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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 December 29, 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

(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 February 6, 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         
|                                                                                              | 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                                                                
|Item 3. DEFAULTS UPON SENIOR SECURITIES                                                      
|Item 4. CONTROLS AND PROCEDURES                                                              
|Item 5. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|Item 6. OTHER INFORMATION                                                                    
|Item 7. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|Signatures                                                                                   
|CERTIFICATION PURSUANT TO SECTION 302 (a) OF THE SARBANES-OXLEY ACT                          
|EXHIBIT 10.33                                                                                
|EXHIBIT 99.3                                                                                 



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STATER BROS. HOLDINGS INC.
DECEMBER 29, 2002

INDEX

|               |  |                                                                                       |  |                                                                                                                  |    |  |   | 
|-------------- |  | ------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------- | -- |  | - | 
|               |  |                                                                                       |  | Page                                                                                                            
|               |  |                                                                                       |  |                                                                                                                 
|PART I         |  | FINANCIAL INFORMATION (Unaudited)                                                     |  |                                                                                                                 
|Item 1.        |  | Financial Statements                                                                  |  |                                                                                                                  |    | 
|               |  |                                                                                       |  | Consolidated Balance Sheets (Unaudited) as of September 29, 2002
and December 29, 2002                           |    |  | 3 | 
|               |  |                                                                                       |  | Consolidated Statements of Income (Unaudited) for the 13 weeks ended
December 30, 2001 and December 29, 2002     |    |  | 5 | 
|               |  |                                                                                       |  | Consolidated Statements of Cash Flows (Unaudited) for the 13 weeks ended
December 30, 2001 and December 29, 2002 |    |  | 6 | 
|               |  |                                                                                       |  | Notes to Consolidated Financial Statements (Unaudited)                                                           |    |  | 7 | 
|Item 2.        |  | Managements Discussion and Analysis of Financial
Condition and Results of Operations |  |                                                                                                                  | 9  | 
|Item 3.        |  | Quantitative and Qualitative Disclosure about Market Risk                             |  |                                                                                                                  | 17 | 
|               |  |                                                                                       |  |                                                                                                                  |    | 
|PART II        |  | OTHER INFORMATION                                                                     |  |                                                                                                                  |    | 
|Item 1.        |  | Legal Proceedings                                                                     |  |                                                                                                                  | 18 | 
|Item 2.        |  | Changes in Securities                                                                 |  |                                                                                                                  | 18 | 
|Item 3.        |  | Defaults Upon Senior Securities                                                       |  |                                                                                                                  | 18 | 
|Item 4.        |  | Controls and Procedures                                                               |  |                                                                                                                  | 18 | 
|Item 5.        |  | Submission of Matters to a Vote of Security Holders                                   |  |                                                                                                                  | 18 | 
|Item 6.        |  | Other Information                                                                     |  |                                                                                                                  | 18 | 
|Item 7.        |  | Exhibits and Reports on Form 8-K                                                      |  |                                                                                                                  | 18 | 
|SIGNATURES     |  |                                                                                       |  |                                                                                                                  | 19 | 
|CERTIFICATIONS |  |                                                                                       |  |                                                                                                                  | 20 | 

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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, |         | Dec. 29,
|                                       |                                                |   | 2002      |         | 2002    
|                                       |                                                |   |           |         |         
|Current Assets                         |                                                |   |           |         |          |   |         |        
|                                       | Cash and cash equivalents                      |   | $         | 81,043  |          |   | $       | 98,515  | 
|                                       | Receivables                                    |   |           | 26,500  |          |   |         | 25,654  | 
|                                       | Income tax receivables                         |   |           | 7,061   |          |   |         | 5,188   | 
|                                       | Inventories                                    |   |           | 175,404 |          |   |         | 168,087 | 
|                                       | Prepaid expenses                               |   |           | 7,860   |          |   |         | 8,840   | 
|                                       | Deferred income taxes                          |   |           | 15,281  |          |   |         | 15,281  | 
|                                       |                                                |   |           |         |          |   |         |        
|Total current assets                   |                                                |   | 313,149   |         |          |   | 321,565 |        
|Investment in unconsolidated affiliate |                                                |   | 15,580    |         |          |   | 16,326  |        
|Property and equipment                 |                                                |   |           |         |          |   |         |        
|                                       | Land                                           |   |           | 50,930  |          |   |         | 50,930  | 
|                                       | Buildings and improvements                     |   |           | 191,514 |          |   |         | 194,160 | 
|                                       | Store fixtures and equipment                   |   |           | 212,741 |          |   |         | 217,188 | 
|                                       | Property subject to capital leases             |   |           | 24,670  |          |   |         | 24,670  | 
|                                       |                                                |   |           |         |          |   |         |        
|                                       |                                                |   | 479,855   |         |          |   | 486,948 |        
|                                       | Less accumulated depreciation and amortization |   |           | 194,039 |          |   |         | 198,687 | 
|                                       |                                                |   |           |         |          |   |         |        
|                                       |                                                |   | 285,816   |         |          |   | 288,261 |        
|Deferred debt issuance costs, net      |                                                |   | 13,936    |         |          |   | 13,074  |        
|Other assets                           |                                                |   | 5,649     |         |          |   | 6,430   |        
|                                       |                                                |   |           |         |          |   |         |        
|                                       |                                                |   | 19,585    |         |          |   | 19,504  |        
|                                       |                                                |   |           |         |          |   |         |        
|Total assets                           |                                                | $ | 634,130   |         |          | $ | 645,656 |        
|                                       |                                                |   |           |         |          |   |         |        

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. 29, |   | Dec. 29,
|                                                       |                                              |                                        |         | 2002      |   | 2002    
|                                                       |                                              |                                        |         |           |   |         
|Current Liabilities                                    |                                              |                                        |         |           |   |          |         |        
|                                                       | Accounts payable                             |                                        | $       | 104,166   |   |          | $       | 103,789 |  
|                                                       | Accrued payroll and related expenses         |                                        |         | 41,567    |   |          |         | 36,796  |  
|                                                       | Other accrued liabilities                    |                                        |         | 46,656    |   |          |         | 61,746  |  
|                                                       | Current portion of capital lease obligations |                                        |         | 1,117     |   |          |         | 1,087   |  
|                                                       |                                              |                                        |         |           |   |          |         |        
|Total current liabilities                              |                                              |                                        | 193,506 |           |   |          | 203,418 |        
|Deferred income taxes, long-term                       |                                              |                                        | 6,500   |           |   |          | 6,500   |        
|Long-term debt                                         |                                              |                                        | 458,750 |           |   |          | 458,750 |        
|Capital lease obligations, less current portion        |                                              |                                        | 10,981  |           |   |          | 10,720  |        
|Long-term portion of self-insurance and other reserves |                                              |                                        | 23,855  |           |   |          | 21,350  |        
|Other long-term liabilities                            |                                              |                                        | 14,659  |           |   |          | 16,112  |        
|                                                       |                                              |                                        |         |           |   |          |         |        
|Total liabilities                                      |                                              |                                        | 708,251 |           |   |          | 716,850 |        
|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  38,301 |         |           |  |          |         |         |  | 
|                                                       | Additional paid-in capital                   |                                        |         | 9,740     |   |          |         | 9,740   |  
|                                                       | Retained deficit                             |                                        |         | (83,861   | ) |          |         | (80,934 | )
|                                                       |                                              |                                        |         |           |   |          |         |        
|Total stockholders deficit                            |                                              |                                        | (74,121 | )         |   |          | (71,194 | )      
|                                                       |                                              |                                        |         |           |   |          |         |        
|Total liabilities and stockholders deficit            |                                              | $                                      | 634,130 |           |   | $        | 645,656 |        
|                                                       |                                              |                                        |         |           |   |          |         |        

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
|                                                 |                                              |   |               
|                                                 |                                              |   | Dec. 30,       |         | Dec. 29,
|                                                 |                                              |   | 2001           |         | 2002    
|                                                 |                                              |   |                |         |         
|Sales                                            |                                              | $ | 662,587        |         |          | $ | 681,509 |        
|Cost of goods sold                               |                                              |   | 486,424        |         |          |   | 497,893 |        
|                                                 |                                              |   |                |         |          |   |         |        
|Gross profit                                     |                                              |   | 176,163        |         |          |   | 183,616 |        
|Operating expenses:                              |                                              |   |                |         |          |   |         |        
|                                                 | Selling, general and administrative expenses |   |                | 149,936 |          |   |         | 158,023 | 
|                                                 | Depreciation and amortization                |   |                | 7,504   |          |   |         | 8,164   | 
|                                                 |                                              |   |                |         |          |   |         |        
|Total operating expenses                         |                                              |   | 157,440        |         |          |   | 166,187 |        
|                                                 |                                              |   |                |         |          |   |         |        
|Operating profit                                 |                                              |   | 18,723         |         |          |   | 17,429  |        
|Interest income                                  |                                              |   | 704            |         |          |   | 272     |        
|Interest expense                                 |                                              |   | (12,796        | )       |          |   | (13,258 | )      
|Equity in earnings from unconsolidated affiliate |                                              |   | 648            |         |          |   | 746     |        
|Other expenses  net                             |                                              |   | (614           | )       |          |   | (389    | )      
|                                                 |                                              |   |                |         |          |   |         |        
|Income before income taxes                       |                                              |   | 6,665          |         |          |   | 4,800   |        
|Income taxes                                     |                                              |   | 2,733          |         |          |   | 1,873   |        
|                                                 |                                              |   |                |         |          |   |         |        
|Net income                                       |                                              | $ | 3,932          |         |          | $ | 2,927   |        
|                                                 |                                              |   |                |         |          |   |         |        
|Earnings per share                               |                                              | $ | 78.64          |         |          | $ | 76.42   |        
|                                                 |                                              |   |                |         |          |   |         |        
|Average common shares outstanding                |                                              |   | 50,000         |         |          |   | 38,301  |        
|                                                 |                                              |   |                |         |          |   |         |        
|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)

|                                                                                  |                                                  |                                                                                  |          |                |        |   |          |       |       |  
|--------------------------------------------------------------------------------- | ------------------------------------------------ | -------------------------------------------------------------------------------- | -------- | -------------- | ------ | - | -------- | ----- | ----- | -
|                                                                                  |                                                  |                                                                                  |          | 13 Weeks Ended
|                                                                                  |                                                  |                                                                                  |          |               
|                                                                                  |                                                  |                                                                                  | Dec. 30, |                |        |   | Dec. 29, |      
|                                                                                  |                                                  |                                                                                  | 2001     |                |        |   | 2002     |      
|                                                                                  |                                                  |                                                                                  |          |                |        |   |          |      
|Operating activities:                                                             |                                                  |                                                                                  |          |                |        |   |          |      
|Net income                                                                        |                                                  | $                                                                                | 3,932    |                |        | $ | 2,927    |      
|Adjustments to reconcile net income to net cash provided by
operating activities: |                                                  |                                                                                  |          |                |        |   |          |      
|                                                                                  | Depreciation and amortization                    |                                                                                  |          | 7,504          |        |   |          | 8,164 |      
|                                                                                  | Loss on disposals of assets                      |                                                                                  |          | 614            |        |   |          | 388   |      
|                                                                                  | Equity
in earnings from unconsolidated affiliate |                                                                                  |          | (648           | )      |   |          | (746  | )    
|                                                                                  | Changes in operating assets and liabilities:     |                                                                                  |          |                |        |   |          |       |      
|                                                                                  |                                                  | (Increase) decrease in receivables                                               |          |                | (3,452 | ) |          |       | 846   |  
|                                                                                  |                                                  | Decrease in income tax receivables                                               |          |                | 358    |   |          |       | 1,873 |  
|                                                                                  |                                                  | Decrease in inventories                                                          |          |                | 879    |   |          |       | 7,317 |  
|                                                                                  |                                                  | Increase in prepaid expenses                                                     |          |                | (1,603 | ) |          |       | (983  | )
|                                                                                  |                                                  | (Increase) decrease in other assets                                              |          |                | (25    | ) |          |       | 81    |  
|                                                                                  |                                                  | Decrease in accounts payable                                                     |          |                | (4,432 | ) |          |       | (377  | )
|                                                                                  |                                                  | Increase in accrued income taxes                                                 |          |                | 2,708  |   |          |       |      |  
|                                                                                  |                                                  | Increase in accrued liabilities and long-term
portion of self-insurance reserves |          |                | 15,003 |   |          |       | 9,267 |  
|                                                                                  |                                                  |                                                                                  |          |                |        |   |          |      
|Net cash provided by operating activities                                         |                                                  |                                                                                  | 20,838   |                |        |   | 28,757   |      
|                                                                                  |                                                  |                                                                                  |          |                |        |   |          |      
|Investing activities:                                                             |                                                  |                                                                                  |          |                |        |   |          |      
|Purchase of property and equipment                                                |                                                  |                                                                                  | (13,674  | )              |        |   | (11,020  | )    
|Proceeds from sale of property and equipment                                      |                                                  |                                                                                  | 17       |                |        |   | 26       |      
|                                                                                  |                                                  |                                                                                  |          |                |        |   |          |      
|Net cash used in investing activities                                             |                                                  |                                                                                  | (13,657  | )              |        |   | (10,994  | )    
|                                                                                  |                                                  |                                                                                  |          |                |        |   |          |      
|Financing activities:                                                             |                                                  |                                                                                  |          |                |        |   |          |      
|Principal payments on capital lease obligations                                   |                                                  |                                                                                  | (413     | )              |        |   | (291     | )    
|                                                                                  |                                                  |                                                                                  |          |                |        |   |          |      
|Net cash used in financing activities                                             |                                                  |                                                                                  | (413     | )              |        |   | (291     | )    
|                                                                                  |                                                  |                                                                                  |          |                |        |   |          |      
|Net increase in cash and cash equivalents                                         |                                                  |                                                                                  | 6,768    |                |        |   | 17,472   |      
|Cash and cash equivalents at beginning of period                                  |                                                  |                                                                                  | 101,636  |                |        |   | 81,043   |      
|                                                                                  |                                                  |                                                                                  |          |                |        |   |          |      
|Cash and cash equivalents at end of period                                        |                                                  | $                                                                                | 108,404  |                |        | $ | 98,515   |      
|                                                                                  |                                                  |                                                                                  |          |                |        |   |          |      
|Interest paid                                                                     |                                                  | $                                                                                | 537      |                |        | $ | 489      |      
|Income taxes paid                                                                 |                                                  | $                                                                                | 1,713    |                |        | $ |         |      

See accompanying notes to unaudited consolidated financial statements.

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STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)DECEMBER 29, 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 29, 2002 and December 29, 2002
and the results of its operations and cash flows for the thirteen weeks ended
December 30, 2001 and December 29, 2002. These consolidated financial
statements should be read in conjunction with the audited financial statements
and notes thereto included in the Companys latest annual report filed on Form
10-K. The operating results for the thirteen weeks ended December 29, 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 thirteen weeks ended December 30,
2001 and December 29, 2002 consists of the following:

|                     |  |                |       |               |  |   |       | 
|-------------------- |  | -------------- | ----- | ------------- |  | - | ----- | 
|                     |  | 13 Weeks Ended
|                     |  |               
|                     |  | Dec. 30, 2001  |       | Dec. 29, 2002
|                     |  |                |       |              
|                     |  | (In thousands)
|Federal income taxes |  | $              | 2,144 |               |  | $ | 1,448 | 
|State income taxes   |  |                | 589   |               |  |   | 425   | 
|                     |  |                |       |               |  |   |       | 
|                     |  | $              | 2,733 |               |  | $ | 1,873 | 
|                     |  |                |       |               |  |   |       | 

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 using the equity method of accounting and recognized
income of $648,000 and $746,000 for the thirteen weeks ended December 30, 2001
and December 29, 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 is as follows:

|                        |  |                |        |               |  |   |        | 
|----------------------- |  | -------------- | ------ | ------------- |  | - | ------ | 
|                        |  | 13 Weeks Ended
|                        |  |               
|                        |  | Dec. 30, 2001  |        | Dec. 29, 2002
|                        |  |                |        |              
|                        |  | (In thousands)
|Current assets          |  | $              | 23,508 |               |  | $ | 23,633 | 
|Non-current assets      |  |                | 94,432 |               |  |   | 91,411 | 
|Current liabilities     |  |                | 24,872 |               |  |   | 21,880 | 
|Non-current liabilities |  |                | 66,277 |               |  |   | 60,350 | 
|Shareholders equity    |  |                | 26,791 |               |  |   | 32,814 | 
|                        |  |                |        |               |  |   |        | 
|Sales                   |  |                | 49,306 |               |  |   | 44,862 | 
|Gross profit            |  |                | 8,136  |               |  |   | 7,976  | 
|Net income              |  | $              | 1,295  |               |  | $ | 1,491  | 

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STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)DECEMBER 29, 2002

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 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 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.

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 September 30, 2002. This standard replaces SFAS No.
121 and APB No. 30 and amends APB No. 51. 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  Subsequent Events

On February 4, 2003, the Company signed a Fourth Amendment to the credit
facility with Bank of America N.A. dated August 6, 1999. The principal
provisions of the Fourth Credit Amendment were to remove the
$25 million letter of credit facility, remove the
$15 million Revolving Loan Commitment L/C Sublimit; create a
$50 million Letter of Credit Sublimit; extend the availability of the
Revolving Loan Facility from March 31, 2003 to March 31, 2005 and change the
fee for outstanding letters of credit from 1.50% to 1.25%. The Company will
pay a renewal fee of $75,000 to the administrative agent of the credit
facility.

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STATER BROS. HOLDINGS INC.
DECEMBER 29, 2002

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 principles 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
specified 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 compensation benefits structure. 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 workers compensation, automobile and general liability
insurance reserves at a discount rate of approximately 7.5%.

9



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##### Table of Contents



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

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.


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 term of the applicable
debt agreement.


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 is the sole shareholder of the Company and holds
all of the shares of the Companys Class A Common Stock. 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 and is
the managing general partner with the power to vote the shares of the
Company held by La Cadena.


10



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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 weeks ended December
30, 2001 and December 29, 2002.


|                                                 |                                              |  |                |       |               |  |        |       | 
|------------------------------------------------ | -------------------------------------------- |  | -------------- | ----- | ------------- |  | ------ | ----- | 
|                                                 |                                              |  | 13 Weeks Ended
|                                                 |                                              |  |               
|                                                 |                                              |  | Dec. 30, 2001  |       | Dec. 29, 2002
|                                                 |                                              |  |                |       |              
|Sales                                            |                                              |  | 100.00         | %     |               |  | 100.00 | %    
|Gross profit                                     |                                              |  | 26.59          |       |               |  | 26.94  |      
|Operating expenses:                              |                                              |  |                |       |               |  |        |      
|                                                 | Selling, general and administrative
expenses |  |                | 22.63 |               |  |        | 23.18 | 
|                                                 | Depreciation and amortization                |  |                | 1.13  |               |  |        | 1.20  | 
|Operating profit                                 |                                              |  | 2.83           |       |               |  | 2.56   |      
|Interest income                                  |                                              |  | 0.11           |       |               |  | 0.04   |      
|Interest expense                                 |                                              |  | (1.93          | )     |               |  | (1.95  | )    
|Equity in earnings from unconsolidated affiliate |                                              |  | 0.10           |       |               |  | 0.11   |      
|Other expenses  net                             |                                              |  | (0.10          | )     |               |  | (0.06  | )    
|Income before income taxes                       |                                              |  | 1.01           | %     |               |  | 0.70   | %    

Total sales for the thirteen weeks ended December 29, 2002, the first
quarter of fiscal 2003, increased 2.9% and amounted to $681.5 million
compared to $662.6 million for the same period in the prior year. The
increase in total sales in the first quarter of fiscal 2003 was due
primarily to continued favorable customer response to the Companys
marketing plan which emphasizes high quality, large product selections
and customer service. Like store sales increased 2.3% for the
thirteen-week period ended December 29, 2002. In the first quarter of
the prior year, the Company experienced stronger than normal sales
during the period immediately following the 911 tragedy. The Company
found people were more inclined to stay close to home and be with
family after the 911 tragedy, therefore eating more meals at home.
The Company operated 156 supermarkets at December 29, 2002 and 155
supermarkets at December 30, 2001.

Gross profit for the thirteen weeks ended December 29, 2002, amounted
to $183.6 million or 26.94% of sales compared to $176.2 million or
26.59% of sales in the same period of the prior year. The increase in
the first quarter of fiscal 2003 gross profit, as a percent of sales,
was due primarily to an increase in the sale of higher margin items.

Operating expenses include selling, general and administrative
expenses and depreciation and amortization. For the thirteen weeks
ended December 29, 2002, selling, general and administrative expenses
amounted to $158.0 million or 23.18% of sales compared to $149.9
million or 22.63% of sales for the thirteen weeks ended December 30,
2001. The increase in selling, general and administration expenses,
as a percentage of sales, in the first quarter of fiscal 2003 compared
to the first quarter of fiscal 2002, was due primarily to an increase
in payroll related expenses.

11



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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.)

Depreciation and amortization expenses amounted to $8.2 million for
the thirteen weeks ended December 29, 2002 and amounted to $7.5
million for the like period of the prior year. The increase in
depreciation and amortization expense in fiscal 2003 was primarily due
to an increase in fixed assets.


Operating profit for the thirteen weeks ended December 29, 2002
amounted to $17.4 million or 2.56% of sales compared to $18.7 million
or 2.83% of sales for the thirteen weeks ended December 30, 2001.

Interest expense amounted to $13.3 million for the thirteen weeks
ended December 29, 2002 compared to $12.8 million for the thirteen
weeks ended December 30, 2001. The increase in interest expense in
the first quarter of fiscal 2003 is primarily attributed to the
issuance of a $20.0 million subordinated note in connection with the
redemption of Company stock in the second quarter of 2002.

The Companys equity in earnings from unconsolidated affiliate,
amounted to $746,000 for the first quarter of fiscal 2003 compared to
$648,000 in the first quarter of the prior year. The increase in
earnings in the first quarter of 2003 over the first quarter of 2002,
was due to increased volume and improved efficiencies by Santee.

Income before income taxes amounted to $4.8 million for the thirteen
weeks ended December 29, 2002 compared to $6.7 million for the
thirteen weeks ended December 30, 2001.

Net income for the thirteen weeks ended December 29, 2002, amounted to
$2.9 million compared to $3.9 million for the thirteen weeks ended
December 30, 2001.

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 the lesser of a) Revolving Loan
Commitment or b) $50 million. As of December 29, 2002, the Company had $39.4 million of
outstanding letters of credit and had $35.6 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.


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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 December 29, 2002.


|                                    |  |                                             |         |        |  |           |        |           |  |       |         |  |  |   |         |       |  |   |        | 
|----------------------------------- |  | ------------------------------------------- | ------- | ------ |  | --------- | ------ | --------- |  | ----- | ------- |  |  | - | ------- | ----- |  | - | ------ | 
|                                    |  | Contractual Cash Obligations (In thousands)
|                                    |  |                                            
|                                    |  |                                             |         |        |  | Less than |        |           |  |       |         |  |  |   |         | After
|                                    |  | Total                                       |         | 1 Year |  | 1-3 Years |        | 4-5 Years |  | 5 Yrs
|                                    |  |                                             |         |        |  |           |        |           |  |      
|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% 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                           |  |                                             | 11,807  |        |  |           | 1,087  |           |  |       | 1,925   |  |  |   | 1,786   |       |  |   | 7,009  | 
|Interest                            |  |                                             | 11,063  |        |  |           | 1,855  |           |  |       | 3,156   |  |  |   | 2,545   |       |  |   | 3,507  | 
|                                    |  |                                             |         |        |  |           |        |           |  |       |         |  |  |   |         |       |  |   |        | 
|                                    |  |                                             | 22,870  |        |  |           | 2,942  |           |  |       | 5,081   |  |  |   | 4,331   |       |  |   | 10,516 | 
|Operating Leases(1)                 |  |                                             | 213,992 |        |  |           | 29,534 |           |  |       | 52,006  |  |  |   | 44,181  |       |  |   | 88,271 | 
|                                    |  |                                             |         |        |  |           |        |           |  |       |         |  |  |   |         |       |  |   |        | 
|Total Contractual Cash Obligations  |  | $                                           | 912,737 |        |  | $         | 80,615 |           |  | $     | 153,365 |  |  | $ | 579,970 |       |  | $ | 98,787 | 
|                                    |  |                                             |         |        |  |           |        |           |  |       |         |  |  |   |         |       |  |   |        | 
|                                    |  |                                            
|                                    |  | Other Commercial Commitments (In thousands)
|                                    |  |                                            
|                                    |  |                                             |         |        |  | Less than |        |           |  |       |         |  |  |   |         | After
|                                    |  | Total                                       |         | 1 Year |  | 1-3 Years |        | 4-5 Years |  | 5 Yrs
|                                    |  |                                             |         |        |  |           |        |           |  |      
|Standby Letters of Credit(2)        |  | $                                           | 39,357  |        |  | $         | 39,357 |           |  | $     |        |  |  | $ |        |       |  | $ |       | 
|                                    |  |                                             |         |        |  |           |        |           |  |       |         |  |  |   |         |       |  |   |        | 
|Total Other Commercial Commitments  |  | $                                           | 39,357  |        |  | $         | 39,357 |           |  | $     |        |  |  | $ |        |       |  | $ |       | 
|                                    |  |                                             |         |        |  |           |        |           |  |       |         |  |  |   |         |       |  |   |        | 

(1)        The Company leases the majority of its retail stores, offices and
warehouse 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 May 2003 and
December 2003.

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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.)

Working capital amounted to $118.1 million at December 29, 2002 and
$119.6 million at September 29, 2002, and the Companys current ratios
were 1.58:1, and 1.62:1, respectively. Fluctuations in working
capital and current ratios are not unusual in the industry.


The net cash provided by operating activities in the thirteen weeks
ended December 29, 2002 amounted to $28.8 million compared to $20.8
million for the thirteen weeks ended December 30, 2001. Fluctuations
in net cash provided by or used in operating activities are not
unusual in the industry. Cash provided by operating activities in
fiscal 2003 consisted of a $9.3 million increase in accrued
liabilities and self-insurance reserves, a $7.3 million decrease in
inventory and $8.2 million from depreciation. Cash provided by
operating activities in fiscal 2002 consisted of a $15.0 million
increase in accrued liabilities and self-insurance reserves, $7.5
million from depreciation offset by a decrease of $4.4 million in
accounts payable and a $3.5 million increase in accounts receivable.

Net cash used by investing activities for the thirteen weeks ended
December 29, 2002, amounted to $11.0 million compared to $13.7 million
for the thirteen weeks ended December 30, 2001. The difference in net
cash used by investing activities between the comparable periods is
due to the Companys capital expenditures during these periods, net of
proceeds from asset dispositions. Capital expenditures amounted to
$11.0 million in the first quarter of fiscal 2003 compared to $13.7
million in the first quarter of fiscal 2002.

Net cash used by financing activities amounted to $291,000 and
$413,000 for the thirteen weeks ended December 29, 2002 and December
30, 2001, respectively, and consisted of payments on the Companys
capitalized lease obligations.

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##### Table of Contents



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

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,
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 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 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 Stater Bros. 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 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
1.25% 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.

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##### Table of Contents



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

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 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 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 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.

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 December 29, 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
$79.4 million and exceeded minimum inventory coverage by approximately
$36.3 million. The minimum EBITDA covenant measurement period began
in the quarter ending June 25, 2000, and requires an annualized
minimum EBITDA of $85.0 million. As of December 29, 2002, Stater
Bros. Markets exceeded minimum annualized EBITDA by approximately
$18.0 million.

As of December 29, 2002, for purposes of the credit facility with Bank
of America, the Company was 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 December 29, 2002, the Company
was in compliance with all such covenants. However, there can be no
assurance that 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 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






|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.                                                                                                         






|Item 2. |  | CHANGES IN SECURITIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |  | None                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       
|Item 3. |  | DEFAULTS UPON SENIOR SECURITIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        |  | None                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       
|Item 4. |  | CONTROLS AND PROCEDURES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        |  | Within the past 90 days, 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. There were no significant changes in the Companys
internal controls or in other factors that could significantly affect
those internal controls 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 with respect to
those controls.






|Item 5. |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|------- |  | ---------------------------------------------------
|        |  | None                                               
|       
|Item 6. |  | OTHER INFORMATION                                  
|        |  | None                                               
|       
|Item 7. |  | EXHIBITS AND REPORTS ON FORM 8-K                   
|       
|        |  | (a)  Exhibits                                      

|            |  |                                                                                                                                                                                   
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit no. |  | Description                                                                                                                                                                       
|            |  |                                                                                                                                                                                   
|10.33       |  | Fourth Amendment dated February 4, 2003 to
the Credit Agreement dated as of August 6, 1999 by and
among Stater Bros. Markets, Stater Bros. Holdings Inc. and
Bank of America, N.A.
|99.3        |  | Certification Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.                                                           



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

18



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##### Table of Contents



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: February 6, 2003 |  | /s/ Jack H. BrownJack H. Brown
Chairman of the Board, President,
and Chief Executive Officer
(Principal Executive Officer)

|                       |  |                                                                                                                     
|---------------------- |  | --------------------------------------------------------------------------------------------------------------------
|Date: February 6, 2003 |  | /s/ Phillip J. SmithPhillip J. Smith
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)

19



---



##### Table of Contents






CERTIFICATION PURSUANT TO
SECTION 302 (a) OF THE SARBANES-OXLEY ACT

I, Jack H. Brown, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Stater Bros.
Holdings Inc.;                                                                                                                                                                                                                                                                                                        
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;                                                           
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                                                                              
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                                                                                                
|  
|a) |  | designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;                                                                                          
|  
|b) |  | evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and                                                                                                                                                                                            
|  
|c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                                                                                                                  
|  
|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):                                                                                                                                           
|  
|a) |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and                                                                                           
|  
|b) |  | any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                                                                                                                   
|  
|6. |  | The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.

Date: February 6, 2003

|                                 
|---------------------------------
|/s/ Jack H. Brown                
|Jack H. Brown                    
|Chairman of the Board, President,
|and Chief Executive Officer      
|(Principal Executive Officer)    

20



---



##### Table of Contents



CERTIFICATION PURSUANT TO
SECTION 302 (a) OF THE SARBANES-OXLEY ACT

I, Phillip J. Smith, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Stater Bros.
Holdings Inc.;                                                                                                                                                                                                                                                                                                        
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;                                                           
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                                                                              
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                                                                                                
|  
|a) |  | designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;                                                                                          
|  
|b) |  | evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and                                                                                                                                                                                            
|  
|c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                                                                                                                  
|  
|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):                                                                                                                                           
|  
|a) |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and                                                                                           
|  
|b) |  | any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                                                                                                                   
|  
|6. |  | The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.

Date: February 6, 2003

|                                                 
|-------------------------------------------------
|/s/ Phillip J. Smith                             
|Phillip J. Smith                                 
|Senior Vice President and Chief Financial Officer
|(Principal Financial Officer)                    

21