                              |  | 100.00         | %     |                  |  | 100.00 | %     |      |  | 100.00 | %     |  |  | 100.00 | %    
|Gross profit                       |                                              |  | 26.42          |       |                  |  | 25.42  |       |      |  | 26.50  |       |  |  | 25.34  |      
|Operating expenses:                |                                              |  |                |       |                  |  |        |       |      |  |        |       |  |  |        |      
|                                   | Selling, general and
administrative expenses |  |                | 22.27 |                  |  |        | 22.05 |      |  |        | 22.45 |  |  |        | 21.95 | 
|                                   | Depreciation and amortization                |  |                | 1.17  |                  |  |        | 1.14  |      |  |        | 1.15  |  |  |        | 1.12  | 
|Operating profit                   |                                              |  | 2.98           |       |                  |  | 2.23   |       |      |  | 2.90   |       |  |  | 2.27   |      
|Interest income                    |                                              |  | 0.05           |       |                  |  | 0.15   |       |      |  | 0.08   |       |  |  | 0.15   |      
|Interest expense                   |                                              |  | (2.02          | )     |                  |  | (2.09  | )     |      |  | (1.97  | )     |  |  | (2.07  | )    
|Equity in unconsolidated affiliate |                                              |  | 0.21           |       |                  |  | 0.08   |       |      |  | 0.15   |       |  |  | 0.08   |      
|Other income (loss)  (net)        |                                              |  | (0.11          | )     |                  |  |       |       |      |  | (0.10  | )     |  |  | 0.01   |      
|Net income before income taxes     |                                              |  | 1.11           | %     |                  |  | 0.37   | %     |      |  | 1.06   | %     |  |  | 0.44   | %    

Total sales for the thirteen weeks ended March 31, 2002, the second
quarter of fiscal 2002, increased 6.84% and amounted to $654.2 million
compared to $612.3 million for the same period in the prior year.
Total sales for the twenty-six weeks ended March 31, 2002, increased
6.44% and amounted to $1.317 billion compared to $1.237 billion for
the same period in the prior year. The increase in total sales in the
second quarter of fiscal 2002 and fiscal year to date of 2002 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 6.84% and 6.44% for the
thirteen-week and twenty-six week periods ended March 31, 2002,
respectively. The Company operated 155 supermarkets at March 31, 2002
and March 25, 2001.

Gross profit for the thirteen weeks ended March 31,
2002, amounted to $172.8 million or 26.42% of sales compared to $155.7
million or 25.42% of sales in the same period of the prior year. Gross
profit for the twenty-six weeks ended March 31, 2002, amounted to
$349.0 million or 26.50% of sales compared to $313.6 million or 25.34%
of sales in the same period of the prior year. The increase in gross
profit, as a percentage of sales, in both the second quarter of 2002
and for the fiscal year to date of 2002, was due primarily to an
increase in the sales of higher margin items and the effect of price
increases, implemented in the second half of fiscal 2001, to offset
higher utility costs.

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##### Table of Contents



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

RESULTS OF OPERATIONS (contd.)

Operating expenses include selling, general and administrative
expenses, and depreciation and amortization. For the thirteen weeks
ended March 31, 2002, selling, general and administrative expenses
amounted to $145.7 million or 22.27% of sales compared to $135.0
million or 22.05% of sales for the thirteen weeks ended March 25,
2001. For the twenty-six weeks ended March 31, 2002, selling, general
and administrative expenses amounted to $295.6 million or 22.45% of
sales compared to $271.5 million or 21.95% of sales for the twenty-six
weeks ended March 25, 2001. The increase in selling, general and
administrative expenses as a percentage of sales during the second
quarter of fiscal 2002 and for the year to date of fiscal 2002, was
due primarily to increases in payroll related expenses.

Depreciation and amortization expenses amounted to $7.7 million
and $15.2 million for the second quarter and year to date periods
ended March 31, 2002, respectively. Depreciation and amortization
expenses amounted to $7.0 million and $13.9 million for the quarter
and year to date periods of the prior year. The increase in
depreciation and amortization expense in fiscal 2002 was primarily due
to the increase in fixed assets.

Operating profit for the second
quarter of 2002 amounted to $19.5 million or 2.98% of sales compared
to $13.7 million or 2.23% of sales for the second quarter of 2001.
Operating profit for the fiscal year to date of 2002 amounted to $38.2
million or 2.90% of sales compared to $28.1 million or 2.27% of sales
for the fiscal year to date of 2001.

Interest expense amounted to $13.2 million for the second quarter of
2002 compared to $12.8 million for the second quarter of 2001. For
the fiscal year to date of 2002 and 2001, interest expense amounted to
$26.0 million and $25.7 million, respectively. The increase in
interest expense over the prior year was primarily due to the issuance
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 $1.4 million for the second
quarter of fiscal 2002 compared to $476,000 in the second quarter of
the prior year. For the fiscal year to date periods of 2002 and 2001,
the Companys equity in earnings from unconsolidated affiliate
amounted to $2.0 million and $958,000, respectively. The difference
in equity in earnings from unconsolidated affiliate for both the
quarter and year to date fiscal 2002 versus fiscal 2001, is due
primarily to the revaluation, by the affiliate, of deferred tax
benefits arising from past net operating losses.

Income before income
taxes amounted to $7.3 million and $2.3 million for the second quarter
of 2002 and 2001, respectively. Income before income taxes amounted
to $13.9 million and $5.4 million for the twenty-six weeks year to
date periods of 2002 and 2001, respectively.

Net income for the second
quarter amounted to $4.3 million and $1.4 million for 2002 and 2001,
respectively. Net income for the fiscal year to date periods amounted
to $8.2 million and $3.2 million for 2002 and 2001, respectively.

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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

The Company has historically 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 2003 and consists of a revolving loan
facility for working capital of $50.0 million, and a letter of credit
facility with a maximum availability of $25.0 million. The credit
agreement was amended December 13, 2001, to include a $15.0 million
letter of credit sub-limit. As of March 31, 2002, the Company had
$30.2 million of outstanding letters of credit and had $44.8 million
available under the revolving loan facility. As of March 31, 2002, and
for the twenty-six weeks then ended, the Company had no outstanding
balances and had not drawn down on 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 current rent obligations.

The following table sets forth the Companys contractual cash
obligations and commercial commitments as of March 31, 2002.

|                                      |  |                                             |         |        |  |           |        |           |  |         |         |  |  |   |         |       |  |   |         | 
|------------------------------------- |  | ------------------------------------------- | ------- | ------ |  | --------- | ------ | --------- |  | ------- | ------- |  |  | - | ------- | ----- |  | - | ------- | 
|                                      |  | 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                              |  |                                             | 212,125 |        |  |           | 47,139 |           |  |         | 94,278  |  |  |   | 70,708  |       |  |   |        | 
|                                      |  |                                             |         |        |  |           |        |           |  |         |         |  |  |   |         |       |  |   |         | 
|                                      |  |                                             | 650,875 |        |  |           | 47,139 |           |  |         | 94,278  |  |  |   | 509,458 |       |  |   |        | 
|5.0% Subordinated Note due March 2007 |  |                                             |         |        |  |           |        |           |  |         |         |  |  |   |         |       |  |   |         | 
|Principal                             |  |                                             | 20,000  |        |  |           |       |           |  |         |        |  |  |   | 20,000  |       |  |   |        | 
|Interest                              |  |                                             | 5,000   |        |  |           | 1,000  |           |  |         | 2,000   |  |  |   | 2,000   |       |  |   |        | 
|                                      |  |                                             |         |        |  |           |        |           |  |         |         |  |  |   |         |       |  |   |         | 
|                                      |  |                                             | 25,000  |        |  |           | 1,000  |           |  |         | 2,000   |  |  |   | 22,000  |       |  |   |        | 
|Capital Lease Obligations(1)          |  |                                             |         |        |  |           |        |           |  |         |         |  |  |   |         |       |  |   |         | 
|Principal                             |  |                                             | 12,771  |        |  |           | 1,253  |           |  |         | 2,090   |  |  |   | 1,739   |       |  |   | 7,689   | 
|Interest                              |  |                                             | 12,566  |        |  |           | 1,981  |           |  |         | 3,440   |  |  |   | 2,747   |       |  |   | 4,398   | 
|                                      |  |                                             |         |        |  |           |        |           |  |         |         |  |  |   |         |       |  |   |         | 
|                                      |  |                                             | 25,337  |        |  |           | 3,234  |           |  |         | 5,530   |  |  |   | 4,486   |       |  |   | 12,087  | 
|                                     
|Operating Leases(1)                   |  |                                             | 205,320 |        |  |           | 29,683 |           |  |         | 47,789  |  |  |   | 38,295  |       |  |   | 89,553  | 
|                                      |  |                                             |         |        |  |           |        |           |  |         |         |  |  |   |         |       |  |   |         | 
|Total Contractual Cash Obligations    |  | $                                           | 906,532 |        |  | $         | 81,056 |           |  | $       | 149,597 |  |  | $ | 574,239 |       |  | $ | 101,640 | 
|                                      |  |                                             |         |        |  |           |        |           |  |         |         |  |  |   |         |       |  |   |         | 

|                                   |  |                                             |        |        |  |           |        |           |  |         |   |  |  |   |   |       |  |   |   | 
|---------------------------------- |  | ------------------------------------------- | ------ | ------ |  | --------- | ------ | --------- |  | ------- | - |  |  | - | - | ----- |  | - | - | 
|                                   |  | Other Commercial Commitments (In thousands)
|                                   |  |                                            
|                                   |  |                                             |        |        |  | Less than |        |           |  |         |   |  |  |   |   | After
|                                   |  | Total                                       |        | 1 Year |  | 1-3 Years |        | 4-5 Years |  | 5 Years
|                                   |  |                                             |        |        |  |           |        |           |  |        
|Standby Letters of Credit (2)      |  | $                                           | 30,185 |        |  | $         | 30,185 |           |  | $       |  |  |  | $ |  |       |  | $ |  | 
|                                   |  |                                             |        |        |  |           |        |           |  |         |   |  |  |   |   |       |  |   |   | 
|Total Other Commercial Commitments |  | $                                           | 30,185 |        |  | $         | 30,185 |           |  | $       |  |  |  | $ |  |       |  | $ |  | 
|                                   |  |                                             |        |        |  |           |        |           |  |         |   |  |  |   |   |       |  |   |   | 



---

|(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 June 30, 2002 and
October 1, 2002.                                                   

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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 $98.9 million at March 31, 2002 and $124.3
million at September 30, 2001, and the Companys current ratios were
1.51:1, and 1.64:1, respectively. Fluctuations in working capital and
current ratios are not unusual in the industry.

Net cash provided by operating activities in the twenty-six weeks
ended March 31, 2002 amounted to $25.7 million compared to $27.4
million for the twenty-six weeks ended March 25, 2001. Fluctuations
in net cash provided by operating activities is not unusual in the
industry. Cash provided by operating activities in fiscal 2002 of
$25.7 million consisted of a $10.7 million increase in accrued
liabilities and self-insurance reserves, a decrease of $4.4 million in
inventory and $15.2 million of depreciation offset by a decrease in
accounts payable of $9.7 million. Cash provided by operating
activities in fiscal 2001 of $27.4 million consisted of a decrease in
lease guarantee escrow of $13.2 million and $13.9 million of
depreciation offset by an increase of $3.6 million in prepaid
expenses, an increase of $3.1 million in receivables and a decrease of
$4.3 million in accounts payable.

Net cash used in investing activities for the twenty-six weeks ended
March 31, 2002, amounted to $22.2 million compared to $17.7 million
for the twenty-six weeks ended March 25, 2001. 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 $22.2
million in the fiscal year to date of 2002 compared to $18.0 million
in the fiscal year to date of 2001.

Net cash used by financing activities amounted to $30.5 million and
$6.2 million for the twenty-six weeks ended March 31, 2002 and March
25, 2001, respectively. The $30.5 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 Investments, 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
Investments; 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 Investments. 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 current and prior year was for principal payment of long-term
debt and payments on capital lease obligations.

The Credit Facilities

The Companys principal operating subsidiary,
Stater Bros. Markets, signed a credit facility with Bank of America
N.A. on August 6, 1999. The credit facility, as amended December 31,
2001, provides for (i) a $50.0 million three-year revolving loan
facility and (ii) a $25.0 million three-year letter of credit facility
and (iii) a Revolving Loan Commitment L/C Sublimit which is defined
as an amount equal to the lessor of (a) the Revolving Loan Commitment
and (b) $15,000,000. The Revolving Loan Commitment L/C 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 the purchase of inventory, obligations
incurred in connection with the construction of stores, workers
compensation insurance obligations and security for current rent
obligations. The availability of the loans and letters of credit are
subject to certain sublimits and other borrowing restrictions.

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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.)

Indebtedness of Stater Bros. Markets under the credit facility is
guaranteed by Stater Bros. Development, Inc., a subsidiary of the
Company, and any subsidiaries that Stater Bros. 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 2.25%.
For Offshore Rate Loans, the Offshore Rate will be applied in
consecutive interest periods of the earlier of (a) the maturity date
of the loan or (b) periods, as selected by Stater Bros. Markets, of
one, two, three or six months.

The revolving loan facility, as amended January 18, 2002, will cease
to be available and will be payable in full on March 31, 2003.
Letters of credit under the credit facility can be issued until March
31, 2003, and all letters of credit must expire no later than March
31, 2004. 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 Stater Bros. Markets. Stater Bros. 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
1.50% per annum on the face amount of such letters of credit, payable
quarterly in arrears. The Company 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.

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 Stater Bros. 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 Stater
Bros. Markets.

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 of 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 Stater Bros. Markets to
comply with certain covenants intended to ensure that their legal
identities remain separate.

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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 Credit Facilities (contd.)

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;
judgment; 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 March 31, 2002, for
purposes of the credit facility with Bank of America, the Company was
in compliance with all restrictive covenants and exceeded the minimum
net worth covenant by approximately $69.2 million and exceeded minimum
inventory coverage by approximately $44.4 million. The minimum EBITDA
(as defined) covenant measurement period began (as amended) in the
quarter ending June 25, 2000, and requires an annualized minimum
EBITDA, as amended January 18, 2002, of $85.0 million. As of March
31, 2002, Stater Bros. Markets exceeded minimum annualized EBITDA by
approximately $19.8 million.

As of March 31, 2002, for purposes of the credit facility with Bank of
America, the Company was in compliance with all restrictive
covenants.

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 1998 and expires in September 2002. Management
believes it has good relations with its employees.

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.

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

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.
MARCH 31, 2002




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 30, 2001.                                                                                                         




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

None




Item 6.   EXHIBITS AND REPORTS ON FORM 8-K



|(a) |  | Exhibits           
|--- |  | -------------------
|   
|    |  | None               
|   
|(b) |  | Reports on Form 8-K
|   
|    |  | None               

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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: May 14, 2002 |  | /s/                    Jack H. BrownJack H. Brown
Chairman of the Board, President,
and Chief Executive Officer
(Principal Executive Officer)
|                  
|Date: May 14, 2002 |  | /s/                    Phillip J. SmithPhillip J. Smith
Senior Vice President and Chief Financial Officer
(Chief Accounting Officer)         

19