##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 25, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition from  to
 Commission file number 001-13222
 STATER BROS. HOLDINGS INC.
  Delaware
    
    33-0350671(State or other jurisdiction of incorporation or
    
    (I.R.S. Employer Identification No.)organization)21700 Barton RoadColton, California
    
    92324(Address of principal executive offices)
    
    (Zip Code)Registrants telephone number, including area code
    
    (909) 783-5000
 Not Applicable
  þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ.
 o þ




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##### 



STATER BROS. HOLDINGS INC.
March 25, 2007
 INDEX
 PagePART I
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial StatementsConsolidated Balance Sheets as of September 24, 2006 and
March 25, 2007 (Unaudited)
    
    
    3Consolidated Statements of Income (Unaudited) for the 13 weeks ended
March 26, 2006 and March 25, 2007
    
    
    5Consolidated Statements of Income (Unaudited) for the 26 weeks ended
March 26, 2006 and March 25, 2007
    
    
    6Consolidated Statements of Cash Flows (Unaudited) for the 13 weeks
ended March 26, 2006 and March 25, 2007
    
    
    7Notes to Consolidated Financial Statements (Unaudited)
    
    
    8Item 2.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    13Item 3.
    
    Quantitative and Qualitative Disclosure about Market Risk
    
    
    28Item 4.
    
    Controls and Procedures
    
    
    28PART II
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    29Item 1A.
    
    Risk Factors
    
    
    29Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    30Item 3.
    
    Defaults Upon Senior Securities
    
    
    30Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    30Item 5.
    
    Other Information
    
    
    30Item 6.
    
    Exhibits
    
    
    30SIGNATURES
    
    
    
    
    31EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. FINANCIAL STATEMENTS
 STATER BROS. HOLDINGS INC.
 
 CONSOLIDATED BALANCE SHEETS
  ASSETS
 Sept. 24,
    
    
    Mar. 25,2006
    
    
    2007(Unaudited)Current assetsCash and cash equivalents
    
    $
    198,545
    
    
    $
    228,169Restricted cash
    
    
    24,121
    
    
    
    8,121Short-term investments
    
    
    26,849
    
    
    
    Receivables, net of allowance of $936 and $817
    
    
    35,310
    
    
    
    40,718Income tax receivables
    
    
    3,863
    
    
    
    Inventories
    
    
    196,031
    
    
    
    194,688Prepaid expenses
    
    
    8,513
    
    
    
    8,832Deferred income taxes
    
    
    21,609
    
    
    
    22,446Total current assets
    
    
    514,841
    
    
    
    502,974Property and equipmentLand
    
    
    110,479
    
    
    
    111,814Buildings and improvements
    
    
    323,805
    
    
    
    370,207Store fixtures and equipment
    
    
    397,491
    
    
    
    407,816Property subject to capital leases
    
    
    25,836
    
    
    
    25,759857,611
    
    
    
    915,596Less accumulated depreciation and amortization
    
    
    360,538
    
    
    
    386,550497,073
    
    
    
    529,046Deferred debt issuance costs, net
    
    
    15,972
    
    
    
    14,444Deferred income taxes, long-term
    
    
    8,845
    
    
    
    9,613Long-term receivable
    
    
    12,160
    
    
    
    21,771Goodwill
    
    
    2,894
    
    
    
    2,894Other assets
    
    
    6,307
    
    
    
    6,59746,178
    
    
    
    55,319Total assets
    
    $
    1,058,092
    
    
    $
    1,087,339
  3




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##### Table of Contents



STATER BROS. HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS (contd.)
 LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)
 Sept. 24,
    
    
    Mar. 25,2006
    
    
    2007(Unaudited)Current liabilitiesAccounts payable
    
    $
    155,827
    
    
    $
    153,431Accrued payroll and related expenses
    
    
    55,582
    
    
    
    60,161Accrued income taxes
    
    
    
    
    
    
    5,752Other accrued liabilities
    
    
    69,098
    
    
    
    59,312Current portion of capital lease obligations
    
    
    1,054
    
    
    
    940Total current liabilities
    
    
    281,561
    
    
    
    279,596Long-term debt
    
    
    700,000
    
    
    
    700,000Capital lease obligations, less current portion
    
    
    7,294
    
    
    
    6,807Long-term portion of self-insurance and other reserves
    
    
    33,112
    
    
    
    33,681Long-term deferred benefits
    
    
    43,573
    
    
    
    51,664Other long-term liabilities
    
    
    3,631
    
    
    
    3,308Total liabilities
    
    
    1,069,171
    
    
    
    1,075,056Commitment and ContingenciesStockholders equity (deficit)Common Stock, $.01 par value:Authorized shares  100,000Issued and outstanding shares  0
    
    
    
    
    
    
    Class A Common Stock, $.01 par value:Authorized shares  100,000Issued and outstanding shares  36,895
    
    
    
    
    
    
    Additional paid-in capital
    
    
    9,382
    
    
    
    9,382Retained earnings (deficit)
    
    
    (20,461
    )
    
    
    2,901Total stockholders equity (deficit)
    
    
    (11,079
    )
    
    
    12,283Total liabilities and stockholders equity (deficit)
    
    $
    1,058,092
    
    
    $
    1,087,339
  4




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##### Table of Contents



STATER BROS. HOLDINGS INC.
 
 CONSOLIDATED STATEMENTS OF INCOME
   13 Weeks EndedMar. 26
    
    
    Mar. 25,2006
    
    
    2007Sales
    
    $
    863,751
    
    
    $
    866,062Cost of goods sold
    
    
    631,239
    
    
    
    616,618Gross profit
    
    
    232,512
    
    
    
    249,444Operating expensesSelling, general and administrative expenses
    
    
    198,011
    
    
    
    203,685Depreciation and amortization
    
    
    11,059
    
    
    
    12,085Total operating expenses
    
    
    209,070
    
    
    
    215,770Operating profit
    
    
    23,442
    
    
    
    33,674Interest income
    
    
    2,378
    
    
    
    2,719Interest expense
    
    
    (14,964
    )
    
    
    (13,749
    )Other income (expenses), net
    
    
    (617
    )
    
    
    3Income before income taxes
    
    
    10,239
    
    
    
    22,647Income taxes
    
    
    4,063
    
    
    
    9,187Net income
    
    $
    6,176
    
    
    $
    13,460Earnings per share
    
    $
    164.95
    
    
    $
    364.82Average common shares outstanding
    
    
    37,442
    
    
    
    36,895Shares outstanding at end of period
    
    
    36,895
    
    
    
    36,895
  5




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##### Table of Contents



STATER BROS. HOLDINGS INC.
 
 CONSOLIDATED STATEMENTS OF INCOME
   26 Weeks EndedMar. 26
    
    
    Mar. 25,2006
    
    
    2007Sales
    
    $
    1,730,917
    
    
    $
    1,770,416Cost of goods sold
    
    
    1,271,690
    
    
    
    1,279,082Gross profit
    
    
    459,227
    
    
    
    491,334Operating expensesSelling, general and administrative expenses
    
    
    396,776
    
    
    
    405,486Depreciation and amortization
    
    
    21,417
    
    
    
    23,969Total operating expenses
    
    
    418,193
    
    
    
    429,455Operating profit
    
    
    41,034
    
    
    
    61,879Interest income
    
    
    4,888
    
    
    
    5,545Interest expense
    
    
    (29,540
    )
    
    
    (28,034
    )Other expenses, net
    
    
    (693
    )
    
    
    (168
    )Income before income taxes
    
    
    15,689
    
    
    
    39,222Income taxes
    
    
    6,181
    
    
    
    15,860Net income
    
    $
    9,508
    
    
    $
    23,362Earnings per share
    
    $
    251.06
    
    
    $
    633.20Average common shares outstanding
    
    
    37,871
    
    
    
    36,895Shares outstanding at end of period
    
    
    36,895
    
    
    
    36,895
  6




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##### Table of Contents



STATER BROS. HOLDINGS INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
   26 Weeks EndedMar. 26,
    
    
    Mar. 25,2006
    
    
    2007Operating activities:Net income
    
    $
    9,508
    
    
    $
    23,362Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    27,354
    
    
    
    29,866Amortization of debt issuance costs
    
    
    1,529
    
    
    
    1,528Deferred income taxes
    
    
    (569
    )
    
    
    (1,605
    )Loss on disposals of assets
    
    
    1,024
    
    
    
    258Changes in operating assets and liabilities:(Increase) decrease in restricted cash
    
    
    (2,000
    )
    
    
    16,000(Increase) decrease in receivables
    
    
    5,799
    
    
    
    (1,729
    )(Increase) decrease in income tax receivables
    
    
    (3,749
    )
    
    
    3,863(Increase) decrease in inventories
    
    
    (8,839
    )
    
    
    1,343Increase in prepaid expenses
    
    
    (1,806
    )
    
    
    (319
    )(Increase) decrease in other assets
    
    
    57
    
    
    
    (301
    )Decrease in accounts payable
    
    
    (10,852
    )
    
    
    (2,396
    )Increase in accrued income taxes
    
    
    
    
    
    
    5,752Decrease in other accrued liabilities
    
    
    (7,609
    )
    
    
    (5,207
    )Increase in long-term reserves
    
    
    3,725
    
    
    
    8,337Net cash provided by operating activities
    
    
    13,572
    
    
    
    78,752Financing activities:Principal payments on capital lease obligations
    
    
    (513
    )
    
    
    (601
    )Stock redemption
    
    
    (18,750
    )
    
    
    Net cash used in financing activities
    
    
    (19,263
    )
    
    
    (601
    )Investing activities:Decrease in short-term investments
    
    
    
    
    
    
    26,849Increase in store construction reimbursements
    
    
    (3,406
    )
    
    
    (3,679
    )Increase in long-term receivable
    
    
    
    
    
    
    (9,611
    )Purchase of property and equipment
    
    
    (47,289
    )
    
    
    (62,121
    )Proceeds from sale of property and equipment
    
    
    331
    
    
    
    35Net cash used in investing activities
    
    
    (50,364
    )
    
    
    (48,527
    )Net increase (decrease) in cash and cash equivalents
    
    
    (56,055
    )
    
    
    29,624Cash and cash equivalents at beginning of period
    
    
    263,397
    
    
    
    198,545Cash and cash equivalents at end of period
    
    $
    207,342
    
    
    $
    228,169Interest paid
    
    $
    28,825
    
    
    $
    29,796Income taxes paid
    
    $
    10,500
    
    
    $
    7,850
  7




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##### Table of Contents



STATER BROS. HOLDINGS INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 25, 2007
 Note 1  Basis of Presentation
    Note 2  Reclassifications
  Note 3  Recent Accounting Pronouncements
    8




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##### Table of Contents



STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   MARCH 25, 2007
 Note 4  Use of Estimates
  Note 5  Restricted Cash
  Note 6  Retirement Plans
   13 Weeks Ended
    
    
    26 Weeks EndedMar. 26,
    
    
    Mar. 25,
    
    
    Mar. 26,
    
    
    Mar. 25,2006
    
    
    2007
    
    
    2006
    
    
    2007(in thousands)
    
    
    (in thousands)Expected return on assets
    
    $
    (425
    )
    
    $
    (519
    )
    
    $
    (850
    )
    
    $
    (1,038
    )Service cost
    
    
    716
    
    
    
    684
    
    
    
    1,432
    
    
    
    1,367Interest cost
    
    
    739
    
    
    
    818
    
    
    
    1,477
    
    
    
    1,635Amortization of prior service cost
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )Amortization of recognized losses
    
    
    261
    
    
    
    215
    
    
    
    523
    
    
    
    430Net pension expense
    
    $
    1,291
    
    
    $
    1,198
    
    
    $
    2,581
    
    
    $
    2,393Actuarial assumptions used to determine net pension expense
were:Discount rate
    
    
    5.50
    %
    
    
    5.80
    %
    
    
    5.50
    %
    
    
    5.80
    %Rate of increase in compensation levels
    
    
    3.00
    %
    
    
    3.00
    %
    
    
    3.00
    %
    
    
    3.00
    %Expected long-term rate of return on
assets
    
    
    5.00
    %
    
    
    5.00
    %
    
    
    5.00
    %
    
    
    5.00
    %
 9




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##### Table of Contents



STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   MARCH 25, 2007
 Note 7  Segment Information
   Thirteen Weeks
    
    
    Twenty-six WeeksRetail
    
    
    All Other
    
    
    Total
    
    
    Retail
    
    
    All Other
    
    
    Total(in thousands)
    
    
    (in thousands)Sales to external
customers
    
    $
    838,407
    
    
    $
    25,344
    
    
    $
    863,751
    
    
    $
    1,678,405
    
    
    $
    52,512
    
    
    $
    1,730,917Intersegment sales
    
    
    
    
    
    
    19,020
    
    
    
    19,020
    
    
    
    
    
    
    
    39,033
    
    
    
    39,033Operating profit
    
    
    22,185
    
    
    
    1,257
    
    
    
    23,442
    
    
    
    38,538
    
    
    
    2,496
    
    
    
    41,034Net income (loss)
    
    
    14,015
    
    
    
    (7,839
    )
    
    
    6,176
    
    
    
    24,963
    
    
    
    (15,455
    )
    
    
    9,508
   Thirteen Weeks
    
    
    Twenty-six WeeksRetail
    
    
    All Other
    
    
    Total
    
    
    Retail
    
    
    All Other
    
    
    Total(in thousands)
    
    
    (in thousands)Sales to external
customers
    
    $
    842,976
    
    
    $
    23,086
    
    
    $
    866,062
    
    
    $
    1,723,315
    
    
    $
    47,101
    
    
    $
    1,770,416Intersegment sales
    
    
    
    
    
    
    19,263
    
    
    
    19,263
    
    
    
    
    
    
    
    38,066
    
    
    
    38,066Operating profit
    
    
    34,365
    
    
    
    (691
    )
    
    
    33,674
    
    
    
    62,936
    
    
    
    (1,057
    )
    
    
    61,879Net income (loss)
    
    
    22,126
    
    
    
    (8,666
    )
    
    
    13,460
    
    
    
    40,782
    
    
    
    (17,420
    )
    
    
    23,362
  10




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##### Table of Contents



STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   MARCH 25, 2007
 Note 8  Subsidiary Guarantee
   Note 9  Corporate Office and Distribution Facilities
   
    
    Component 1: corporate offices and satellite buildings;
    
    Component 2: dry goods warehouse; and
    
    Component 3: refrigeration warehouse.
  Note 10  Subsequent Events
 New Senior Notes
 3 4
 Note Redemption
  11




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##### Table of Contents



STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   MARCH 25, 2007
 Note 10  Subsequent Events (contd.)
 Stock Redemption
  Dividend
  New Credit Facility
     Santee Credit Facility
 ,
   12




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##### Table of Contents



STATER BROS. HOLDINGS INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 PART I  FINANCIAL INFORMATION (contd.)
 
 Item 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
 CRITICAL ACCOUNTING POLICIES
  Self-Insurance Reserves
  Employee Benefit Plans
   13




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##### Table of Contents



STATER BROS. HOLDINGS INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 CRITICAL ACCOUNTING POLICIES (contd.)
 Employee Benefit Plans (contd.)
  Long-Lived Assets
   Income Taxes
  Goodwill
  14




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##### Table of Contents



STATER BROS. HOLDINGS INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 CRITICAL ACCOUNTING POLICIES (contd.)
 Store Closing Costs
  Advertising Allowances
   Gift Cards and Certificates
  Significant Accounting Policies
  15




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##### Table of Contents



STATER BROS. HOLDINGS INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 OWNERSHIP OF THE COMPANY
  EXECUTIVE OVERVIEW
       16




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##### Table of Contents



STATER BROS. HOLDINGS INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 RESULTS OF OPERATIONS
 13 Weeks Ended
    
    ChangeMar. 26,
    
    Mar. 25,
    
    2007 to 2006($ in thousands)
    
    2006
    
    2007
    
    Dollar
    
    %Sales
    
    $
    863,751
    
    
    $
    866,062
    
    
    $
    2,311
    
    
    
    0.27
    %Gross Profit
    
    $
    232,512
    
    
    $
    249,444
    
    
    $
    16,932
    
    
    
    7.28
    %as a % of sales
    
    
    26.92
    %
    
    
    28.80
    %
 26 Weeks Ended
    
    ChangeMar. 26,
    
    Mar. 25,
    
    2007 to 2006($ in thousands)
    
    2006
    
    2007
    
    Dollar
    
    %Sales
    
    $
    1,730,917
    
    
    $
    1,770,416
    
    
    $
    39,499
    
    
    
    2.28
    %Gross Profit
    
    $
    459,227
    
    
    $
    491,334
    
    
    $
    32,107
    
    
    
    6.99
    %as a % of sales
    
    
    26.53
    %
    
    
    27.75
    %
 Sales
  Like Store Sales
    17




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##### Table of Contents



STATER BROS. HOLDINGS INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 RESULTS OF OPERATIONS (contd.)
 Like Store Sales (contd.)
  Santee Sales
  Gross Profit
  Operating Expenses and Income
 13 Weeks Ended
    
    ChangeMar. 26,
    
    Mar. 25,
    
    2007 to 2006($ in thousands)
    
    2006
    
    2007
    
    Dollar
    
    %Operating Expenses:Selling, general and administrative expenses
    
    $
    198,011
    
    
    $
    203,685
    
    
    $
    5,674
    
    
    
    2.87
    %as a % of sales
    
    
    22.93
    %
    
    
    23.51
    %Depreciation and amortization
    
    $
    11,059
    
    
    $
    12,085
    
    
    $
    1,026
    
    
    
    9.28
    %as a % of sales
    
    
    1.28
    %
    
    
    1.40
    %Operating profit
    
    $
    23,442
    
    
    $
    33,674
    
    
    $
    10,232
    
    
    
    43.65
    %as a % of sales
    
    
    2.71
    %
    
    
    3.89
    %
 26 Weeks Ended
    
    ChangeMar. 26,
    
    Mar. 25,
    
    2007 to 2006($ in thousands)
    
    2006
    
    2007
    
    Dollar
    
    %Operating Expenses:Selling, general and administrative expenses
    
    $
    396,776
    
    
    $
    405,486
    
    
    $
    8,710
    
    
    
    2.20
    %as a % of sales
    
    
    22.92
    %
    
    
    22.90
    %Depreciation and amortization
    
    $
    21,417
    
    
    $
    23,969
    
    
    $
    2,552
    
    
    
    11.92
    %as a % of sales
    
    
    1.24
    %
    
    
    1.35
    %Operating profit
    
    $
    41,034
    
    
    $
    61,879
    
    
    $
    20,845
    
    
    
    50.80
    %as a % of sales
    
    
    2.37
    %
    
    
    3.50
    %
 18




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##### Table of Contents



STATER BROS. HOLDINGS INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 RESULTS OF OPERATIONS (contd.)
 Selling, General and Administrative Expenses
    Depreciation and Amortization
  19




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##### Table of Contents



STATER BROS. HOLDINGS INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 RESULTS OF OPERATIONS (contd.)
 Interest Income
  Interest Expense
  Income Before Income Taxes
  Income Taxes
  Net Income
  LIQUIDITY AND CAPITAL RESOURCES
   20




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##### Table of Contents



STATER BROS. HOLDINGS INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 LIQUIDITY AND CAPITAL RESOURCES (contd.)
  Contractual Cash Obligations(in thousands)Less than
    
    
    
    
    
    
    
    
    
    
    AfterTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    4-5 Years
    
    
    5 Years8.125% Senior Notes due June 2012Principal
    
    $
    525,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    525,000Interest
    
    
    234,609
    
    
    
    42,656
    
    
    
    85,313
    
    
    
    85,313
    
    
    
    21,327759,609
    
    
    
    42,656
    
    
    
    85,313
    
    
    
    85,313
    
    
    
    546,327Floating Rate Senior Notes due
June 2010(1)Principal
    
    $
    175,000
    
    
    $
    175,000
    
    
    $
    
    
    
    $
    
    
    
    $
    Call premiums
    
    
    1,750
    
    
    
    1,750
    
    
    
    
    
    
    
    
    
    
    
    Interest
    
    
    4,089
    
    
    
    4,089
    
    
    
    
    
    
    
    
    
    
    
    180,839
    
    
    
    180,839
    
    
    
    
    
    
    
    
    
    
    
    Capital lease obligations (2)Principal
    
    $
    7,747
    
    
    $
    940
    
    
    $
    2,333
    
    
    $
    3,025
    
    
    $
    1,449Interest
    
    
    4,404
    
    
    
    1,174
    
    
    
    1,887
    
    
    
    1,057
    
    
    
    28612,151
    
    
    
    2,114
    
    
    
    4,220
    
    
    
    4,082
    
    
    
    1,735Operating leases (2)
    
    
    260,931
    
    
    
    37,644
    
    
    
    52,066
    
    
    
    35,533
    
    
    
    135,688Total contractual cash obligations
    
    $
    1,213,530
    
    
    $
    263,253
    
    
    $
    141,599
    
    
    $
    124,928
    
    
    $
    683,750Other Commercial Commitments(in thousands)Less than
    
    
    
    
    
    
    
    
    
    
    AfterTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    4-5 Years
    
    
    5 YearsStandby letters of credit (3)
    
    $
    50,433
    
    
    $
    50,433
    
    
    $
    
    
    
    $
    
    
    
    $
    Total other commercial commitments
    
    $
    50,433
    
    
    $
    50,433
    
    
    $
    
    
    
    $
    
    
    
    $
    
 
 (1)
    
    Interest on the Floating Rate Senior Notes (the Floating Rate Notes) is based on
the Three-month LIBOR plus 3.50% and is set quarterly based on the Three-month LIBOR rate for the
second London Banking Day preceding each interest period. The floating interest rate at March 25,
2007 was 8.85%. The redemption of the Floating Rate Notes have been accelerated due to the
issuance on April 18, 2007 of $285 million of 7.75% Senior Notes due April 2015. The proceeds from
these Notes will be used to repay all principal and accrued interest on the Floating Rate Notes in
June 2007. The Floating Rate Notes will be redeemed on June 18, 2007 (the Redemption Date) at a
price equal to 101% per $1,000 principal amount of the Floating Rate Notes, plus accrued and unpaid
interest thereon to the Redemption Date.(2)
    
    We lease the majority of our retail stores, offices, warehouses and
distribution facilities. Certain of our operating leases provide for minimum annual payments
that change over the primary term of the lease. For purposes of contractual cash obligations
shown here, contractual step increases or decreases are shown in the period they are due.
Certain leases provide for additional rents based on sales. Primary lease terms range from 3 to
55 years and substantially all leases provide for renewal options.(3)
    
    Standby letters of credit are committed as security for workers compensation
obligations. Outstanding letters of credit expire between September 2007 and December 2007. 21




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##### Table of Contents



STATER BROS. HOLDINGS INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 LIQUIDITY AND CAPITAL RESOURCES (contd.)
      The Credit Facilities
 Existing Credit Facilities
   22




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##### Table of Contents



STATER BROS. HOLDINGS INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 LIQUIDITY AND CAPITAL RESOURCES (contd.)
 The Credit Facilities (contd.)
         23




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##### Table of Contents



STATER BROS. HOLDINGS INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 LIQUIDITY AND CAPITAL RESOURCES (contd.)
 The Credit Facilities (contd.)
  New Credit Facilities
 Markets Credit Agreement
      24




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##### Table of Contents



STATER BROS. HOLDINGS INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 LIQUIDITY AND CAPITAL RESOURCES (contd.)
 The Credit Facilities (contd.)
   Santee Credit Agreement
 ,
    25




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##### Table of Contents



STATER BROS. HOLDINGS INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 LIQUIDITY AND CAPITAL RESOURCES (contd.)
 The Credit Facilities (contd.)
   Labor Relations
    26




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##### Table of Contents



STATER BROS. HOLDINGS INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 RECENT ACCOUNTING PRONOUNCEMENTS
    CAUTIONARY STATEMENT FOR PURPOSES OF SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995.
  27




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##### Table of Contents



STATER BROS. HOLDINGS INC.
MARCH 25, 2007
 PART I    FINANCIAL INFORMATION (contd.)
 
 Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
  
 Item 4. CONTROLS AND PROCEDURES
    28




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##### Table of Contents



STATER BROS. HOLDINGS INC.
MARCH 25, 2007
 
 PART II  OTHER INFORMATION
 
 Item 1 . LEGAL PROCEEDINGS
   
 Item 1A. RISK FACTORS
    29




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##### Table of Contents



STATER BROS. HOLDINGS INC.
MARCH 25, 2007
 PART II  OTHER INFORMATION (contd.)
 
 Item 2 . UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 Item 3 . DEFAULTS UPON SENIOR SECURITIES
  
 Item 4 . SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 Item 5 . OTHER INFORMATION
  
 Item 6 . EXHIBITS
 (a)
    
    Exhibits31.1
    
    Certification of Principal Executive Officer pursuant to Section 302
(a) of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Principal Financial Officer pursuant to Section 302
(a) of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Principal Executive Officer and Principal Financial
Officer pursuant to18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
 30




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##### Table of Contents



STATER BROS. HOLDINGS INC.
 
   Date:  May 9, 2007
    /s/ Jack H. BrownJack H. BrownChairman of the Board, President,
and Chief Executive Officer
(Principal Executive Officer) Date:  May 9, 2007
    /s/ Phillip J. SmithPhillip J. SmithExecutive Vice President
and Chief Financial Officer
(Principal Financial Officer) 31