##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K
  þ
    
    ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended: September 27, 2009
 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 
organization)
    
    (IRS Employer Identification No.)301 S. Tippecanoe Avenue 
San Bernardino, California
    
    92408(Address of principal executive offices)
    
    (Zip Code)
 (909) 733-5000
 
 
 o þ
 o þ
 þ o
 þ o
 o o
  Large accelerated filer o
Accelerated filer o
Non-accelerated filer þ(Do not check if a smaller reporting company)Smaller reporting company o o þ
   DOCUMENTS INCORPORATED BY REFERENCE
 None




---



##### 



Page NumberPART IItem 1
    
    Business
    
    3Item 1A
    
    Risk Factors
    
    8Item 1B
    
    Unresolved Staff Comments
    
    9Item 2
    
    Properties
    
    9Item 3
    
    Legal Proceedings
    
    10Item 4
    
    Submission of Matters to a Vote of Security Holders
    
    11PART IIItem 5
    
    Market for the Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    11Item 6
    
    Selected Financial Data
    
    11Item 7
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    13Item 7A
    
    Quantitative and Qualitative Disclosure about Market Risk
    
    24Item 8
    
    Financial Statements and Supplementary Data
    
    25Item 9
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    25Item 9A
    
    Controls and Procedures
    
    25Item 9B
    
    Other Information
    
    26PART IIIItem 10
    
    Directors and Executive Officers of the Registrant
    
    27Item 11
    
    Executive Compensation
    
    29Item 12
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    38Item 13
    
    Certain Relationships and Related Transactions
    
    39Item 14
    
    Principal Accounting Fees and Services
    
    39PART IVItem 15
    
    Exhibits and Financial Statement Schedules
    
    40Signatures
    
    43EX-12.1EX-31.1EX-31.2EX-32.1
  2




---



##### Table of Contents



PART I
 
 Item 1. Business
 General
    Available Information
 http://www.sec.gov
 Ownership of the Company
  3




---



##### Table of Contents



Item 1. Business (contd.)
 Issuance of Debt and Early Extinguishment of Debt
   Store Profile and Locations
     Store Expansion and Remodeling
    4




---



##### Table of Contents



Item 1. Business (contd.)
 Store Expansion and Remodeling (contd.)
  Sept. 25,
    
    Sept. 24,
    
    Sept. 30,
    
    Sept. 28,
    
    Sept. 27,2005
    
    2006
    
    2007
    
    2008
    
    2009Number of supermarkets:Opened
    
    
    4
    
    
    
    3
    
    
    
    3
    
    
    
    1
    
    
    
    3Closed
    
    
    (1
    )
    
    
    (2
    )
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )Total at end of year
    
    
    161
    
    
    
    162
    
    
    
    164
    
    
    
    165
    
    
    
    167Minor remodel
    
    
    47
    
    
    
    34
    
    
    
    6
    
    
    
    3
    
    
    
    3Major remodel
    
    
    8
    
    
    
    14
    
    
    
    12
    
    
    
    10
    
    
    
    9
  Corporate Offices and Distribution Center
    5




---



##### Table of Contents



Item 1. Business (contd.)
 Purchasing and Marketing
   Retail Operations
  Store Management
 Customer Service
 6




---



##### Table of Contents



Item 1. Business (contd.)
 Santee Dairies, Inc
 ® ® ® ® ®
  Employees
    Competition
    7




---



##### Table of Contents



Item 1. Business (contd.)
 Financial Information about Segments
  Government Regulation
   Environmental
  
 Item 1A. Risk Factors
     8




---



##### Table of Contents



Item 1A. Risk Factors (contd.)
  
 Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
  SquareFeetGrocery goods
    
    
    1,078,000Refrigerated
    
    
    664,000Distribution support
    
    
    445,000Bread
    
    
    46,000Administrative offices
    
    
    176,000Total
    
    
    2,409,000
 9




---



##### Table of Contents



Item 2. Properties (contd.)
  No. of Stores
    
    Total Square FeetUnder
    
    25,000-
    
    30,000-
    
    35,000-
    
    OverCounty
    
    Total
    
    Owned
    
    Leased
    
    25,000
    
    29,999
    
    34,999
    
    40,000
    
    40,000San Bernardino
    
    
    52
    
    
    
    13
    
    
    
    39
    
    
    
    5
    
    
    
    16
    
    
    
    5
    
    
    
    14
    
    
    
    12Riverside
    
    
    47
    
    
    
    11
    
    
    
    36
    
    
    
    9
    
    
    
    13
    
    
    
    3
    
    
    
    5
    
    
    
    17Orange
    
    
    30
    
    
    
    11
    
    
    
    19
    
    
    
    4
    
    
    
    13
    
    
    
    1
    
    
    
    4
    
    
    
    8Los Angeles
    
    
    25
    
    
    
    8
    
    
    
    17
    
    
    
    3
    
    
    
    7
    
    
    
    1
    
    
    
    3
    
    
    
    11San Diego
    
    
    11
    
    
    
    5
    
    
    
    6
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    2
    
    
    
    8Kern
    
    
    2
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1
    
    
    
    Total
    
    
    167
    
    
    
    48
    
    
    
    119
    
    
    
    21
    
    
    
    50
    
    
    
    11
    
    
    
    29
    
    
    
    56
  
 Item 3. Legal Proceedings
    10




---



##### Table of Contents



Item 4. Submission of Matters to a Vote of Security Holders
  
 PART II
 
 Item 5.
Market for the Registrants Common Equity, Related Stockholder Matters And Issuer Purchases of Equity Securities
 (a)
    
    Market Information
  (b)
    
    Holders
 Authorized
    
    OutstandingCommon Stock
    
    
    100,000
    
    
    
    0Class A Common Stock
    
    
    100,000
    
    
    
    35,152
  (c)
    
    Dividends
   
 Item 6. Selected Financial Data
  Fiscal Year EndedSept. 25, (4)
    
    
    Sept. 24, (4)
    
    
    Sept. 30, (4)
    
    
    Sept. 28, (4)
    
    
    Sept. 27, (4)2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009(In thousands, except per share amounts)Statement of Earnings Data:Sales
    
    $
    3,372,844
    
    
    $
    3,508,794
    
    
    $
    3,674,427
    
    
    $
    3,741,254
    
    
    $
    3,766,040Cost of goods sold
    
    
    2,468,736
    
    
    
    2,578,435
    
    
    
    2,674,563
    
    
    
    2,743,074
    
    
    
    2,764,004Gross profit
    
    
    904,108
    
    
    
    930,359
    
    
    
    999,864
    
    
    
    998,180
    
    
    
    1,002,036Selling, general and administrative
expenses
    
    
    772,885
    
    
    
    790,756
    
    
    
    818,863
    
    
    
    829,697
    
    
    
    827,192Depreciation and amortization
    
    
    39,575
    
    
    
    46,642
    
    
    
    48,715
    
    
    
    52,987
    
    
    
    53,536Total operating expenses
    
    
    812,460
    
    
    
    837,398
    
    
    
    867,578
    
    
    
    882,684
    
    
    
    880,728Operating profit
    
    
    91,648
    
    
    
    92,961
    
    
    
    132,286
    
    
    
    115,496
    
    
    
    121,308Interest and other income
    
    
    5,402
    
    
    
    8,288
    
    
    
    13,927
    
    
    
    8,598
    
    
    
    1,194Interest expense
    
    
    (57,142
    )
    
    
    (57,238
    )
    
    
    (59,586
    )
    
    
    (57,464
    )
    
    
    (68,252
    )Interest expense related to purchase
of debt
    
    
    
    
    
    
    
    
    
    
    (3,953
    )
    
    
    
    
    
    
    Income before income taxes
    
    
    39,908
    
    
    
    44,011
    
    
    
    82,674
    
    
    
    66,630
    
    
    
    54,250Income taxes
    
    
    13,662
    
    
    
    17,945
    
    
    
    33,279
    
    
    
    26,000
    
    
    
    19,481Net income
    
    $
    26,246
    
    
    $
    26,066
    
    
    $
    49,395
    
    
    $
    40,630
    
    
    $
    34,769Earnings per average common shares
outstanding
    
    $
    685.26
    
    
    $
    697.21
    
    
    $
    1,356.19
    
    
    $
    1,136.03
    
    
    $
    989.10
 11




---



##### Table of Contents



Item 6. Selected Financial Data (contd.)
 Fiscal Year EndedSept. 25,(4)
    
    Sept. 24,(4)
    
    Sept. 30,(4)
    
    Sept. 28,(4)
    
    Sept. 27,(4)2005
    
    2006
    
    2007
    
    2008
    
    2009(In thousands, except per share amounts)Balance Sheet Data (end of fiscal year):Working capital
    
    $
    373,123
    
    
    $
    324,266
    
    
    $
    322,750
    
    
    $
    249,474
    
    
    $
    290,525Total assets
    
    
    1,055,369
    
    
    
    1,058,092
    
    
    
    1,270,278
    
    
    
    1,276,875
    
    
    
    1,314,735Long-term debt
    
    
    700,000
    
    
    
    700,000
    
    
    
    810,000
    
    
    
    810,000
    
    
    
    810,000Long-term capitalized lease obligations
    
    
    8,146
    
    
    
    7,245
    
    
    
    6,252
    
    
    
    5,104
    
    
    
    3,768Other long-term liabilities
    
    
    90,003
    
    
    
    82,021
    
    
    
    113,131
    
    
    
    113,125
    
    
    
    144,228Common stockholders equity (deficit)
    
    
    (13,395
    )
    
    
    (11,079
    )
    
    
    9,279
    
    
    
    40,506
    
    
    
    63,755Dividends paid per share, Class A
common stock
    
    $
    
    
    
    $
    135.52
    
    
    $
    139.78
    
    
    $
    142.24
    
    
    $
    Cash Flow Data:Cash provided by operating activities
    
    
    81,140
    
    
    
    87,254
    
    
    
    171,356
    
    
    
    57,947
    
    
    
    116,619Cash provided by (used in)
financing activities
    
    
    (930
    )
    
    
    (24,598
    )
    
    
    81,901
    
    
    
    (14,230
    )
    
    
    (1,149
    )Cash used in investing activities
    
    
    (118,760
    )
    
    
    (127,508
    )
    
    
    (174,740
    )
    
    
    (175,837
    )
    
    
    (63,498
    )Other Operating and Financial Data:Sales increases (decreases):Total sales
    
    
    (9.0
    )%
    
    
    4.0
    %
    
    
    4.7
    %
    
    
    1.8
    %
    
    
    0.7
    %Like stores sales (comparable
52-weeks)(1)
    
    
    (12.1
    )%
    
    
    1.5
    %
    
    
    1.7
    %
    
    
    2.5
    %
    
    
    0.0
    %Operating profit
    
    $
    91,648
    
    
    $
    92,961
    
    
    $
    132,286
    
    
    $
    115,496
    
    
    $
    121,308Ratio of earnings to fixed charges(2)
    
    
    1.47
    x
    
    
    1.47
    x
    
    
    1.77
    x
    
    
    1.61
    x
    
    
    1.58
    xGross profit as a percentage of sales
    
    
    26.81
    %
    
    
    26.52
    %
    
    
    27.21
    %
    
    
    26.68
    %
    
    
    26.61
    %Selling, general and administrative
expenses as a percentage of sales
    
    
    22.92
    %
    
    
    22.54
    %
    
    
    22.29
    %
    
    
    22.18
    %
    
    
    21.96
    %Store Data:(3)Number of stores (at end of fiscal year)
    
    
    161
    
    
    
    162
    
    
    
    164
    
    
    
    165
    
    
    
    167Average sales per store (000s)
    
    $
    20,404
    
    
    $
    20,937
    
    
    $
    21,860
    
    
    $
    21,961
    
    
    $
    21,945Average store size:Total square feet
    
    
    33,474
    
    
    
    33,778
    
    
    
    34,028
    
    
    
    34,178
    
    
    
    34,405Selling square feet
    
    
    23,872
    
    
    
    24,028
    
    
    
    24,165
    
    
    
    24,237
    
    
    
    24,340Total square feet (at end of
fiscal year) (000s)
    
    
    5,415
    
    
    
    5,491
    
    
    
    5,599
    
    
    
    5,644
    
    
    
    5,761Total selling square feet (at end of
fiscal year) (000s)
    
    
    3,860
    
    
    
    3,904
    
    
    
    3,972
    
    
    
    4,001
    
    
    
    4,072Sales per average square foot
    
    $
    610
    
    
    $
    620
    
    
    $
    642
    
    
    $
    643
    
    
    $
    638Sales per average selling square foot
    
    $
    855
    
    
    $
    871
    
    
    $
    905
    
    
    $
    906
    
    
    $
    902
 
 (1)
    
    We calculate like store sales by comparing year-to-year sales for stores
that are opened in both years. For stores that were not opened for the entire previous
year, we only use the current years weekly sales that correspond to the weeks the stores
were open in the previous year. For replacement store sales, we include sales for the
entire year in the like store sales calculation. For stores that were closed during the
year, we only include prior year sales that correspond to the week the stores were opened
in the current year. (footnotes continued on following page)
 12




---



##### Table of Contents



Item 6. Selected Financial Data (contd.)
 (2)
    
    For the purpose of determining the ratio of earnings to fixed charges, earnings consist
of income before income taxes and amortization of previously capitalized interest. Fixed
charges consist of interest expense whether expensed or capitalized, amortization of debt
issuance costs, and such portion of rental expense as can be deemed by management to be
representative of the interest factor in the particular case.(3)
    
    Average sales per store, sales per total square feet and sales per selling square feet
are calculated by prorating the number of stores, total square feet and selling square feet
by the period of time the store was opened, for new stores, or the period of time the
expanded square footage was in service, for expanded stores.(4)
    
    Fiscal years 2005, 2006, 2008 and 2009 were 52-week years while fiscal 2007 was a 53-week
year. 
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Critical Accounting Policies
  Self-Insurance Reserves
  Employee Benefit Plans
  13




---



##### Table of Contents



Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations (contd.)
 Employee Benefit Plans (contd.)
   Long-Lived Assets
   Income Taxes
  14




---



##### Table of Contents



Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations (contd.)
 Critical Accounting Policies (contd.)
 Gift Cards
  Significant Accounting Policies
  15




---



##### Table of Contents



Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations (contd.)
 Ownership of the Company
  Executive Overview
      16




---



##### Table of Contents



Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations (contd.)
 Results of Operations
 Sales and Cost of Sales (in thousands)
 Fiscal Year Ended
    
    Change2008 to
    
    2009 toSept. 30,
    
    Sept. 28,
    
    Sept. 27,
    
    2007
    
    20082007
    
    2008
    
    2009
    
    Dollar
    
    %
    
    Dollar
    
    %Sales
    
    $
    3,674,427
    
    
    $
    3,741,254
    
    
    $
    3,766,040
    
    
    $
    66,827
    
    
    
    1.82
    %
    
    $
    24,786
    
    
    
    0.66
    %Gross Profit
    
    $
    999,864
    
    
    $
    998,180
    
    
    $
    1,002,036
    
    
    $
    (1,684
    )
    
    
    (0.17
    )%
    
    $
    3,856
    
    
    
    0.39
    %as a % of sales
    
    
    27.21
    %
    
    
    26.68
    %
    
    
    26.61
    %
 Sales
 rd
 Like Store Sales
     Santee Sales
  17




---



##### Table of Contents



Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations (contd.)
 Results of Operations (contd.)
 Gross Profit
   Operating Expenses and Income (in thousands)
 Fiscal Year Ended
    
    Change2008 to
    
    2009 toSept. 30,
    
    Sept. 28,
    
    Sept. 27,
    
    2007
    
    20082007
    
    2008
    
    2009
    
    Dollar
    
    %
    
    Dollar
    
    %Operating Expenses:Selling, general and
administrative
expenses
    
    $
    818,863
    
    
    $
    829,697
    
    
    $
    827,192
    
    
    $
    10,834
    
    
    
    1.32
    %
    
    $
    (2,505
    )
    
    
    (0.30
    )%as a % of sales
    
    
    22.28
    %
    
    
    22.17
    %
    
    
    21.97
    %Depreciation and amortization
    
    $
    48,715
    
    
    $
    52,987
    
    
    $
    53,536
    
    
    $
    4,272
    
    
    
    8.77
    %
    
    $
    549
    
    
    
    1.04
    %as a % of sales
    
    
    1.33
    %
    
    
    1.42
    %
    
    
    1.42
    %Operating profit
    
    $
    132,286
    
    
    $
    115,496
    
    
    $
    121,308
    
    
    $
    (16,790
    )
    
    
    (12.69
    )%
    
    $
    5,812
    
    
    
    5.03
    %as a % of sales
    
    
    3.60
    %
    
    
    3.09
    %
    
    
    3.22
    %
 Selling, General and Administrative Expenses
    18




---



##### Table of Contents



Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations (contd.)
 Results of Operations (contd.)
 Depreciation and Amortization
  Interest Income
  Interest Expense
  Interest Expense Related to Purchase of Debt
  Income Before Income Taxes
  Income Taxes
  Net Income
  19




---



##### Table of Contents



Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations (contd.)
 Liquidity and Capital Resources
        20




---



##### Table of Contents



Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations (contd.)
 Liquidity and Capital Resources (contd.)
  Expected Capital Expenditures Fiscal 2010
 Store remodels
    
    $
    15,185MIS equipment and software
    
    
    8,800Store equipment
    
    
    8,026Transportation equipment
    
    
    2,451Distribution equipment
    
    
    805Office equipment and other
    
    
    77$
    35,344
  Credit Facilities
 Markets Credit Facility
     21




---



##### Table of Contents



Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations (contd.)
 Credit Facilities (contd.)
 Markets Credit Facility (contd.)
   Santees Revolver
       Labor Relations
   Off-Balance Sheet Arrangements
  22




---



##### Table of Contents



Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations (contd.)
 Tabular Disclosure of Contractual Cash Obligations
  Contractual Cash Obligations(in thousands)Less than
    
    
    
    
    
    
    
    
    
    
    AfterTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    4-5 Years
    
    
    5 Years8.125% Senior Notes due 2012Principal
    
    $
    525,000
    
    
    $
    
    
    
    $
    525,000
    
    
    $
    
    
    
    $
    Interest
    
    
    127,969
    
    
    
    42,656
    
    
    
    85,313
    
    
    
    
    
    
    
    652,969
    
    
    
    42,656
    
    
    
    610,313
    
    
    
    
    
    
    
    7.75% Senior Notes due 2015Principal
    
    
    285,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    285,000Interest
    
    
    132,526
    
    
    
    22,088
    
    
    
    44,175
    
    
    
    44,175
    
    
    
    22,088417,526
    
    
    
    22,088
    
    
    
    44,175
    
    
    
    44,175
    
    
    
    307,088Capital lease obligations (1)Principal
    
    
    5,104
    
    
    
    1,336
    
    
    
    2,669
    
    
    
    1,099
    
    
    
    Interest
    
    
    1,747
    
    
    
    758
    
    
    
    829
    
    
    
    160
    
    
    
    6,851
    
    
    
    2,094
    
    
    
    3,498
    
    
    
    1,259
    
    
    
    Operating leases (1)
    
    
    357,969
    
    
    
    37,185
    
    
    
    64,888
    
    
    
    50,936
    
    
    
    204,960Total contractual cash obligations
    
    $
    1,435,315
    
    
    $
    104,023
    
    
    $
    722,874
    
    
    $
    96,370
    
    
    $
    512,048Other Commercial Commitments(in thousands)Less than
    
    
    
    
    
    
    
    
    
    
    AfterTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    4-5 Years
    
    
    5 YearsStandby letters of credit (2)
    
    $
    49,762
    
    
    $
    49,762
    
    
    $
    
    
    
    $
    
    
    
    $
    Total other commercial commitments
    
    $
    49,762
    
    
    $
    49,762
    
    
    $
    
    
    
    $
    
    
    
    $
    
 
 (1)
    
    We lease the majority of our retail stores. We have subleased our former headquarters
buildings and certain former distribution facilities located in Colton, California under an
initial 15 year term for an amount equal to our lease payments. For purposes of contractual
cash obligation shown here, minimum lease payments on this lease are shown without
sub-lease offset. 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.(2)
    
    Standby letters of credit are committed as security for workers compensation. Outstanding
letters of credit expire between December 2009 and October 2010. 23




---



##### Table of Contents



Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations (contd.)
 Recent Accounting Pronouncements
  Cautionary Statement
  
 Item 7A. Quantitative and Qualitative Disclosure about Market Risk
  Expected Year of Maturity(In thousands)Fair2010
    
    2011
    
    2012
    
    2013
    
    2014
    
    Thereafter
    
    ValueLong-term debt and
capital lease
obligations
    
    $
    1,336
    
    
    $
    1,562
    
    
    $
    526,107
    
    
    $
    799
    
    
    $
    300
    
    
    $
    285,000
    
    
    $
    811,206Average interest rate
    
    
    8.04
    %
    
    
    8.03
    %
    
    
    7.99
    %
    
    
    7.78
    %
    
    
    7.75
    %
    
    
    7.75
    %
 24




---



##### Table of Contents



Item 8. Financial Statements and Supplementary Data
  INDEX TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
 Page NumberReport of Independent Registered Public Accounting Firm
    
    F-2Consolidated Balance Sheets at September 28, 2008
and September 27, 2009
    
    F-3Fiscal years ended September 30, 2007, September 28, 2008
and September 27, 2009:Consolidated Statements of Income
    
    F-5Consolidated Statements of Cash Flows
    
    F-6Consolidated Statements of Stockholders Equity (Deficit)
    
    F-7Notes to Consolidated Financial Statements
    
    F-8
 
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A. Controls and Procedures
 Disclosure Controls and Procedures
  Changes in Internal Controls Over Financial Reporting
  25




---



##### Table of Contents



Item 9A. Controls and Procedures (contd.)
 Managements Report on Internal Control Over financial Reporting
      Attestation Report of Independent Registered Public Accounting Firm
  
 Item 9B. Other Information
  26




---



##### Table of Contents



PART III
 
 Item 10. Directors and Executive Officers of the Registrant
  Name
    
    Age
    
    PositionJack H. Brown
    
    
    71
    
    
    Chairman of the Board, President and Chief Executive OfficerPhillip J. Smith
    
    
    62
    
    
    Executive Vice President and Chief Financial OfficerJames W. Lee
    
    
    58
    
    
    President and Chief Operating Officer of MarketsDennis L. McIntyre
    
    
    49
    
    
    Executive Vice President of Marketing of MarketsGeorge A. Frahm
    
    
    56
    
    
    Executive Vice President of Retail Operations and Administration of MarketsBruce D. Varner
    
    
    73
    
    
    Director and SecretaryThomas W. Field, Jr.
    
    
    76
    
    
    Vice Chairman of the Board of DirectorsRonald G. Skipper
    
    
    69
    
    
    Director
 Background of Directors and Executive Officers
 Jack H. Brown
 Phillip J. Smith
 James W. Lee
 27




---



##### Table of Contents



Item 10. Directors and Executive Officers of the Registrant (contd.)
 Background of Directors and Executive Officers (contd.)
 Dennis L. McIntyre
 George A. Frahm
 Bruce D. Varner
 Thomas W. Field, Jr.
 Ronald G. Skipper
 Director Compensation
  Annual Board Retainer
  Meeting Fees
  28




---



##### Table of Contents



Item 10. Directors and Executive Officers of the Registrant (contd.)
 Director Compensation For fiscal Year 2009
 Director
    
    MeetingName
    
    Fees
    
    Fees
    
    TotalThomas W. Field, Jr.
    
    $
    50,000
    
    
    $
    4,000
    
    
    $
    54,000Bruce D. Varner
    
    $
    50,000
    
    
    $
    4,000
    
    
    $
    54,000Ronald G. Skipper
    
    $
    50,000
    
    
    $
    4,000
    
    
    $
    54,000
  
 Item 11. Executive Compensation
 Compensation Discussion and Analysis
     29




---



##### Table of Contents



Item 11. Executive Compensation (contd.)
 Compensation Discussion and Analysis (contd.)
 Salary
  Bonus
  Deferred Compensation
 .
 Retirement Benefits
  30




---



##### Table of Contents



Item 11. Executive Compensation (contd.)
 Compensation Discussion and Analysis (contd.)
 Other Benefits
  Employment and Severance Agreements
  Deductibility of Compensation
  Compensation Committee Report
  31




---



##### Table of Contents



Item 11. Executive Compensation (contd.)
  Change inPensionValue andNon-qual.
    
    All OtherDef. Comp
    
    CompensationName & Principal Position
    
    Year
    
    Salary
    
    Bonus (1)
    
    Earnings (2)
    
    (3)
    
    TotalJack H. BrownChairman, President and
    
    
    2009
    
    
    $
    1,901,365
    
    
    $
    
    
    
    $
    227,755
    
    
    $
    51,500
    
    
    $
    2,180,620Chief Executive Officer
    
    
    2008
    
    
    $
    1,847,233
    
    
    $
    1,700,000
    
    
    $
    (108,506
    )
    
    $
    51,000
    
    
    $
    3,489,7272007
    
    
    $
    1,651,058
    
    
    $
    2,900,000
    
    
    $
    (45,249
    )
    
    $
    51,500
    
    
    $
    4,557,309Phillip J. SmithExecutive Vice President and
    
    
    2009
    
    
    $
    356,715
    
    
    $
    
    
    
    $
    1,187,697
    
    
    $
    
    
    
    $
    1,544,412Chief Financial Officer
    
    
    2008
    
    
    $
    346,160
    
    
    $
    100,000
    
    
    $
    977,318
    
    
    $
    
    
    
    $
    1,423,4782007
    
    
    $
    310,714
    
    
    $
    145,000
    
    
    $
    618,540
    
    
    $
    
    
    
    $
    1,074,254James W. LeePresident and Chief Operating
    
    
    2009
    
    
    $
    406,301
    
    
    $
    
    
    
    $
    766,141
    
    
    $
    
    
    
    $
    1,172,442Officer of Markets
    
    
    2008
    
    
    $
    400,169
    
    
    $
    100,000
    
    
    $
    672,738
    
    
    $
    
    
    
    $
    1,172,9072007
    
    
    $
    373,365
    
    
    $
    150,000
    
    
    $
    750,667
    
    
    $
    250,000
    
    
    $
    1,524,032Dennis L. McIntyreExecutive Vice President of
    
    
    2009
    
    
    $
    358,730
    
    
    $
    
    
    
    $
    641,236
    
    
    $
    
    
    
    $
    999,966Marketing of Markets
    
    
    2008
    
    
    $
    347,529
    
    
    $
    85,000
    
    
    $
    480,960
    
    
    $
    
    
    
    $
    913,4892007
    
    
    $
    313,708
    
    
    $
    115,000
    
    
    $
    496,649
    
    
    $
    250,000
    
    
    $
    1,175,357George A. FrahmExecutive Vice President of Retail
    
    
    2009
    
    
    $
    302,581
    
    
    $
    
    
    
    $
    565,773
    
    
    $
    
    
    
    $
    868,354Operations and Administration of
    
    
    2008
    
    
    $
    292,283
    
    
    $
    55,000
    
    
    $
    384,169
    
    
    $
    
    
    
    $
    731,452Markets
    
    
    2007
    
    
    $
    256,482
    
    
    $
    85,000
    
    
    $
    427,273
    
    
    $
    
    
    
    $
    768,755
 
 (1)
    
    There will be no annual bonuses paid to the named executive officers for fiscal 2009.(2)
    
    The amount shown represents the change in pension value and change in nonqualified deferred
compensation during fiscal 2009, fiscal 2008 and fiscal year 2007, respectively.(3)
    
    The value of perquisites and other benefits is only included here if the aggregate amount of
such compensation for a named executive officer is greater than $10,000. Mr. Brown is a
Director of Holdings and amount shown is the Director fees paid
during fiscal 2009 of $51,500, fiscal 2008 of $51,000 and fiscal year 2007 of $51,500. Amounts
shown for Mr. Lee and Mr. McIntyre represent a one-time withdrawal from their deferred
compensation plan account. 32




---



##### Table of Contents



Item 11. Executive Compensation (contd.)
  Number of
    
    Present Value
    
    PaymentsYears of
    
    of Accum
    
    During LastName
    
    Plan Name
    
    Credited Service
    
    Benefit
    
    Fiscal YearJack H. Brown 
Chairman, President and
    
    Pension Plan forChief Executive Officer
    
    Salaried Employees
    
    
    28
    
    
    $
    1,495,213
    
    
    $
    Phillip J. Smith 
Executive Vice President and
    
    Pension Plan forChief Financial Officer
    
    Salaried Employees
    
    
    23
    
    
    $
    606,935
    
    
    $
    James W. Lee 
President and Chief Operating
    
    Pension Plan forOfficer of Markets
    
    Salaried Employees
    
    
    7
    
    
    $
    184,154
    
    
    $
    Dennis L. McIntyre 
Executive Vice President of
    
    Pension Plan forMarketing of Markets
    
    Salaried Employees
    
    
    32
    
    
    $
    243,155
    
    
    $
    George A. Frahm 
Executive Vice President of Retail
    
    Pension Plan forOperations and Administration of
Markets
    
    Salaried Employees
    
    
    33
    
    
    $
    384,672
    
    
    $
    
 33




---



##### Table of Contents



Item 11. Executive Compensation (contd.)
  Executive
    
    Registrant
    
    Aggregate
    
    Aggregate
    
    AggregateContributions in
    
    Contributions in
    
    Earnings
    
    Withdrawals
    
    Balance atName
    
    Last FY
    
    Last FY (1)
    
    in Last FY
    
    /Distributions (2)
    
    Last FYE (3)Jack H. Brown 
Chairman, President and
Chief Executive Officer
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Phillip J. Smith 
Executive Vice President and
Chief Financial Officer
    
    $
    
    
    
    $
    994,976
    
    
    $
    
    
    
    $
    300,000
    
    
    $
    5,217,368James W. Lee 
President and Chief Operating
Officer of Markets
    
    $
    
    
    
    $
    686,345
    
    
    $
    
    
    
    $
    250,000
    
    
    $
    3,815,882Dennis L. McIntyre 
Executive Vice President
of Marketing of Markets
    
    $
    
    
    
    $
    525,944
    
    
    $
    
    
    
    $
    250,000
    
    
    $
    3,333,864George A. Frahm 
Executive Vice President of Retail
Operations and Administration of Markets
    
    $
    
    
    
    $
    413,373
    
    
    $
    
    
    
    $
    150,000
    
    
    $
    2,316,349
 
 (1)
    
    These amounts represent the Companys contribution in fiscal year 2009 to the named
executive officers deferred compensation. This includes 20% vesting for units awarded
prior to fiscal year 2009 to Mr. Lee, Mr. Smith, Mr. McIntyre and Mr. Frahm and
appreciation of 68% for units issued prior to 2009; and 10% vesting and 39%
appreciation for units issued in March 2009.(2)
    
    These amounts represent the one-time withdrawals of half the stated value of some of
the vested units in the deferred compensation plan. The stated value of each unit is $20.(3)
    
    The aggregate balance represents each named executive officers deferred compensation
balance as of September 27, 2009. This balance represents the vested portion of all units
plus appreciation, less any withdrawals. 34




---



##### Table of Contents



Item 11. Executive Compensation (contd.)
 POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
  TERMINATION
    
    
    CHANGE IN CONTROLDeferred
    
    Health &Severance Pay
    
    
    Salary & Bonus
    
    Compensation
    
    WelfareName & Principal Position
    
    (1)
    
    
    (2)
    
    (3)
    
    (4)
    
    TotalJack H. Brown 
Chairman, President and
Chief Executive Officer
    
    $
    438,777
    
    
    
    $
    20,621,023
    
    
    $
    
    
    
    $
    74,276
    
    
    $
    20,695,299Phillip J. Smith 
Executive Vice President and
Chief Financial Officer
    
    $
    82,319
    
    
    
    $
    1,511,727
    
    
    $
    5,707,368
    
    
    $
    28,368
    
    
    $
    7,247,463James W. Lee 
President and Chief Operating
Officer of Markets
    
    $
    93,762
    
    
    
    $
    1,675,856
    
    
    $
    4,147,882
    
    
    $
    28,368
    
    
    $
    5,852,106Dennis L. McIntyre 
Executive Vice President of
Marketing of Markets
    
    $
    82,784
    
    
    
    $
    1,468,746
    
    
    $
    3,573,864
    
    
    $
    44,565
    
    
    $
    5,087,175George A. Frahm 
Executive Vice President of Retail
Operations and Administration of
Markets
    
    $
    69,826
    
    
    
    $
    1,183,593
    
    
    $
    2,518,349
    
    
    $
    28,368
    
    
    $
    3,730,310
 
 (1)
    
    Termination of employment by Mr. Brown or by the Board of Directors with the consent
of Mr. Brown entitles named executive officers to two weeks of severance pay for every
year of service to Markets, up to a maximum of twelve weeks. Severance Pay outlined above
represents 12 weeks of pay for Messrs. Brown, Smith, Lee, McIntyre and Frahm.(2)
    
    Per each named executive officers employment and severance agreements, the salary
and bonus payable with a change in control represents the sum of five times the base
salary and five times the incentive bonus for Mr. Brown and the sum of three times the
base salary and three times the incentive bonus for Messrs. Smith, Lee, McIntyre and Frahm
with an estimated increase of 10% per year.(3)
    
    At a change in control, the named executive officer is entitled to the full vested
value and appreciation of all deferred compensation, less any withdrawals. The amounts
above reflect values as of September 27, 2009.(4)
    
    Represents continued group health benefits (medical, dental and vision) for the
executives and current dependents for a period of up to 5 years for Mr. Brown and 3 years
for Messrs. Smith, Lee, McIntyre and Frahm. 35




---



##### Table of Contents



Item 11. Executive Compensation (contd.)
 Stock Options and SARs
  Pension Plan
   Pension Plan TableYears of ServiceRemuneration
    
    15
    
    20
    
    25
    
    30
    
    35$
    50,000
    
    
    $
    5,625
    
    
    $
    7,500
    
    
    $
    9,375
    
    
    $
    11,250
    
    
    $
    13,12575,000
    
    
    
    10,328
    
    
    
    13,770
    
    
    
    17,213
    
    
    
    20,655
    
    
    
    24,098100,000
    
    
    
    18,390
    
    
    
    24,520
    
    
    
    30,650
    
    
    
    36,780
    
    
    
    42,910125,000
    
    
    
    26,453
    
    
    
    35,270
    
    
    
    44,088
    
    
    
    52,905
    
    
    
    61,723150,000
    
    
    
    34,515
    
    
    
    46,020
    
    
    
    57,525
    
    
    
    69,030
    
    
    
    80,535175,000
    
    
    
    42,578
    
    
    
    56,770
    
    
    
    70,963
    
    
    
    85,155
    
    
    
    99,348200,000
    
    
    
    50,640
    
    
    
    67,520
    
    
    
    84,400
    
    
    
    101,280
    
    
    
    118,160225,000
    
    
    
    58,703
    
    
    
    78,270
    
    
    
    97,838
    
    
    
    117,405
    
    
    
    136,973230,000
    
    
    
    60,315
    
    
    
    80,420
    
    
    
    100,525
    
    
    
    120,630
    
    
    
    140,735
 Employment Agreements
   36




---



##### Table of Contents



Item 11. Executive Compensation (contd.)
 Deferred Compensation Plan
   Board of Directors
    Code of Ethics
  37




---



##### Table of Contents



Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
  Shares ofClass A
    
    Percentage ofCommon Stock
    
    Class AName and Address of
    
    Beneficially
    
    Common StockBeneficial Owner
    
    Owned
    
    OutstandingLa Cadena(1)
    
    
    35,152
    
    
    
    100
    %Jack H. Brown(1)(2)
    
    
    35,152
    
    
    
    100
    %Phillip J. Smith(2)
    
    
    
    
    
    
    James W. Lee(2)
    
    
    
    
    
    
    Dennis L. McIntyre(2)George A. Frahm(2)Thomas W. Field, Jr.(2)
    
    
    
    
    
    
    Bruce D. Varner(2)
    
    
    
    
    
    
    Ronald G. Skipper(2)
    
    
    
    
    
    
    All Directors and executive officers
as a group (8 persons)(1)
    
    
    35,152
    
    
    
    100
    %
 
 (1)
    
    The 35,152 outstanding shares of Holdings Class A Common Stock are owned by La Cadena
and may be deemed to be beneficially owned by the partners of La Cadena. The sole equity
partner of La Cadena is The Jack H. Brown Revocable Trust. Mr. Browns Trust has the sole
voting interest and Mr. Brown is the Managing General Partner of La Cadena with the power to
vote the shares of Holdings owned by La Cadena on all matters. The address of La Cadena is
3750 University Avenue, Suite 610, Riverside, California 92501.(2)
    
    The address of Messrs. Brown, Smith, Lee, McIntyre, Frahm, Field, Varner and Skipper is
c/o Stater Bros. at 301 S. Tippecanoe Avenue, San Bernardino, California 92408. Change of Control Arrangements
  38




---



##### Table of Contents



Item 13. Certain Relationships and Related
 Transactions
    
 Item 14.
Independent Registered Public Accounting Firm Fees and Services
 Audit Fees
  Audit Related Fees
  Tax Fees
  All Other Fees
  39




---



##### Table of Contents



PART IV
 
 Item 15. Exhibits and Financial Statement Schedules
 (a)
    
    Document list
 (1)
    
    Financial StatementsSee Financial Statement Index included in Item 8 of Part II of this Form 10-K.(2)
    
    Financial Statement SchedulesThe Financial Statement Schedules required by Item 15(d) for which provision is
made in the applicable accounting regulations of the Securities and Exchange
Commission, are not required under the related instructions or are inapplicable
and therefore, have been omitted.(3)
    
    ExhibitsExhibits as required by Item 15(c) are as follows:
 EXHIBIT NO.
    
    
    
    
    
    DESCRIPTION3.1
    
    
    (1
    )
    
    Certificate of Incorporation of Stater Bros. Holdings Inc.3.2
    
    
    (1
    )
    
    By-Laws of Stater Bros. Holdings Inc.3.3
    
    
    (1
    )
    
    Articles of Incorporation of Stater Bros. Markets3.4
    
    
    (1
    )
    
    By-Laws of Stater Bros. Markets3.5
    
    
    (1
    )
    
    Articles of Incorporation of Stater Bros. Development, Inc.3.6
    
    
    (1
    )
    
    By-Laws of Stater Bros. Development, Inc.3.7
    
    
    (1
    )
    
    Articles of Incorporation of Santee Dairies, Inc3.8
    
    
    (1
    )
    
    By-Laws of Santee Dairies, Inc.3.9
    
    
    (2
    )
    
    Articles of Incorporation of Super Rx, Inc.3.10
    
    
    (2
    )
    
    By-Laws of Super Rx, Inc.4.1
    
    
    (1
    )
    
    Indenture dated as of June 17, 2004 among
Stater Bros. Holdings Inc. as Issuer, Stater Bros. Markets, Stater
Bros. Development, Inc. and Santee Dairies Inc., as Guarantors, and The
Bank of New York, as Trustee4.2
    
    
    (1
    )
    
    Specimen Form of Fixed Rate Global Note4.3
    
    
    (3
    )
    
    Supplemental Indenture dated as of April 16,
2007 among Stater Bros. Holdings Inc., Stater Bros. Markets, Santee
Dairies, Inc., Stater Bros. Development, Inc., Super Rx, Inc. and The
Bank of New York Trust Company, N.A. (as successor in interest to The
Bank of New York), as Trustee4.4
    
    
    (4
    )
    
    Indenture dated as of April 18, 2007, between
Stater Bros. Holdings Inc., Stater Bros. Markets, Stater Bros.
Development Inc., Super Rx, Inc., Santee Dairies, Inc. and The Bank of
New York Trust Company, N.A.
 40




---



##### Table of Contents



Item 15. Exhibits and Financial Statement Schedules (contd.)
 (a)(3)
    
    Exhibits (contd.)
 EXHIBIT NO.
    
    
    
    
    
    DESCRIPTION4.5
    
    
    (4
    )
    
    Registration Rights Agreement, dated as of
April 18, 2007, between Stater Bros. Holdings Inc., Stater Bros.
Markets, Stater Bros. Development, Inc., Super Rx, Inc., Santee
Dairies, Inc. and Banc of America Securities LLC4.6
    
    
    (4
    )
    
    Restricted 144A Global Note4.7
    
    
    (4
    )
    
    Restricted Temporary Regulations S Global Note5.1
    
    
    (11
    )
    
    Opinion of Gibson, Dunn & Crutcher LLP10.1
    
    
    (5
    )
    
    Amended and restated Sublease Agreement dated
June 1, 1983, between Wren Leasing Corp., as Lessor, and Stater Bros.
Markets, as Lessee10.2
    
    
    (6
    )
    
    Employment contract dated June 1, 2000 by and
between Stater Bros. Markets and Jack H. Brown10.3
    
    
    (7
    )
    
    Employment contract dated June 1, 2000 by and
between Stater Bros. Markets and Phillip J. Smith10.4
    
    
    (8
    )
    
    Employment contract dated June 1, 2000 by and
between Stater Bros. Markets and Dennis L. McIntyre10.6
    
    
    (8
    )
    
    Employment contract dated August 1, 2002 by
and between Stater Bros. Markets and James W. Lee10.7
    
    
    (11
    )
    
    Employment contract dated May 16, 2000 by and
between Stater Bros. Markets and George A. Frahm10.8
    
    
    (11
    )
    
    Amendment to employment contract dated July
1, 2000 by and between Stater Bros. Markets and George A. Frahm10.9
    
    
    (9
    )
    
    Owner Participation Agreement, dated as of
April 14, 2004 between Stater Bros. Markets and the Inland Valley
Development Agency10.10
    
    
    (9
    )
    
    Development Parcel Disposition Agreement,
dated as of June 16, 2004 between Stater Bros. Markets and Hillwood/San
Bernardino, LLC10.11
    
    
    (10
    )
    
    Amendment No. 1 to Amended and Restated
Stater Bros. Holdings Inc. Phantom Stock Plan dated September 30, 200510.12
    
    
    (4
    )
    
    Second Amended and Restated Credit Agreement,
dated as of April 16, 2007, by and among Stater Bros. Markets, Stater
Bros. Holdings Inc., and Bank of America, N.A.10.13
    
    
    (4
    )
    
    Second Amended and Restated Business Loan
Agreement (Receivables) dated as of April 16, 2007, by and among Santee
Dairies, Inc., as Borrower, Bank of America, N.A., as Lender, and
Stater Bros. Markets, as guarantor.10.14
    
    
    (11
    )
    
    Subsidiary Guaranty entered into as of April
16, 2007 by Stater Bros. Holdings Inc., Stater Bros. Development, Inc.,
Santee Dairies, Inc. and Super Rx, Inc.10.15
    
    
    (11
    )
    
    Amended and Restated Stater Bros. Holdings
Inc. Phantom Stock Plan dated December 18, 2002
 41




---



##### Table of Contents



Item 15. Exhibits and Financial Statement Schedules (contd.)
 (a)(3)
    
    Exhibits (contd.)
 EXHIBIT NO.
    
    
    
    
    
    DESCRIPTION10.16
    
    
    (11
    )
    
    Amendment No. 2 to amended and restated
Stater Bros. Holdings Inc. Phantom Stock Plan dated May 15, 200612.1
    
    
    (12
    )
    
    Computation of ratio of earnings to fixed charges.14.1
    
    
    (11
    )
    
    Copy of Key Personnel Code of Ethics.21.1
    
    
    (1
    )
    
    Subsidiaries of Stater Bros. Holdings Inc.21.2
    
    
    (2
    )
    
    Subsidiaries of Stater Bros. Markets31.1
    
    
    (12
    )
    
    Certification of Principal Executive Officer
pursuant to Section 302 (a) of the Sarbanes-Oxley Act of 2002.31.2
    
    
    (12
    )
    
    Certification of Principal Financial Officer
pursuant to Section 302 (a) of the Sarbanes-Oxley Act of 2002.32.1
    
    
    (12
    )
    
    Certification of Principal Executive Officer
and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 (1)
    
    Previously filed with the Securities and Exchange
Commission as an exhibit to the Registration Statement S-4 No.
33-118436 dated August 27, 2004, as amended(2)
    
    Previously filed with the Securities and Exchange
Commission as an exhibit to the Annual report on Form 10-K for the
fiscal year ended September 25, 2005(3)
    
    Previously filed with the Securities and Exchange
Commission as an exhibit to the Current Report on form 8-k dated April
17, 2007(4)
    
    Previously filed with the Securities and Exchange
Commission as an exhibit to the Current Report on Form 8-K dated April
20, 2007(5)
    
    Previously filed with the Securities and Exchange
Commission as an exhibit to the Registration Statement S-4 No. 33-77296
dated July 21, 1994(6)
    
    Previous filed with the Securities and Exchange
Commission as exhibits to Registrants Quarterly report on Form 10-Q
dated June 25, 2000 and filed on August 9, 2000(7)
    
    Previously filed with the Securities and Exchange
Commission as exhibits with the Annual Report on Form 10-K for the
fiscal year ended September 24, 2000(8)
    
    Previously filed with the Securities and Exchange
Commission as exhibits with the Annual Report on Form 10-K for the
fiscal year ended September 29, 2002(9)
    
    Incorporated by reference to Exhibit 10.35 to the
Quarterly Report on Form 10-Q for the quarter ended June 27, 2004(10)
    
    Previously filed with the Securities and Exchange
Commission as an exhibit to the Annual Report on Form 10-K for the
fiscal year ended September 25, 2005(11)
    
    Previously filed with the Securities and Exchange
Commission as an exhibit to the Registration Statement S-4 No.
33-0350671 dated July 24, 2007(12)
    
    Filed with the Securities and Exchange Commission
as exhibits with the Annual Report on Form 10-K for the fiscal year
ended September 28, 2008 42




---



##### Table of Contents



December 17, 2009     
            Date
    Stater Bros. Holdings Inc.By:
    /s/ Jack H. BrownJack H. BrownChairman of the Board,
President and Chief
Executive Officer  Signature
    
    Title
    
    Date/s/ Jack H. Brown

Jack H. Brown
    
    Chairman of the Board, President and
Chief Executive Officer and Director
(Principal Executive Officer)
    
    December 17, 2009/s/ Thomas W. Field, Jr.

Thomas W. Field, Jr.
    
    Vice Chairman of the Board
and Director
    
    December 17, 2009/s/ Ronald G. Skipper

Ronald G. Skipper
    
    Director
    
    December 17, 2009/s/ Bruce D. Varner

Bruce D. Varner
    
    Secretary and Director
    
    December 17, 2009/s/ Phillip J. Smith

Phillip J. Smith
    
    Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
    
    December 17, 2009
 43




---



##### Table of Contents



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 Page NumberReport of Independent Registered Public Accounting Firm
    
    F-2Consolidated Balance Sheets at September 28, 2008
and September 27, 2009
    
    F-3Fiscal years ended September 30, 2007, September 28, 2008
and September 27, 2009:Consolidated Statements of Income
    
    F-5Consolidated Statements of Cash Flows
    
    F-6Consolidated Statements of Stockholders Equity (Deficit)
    
    F-7Notes to Consolidated Financial Statements
    
    F-8
 F-1




---



##### Table of Contents



F-2




---



##### Table of Contents



STATER BROS. HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
 ASSETS
 Sept. 28,
    
    
    Sept. 27,2008
    
    
    2009Current assetsCash and cash equivalents
    
    $
    144,942
    
    
    $
    196,914Restricted cash
    
    
    5,621
    
    
    
    3,121Receivables, net of allowance of $840 and $759
    
    
    40,198
    
    
    
    36,671Income tax receivables
    
    
    4,636
    
    
    
    4,049Inventories
    
    
    230,218
    
    
    
    212,856Prepaid expenses
    
    
    8,826
    
    
    
    9,330Deferred income taxes
    
    
    27,999
    
    
    
    29,809Assets held for sale
    
    
    95,174
    
    
    
    90,459Note receivable, current portion
    
    
    
    
    
    
    300Total current assets
    
    
    557,614
    
    
    
    583,509Property and equipmentLand
    
    
    95,144
    
    
    
    97,430Buildings and improvements
    
    
    529,993
    
    
    
    544,440Store fixtures and equipment
    
    
    378,658
    
    
    
    428,431Property subject to capital leases
    
    
    9,983
    
    
    
    9,9831,013,778
    
    
    
    1,080,284Less accumulated depreciation and amortization
    
    
    353,715
    
    
    
    408,791660,063
    
    
    
    671,493Deferred income taxes, long-term
    
    
    13,276
    
    
    
    19,842Deferred debt issurance costs, net
    
    
    14,478
    
    
    
    11,276Note receivable, less current portion
    
    
    
    
    
    
    493Long-term receivable
    
    
    22,228
    
    
    
    18,867Goodwill
    
    
    2,894
    
    
    
    2,894Other assets
    
    
    6,322
    
    
    
    6,36159,198
    
    
    
    59,733Total assets
    
    $
    1,276,875
    
    
    $
    1,314,735
  F-3




---



##### Table of Contents



STATER BROS. HOLDINGS INC.  CONSOLIDATED BALANCE SHEETS (contd.)
 LIABILITIES AND STOCKHOLDERS EQUITY
 Sept. 28,
    
    
    Sept. 27,2008
    
    
    2009Current liabilitiesAccounts payable
    
    $
    154,283
    
    
    $
    153,083Accrued payroll and related expenses
    
    
    59,560
    
    
    
    53,313Other accrued liabilities
    
    
    76,639
    
    
    
    79,618Liabilities held for sale
    
    
    16,509
    
    
    
    5,634Current portion of capital lease obligations
    
    
    1,149
    
    
    
    1,336Total current liabilities
    
    
    308,140
    
    
    
    292,984Long-term debt
    
    
    810,000
    
    
    
    810,000Capital lease obligations, less current portion
    
    
    5,104
    
    
    
    3,768Long-term portion of self-insurance and other reserves
    
    
    35,164
    
    
    
    36,227Long-term deferred benefits
    
    
    66,340
    
    
    
    77,396Other long-term liabilities
    
    
    11,621
    
    
    
    30,605Total liabilities
    
    
    1,236,369
    
    
    
    1,250,980Commitments and contingenciesStockholders equityCommon Stock, $.01 par value:
Authorized shares  100,000
Issued and outstanding shares  0 in 2008 and 2009
    
    
    
    
    
    
    Class A Common Stock, $.01 par value:
Authorized shares  100,000
Issued and outstanding shares  35,152 in 2008
and 2009
    
    
    
    
    
    
    Additional paid-in capital
    
    
    8,939
    
    
    
    8,939Accumulated other comprehensive loss
    
    
    (5,200
    )
    
    
    (16,720
    )Retained earnings
    
    
    36,767
    
    
    
    71,536Total stockholders equity
    
    
    40,506
    
    
    
    63,755Total liabilities and stockholders equity
    
    $
    1,276,875
    
    
    $
    1,314,735
  F-4




---



##### Table of Contents



STATER BROS. HOLDINGS INC.
CONSOLIDATED STATEMENTS OF INCOME
 Fiscal Year EndedSept. 30,
    
    
    Sept. 28,
    
    
    Sept. 27,2007
    
    
    2008
    
    
    2009(53 weeks)
    
    
    (52 weeks)
    
    
    (52 weeks)Sales
    
    $
    3,674,427
    
    
    $
    3,741,254
    
    
    $
    3,766,040Cost of goods sold
    
    
    2,674,563
    
    
    
    2,743,074
    
    
    
    2,764,004Gross profit
    
    
    999,864
    
    
    
    998,180
    
    
    
    1,002,036Operating expenses:Selling, general and administrative expenses
    
    
    818,863
    
    
    
    829,697
    
    
    
    827,192Depreciation and amortization
    
    
    48,715
    
    
    
    52,987
    
    
    
    53,536Total operating expenses
    
    
    867,578
    
    
    
    882,684
    
    
    
    880,728Operating profit
    
    
    132,286
    
    
    
    115,496
    
    
    
    121,308Interest income
    
    
    14,151
    
    
    
    5,735
    
    
    
    471Interest expense
    
    
    (59,586
    )
    
    
    (57,464
    )
    
    
    (68,252
    )Interest expense related to purchase of debt
    
    
    (3,953
    )
    
    
    
    
    
    
    Other income (expenses), net
    
    
    (224
    )
    
    
    2,863
    
    
    
    723Income before income taxes
    
    
    82,674
    
    
    
    66,630
    
    
    
    54,250Income taxes
    
    
    33,279
    
    
    
    26,000
    
    
    
    19,481Net income
    
    $
    49,395
    
    
    $
    40,630
    
    
    $
    34,769Earnings per average common shares outstanding
    
    $
    1,356.19
    
    
    $
    1,136.03
    
    
    $
    989.10Dividends per common share outstanding at end of year
    
    $
    139.78
    
    
    $
    142.24
    
    
    $
    Average common shares outstanding
    
    
    36,422
    
    
    
    35,765
    
    
    
    35,152Common shares outstanding at end of year
    
    
    35,770
    
    
    
    35,152
    
    
    
    35,152
  F-5




---



##### Table of Contents



STATER BROS. HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
 Fiscal Year EndedSept. 30,
    
    
    Sept. 28,
    
    
    Sept. 27,2007
    
    
    2008
    
    
    2009(53 weeks)
    
    
    (52 weeks)
    
    
    (52 weeks)Operating activities:Net income
    
    $
    49,395
    
    
    $
    40,630
    
    
    $
    34,769Adjustments to reconcile net income to net cash provided
by operating activities:Depreciation and amortization
    
    
    60,395
    
    
    
    66,960
    
    
    
    68,179Amortization of debt issuance costs
    
    
    5,496
    
    
    
    3,193
    
    
    
    3,202Premium paid on purchase of debt
    
    
    (1,750
    )
    
    
    
    
    
    
    Deferred income taxes
    
    
    (11,576
    )
    
    
    (3,121
    )
    
    
    (8,376
    )(Gain) loss on disposals of assets
    
    
    404
    
    
    
    (1,918
    )
    
    
    (543
    )Changes in operating assets and liabilities:Decrease in restricted cash
    
    
    16,000
    
    
    
    2,500
    
    
    
    2,500(Increase) decrease in receivables
    
    
    (7,425
    )
    
    
    1,878
    
    
    
    (6,387
    )(Increase) decrease in income tax receivables
    
    
    3,863
    
    
    
    (4,727
    )
    
    
    587(Increase) decrease in inventories
    
    
    (5,406
    )
    
    
    (31,435
    )
    
    
    17,362(Increase) decrease in prepaid expenses
    
    
    (4,066
    )
    
    
    1,655
    
    
    
    (504
    )(Increase) decrease in assets held for sale
    
    
    (6,284
    )
    
    
    2,026
    
    
    
    1,629(Increase) decrease in other assets
    
    
    (33
    )
    
    
    18
    
    
    
    (39
    )Increase (decrease) in accounts payable
    
    
    26,326
    
    
    
    (17,795
    )
    
    
    (1,200
    )Increase (decrease) in accrued income taxes
    
    
    4,727
    
    
    
    (4,636
    )
    
    
    Increase (decrease) in liabilities held for sale
    
    
    7,309
    
    
    
    (2,328
    )
    
    
    (10,875
    )Increase (decrease) in other accrued liabilities
    
    
    14,913
    
    
    
    1,216
    
    
    
    (3,268
    )Increase in long-term reserves
    
    
    19,068
    
    
    
    3,831
    
    
    
    19,583Net cash provided by operating activities
    
    
    171,356
    
    
    
    57,947
    
    
    
    116,619Financing activities:Proceeds from issuance of long-term debt
    
    
    285,000
    
    
    
    
    
    
    
    Debt issuance costs
    
    
    (7,195
    )
    
    
    
    
    
    
    Dividends paid
    
    
    (5,000
    )
    
    
    (5,000
    )
    
    
    Stock redemption
    
    
    (15,000
    )
    
    
    (8,240
    )
    
    
    Principal payment on long-term debt
    
    
    (175,000
    )
    
    
    
    
    
    
    Principal payments on capital lease obligations
    
    
    (904
    )
    
    
    (990
    )
    
    
    (1,149
    )Net cash provided by (used in) financing activities
    
    
    81,901
    
    
    
    (14,230
    )
    
    
    (1,149
    )Investing activities:Decrease in short-term investments
    
    
    26,849
    
    
    
    
    
    
    
    (Increase) decrease in store reimbursement
    
    
    145
    
    
    
    (9,427
    )
    
    
    9,914Increase in note receivable
    
    
    
    
    
    
    
    
    
    
    (793
    )(Increase) decrease in long-term receivable
    
    
    (10,068
    )
    
    
    
    
    
    
    3,361Purchase of property and equipment
    
    
    (191,873
    )
    
    
    (168,886
    )
    
    
    (76,970
    )Proceeds from sale of property and equipment
    
    
    207
    
    
    
    2,476
    
    
    
    990Net cash used in investing activities
    
    
    (174,740
    )
    
    
    (175,837
    )
    
    
    (63,498
    )Net increase (decrease) in cash and cash equivalents
    
    
    78,517
    
    
    
    (132,120
    )
    
    
    51,972Cash and cash equivalents at beginning of period
    
    
    198,545
    
    
    
    277,062
    
    
    
    144,942Cash and cash equivalents at end of period
    
    $
    277,062
    
    
    $
    144,942
    
    
    $
    196,914Interest paid
    
    $
    57,587
    
    
    $
    65,707
    
    
    $
    65,723Income taxes paid
    
    $
    34,850
    
    
    $
    39,300
    
    
    $
    19,425
  F-6




---



##### Table of Contents



STATER BROS. HOLDINGS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
 Accumulated
    
    
    
    
    
    
    Total
    
    
    Comp-Class A
    
    
    Additional
    
    
    Other Comp-
    
    
    Retained
    
    
    Stockholders
    
    
    rehensiveCommon
    
    
    Common Stock
    
    
    Paid-in
    
    
    rehensive
    
    
    Earnings
    
    
    Equity
    
    
    IncomeStock
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    

Gain
(Loss)
    
    
    (Deficit)
    
    
    (Deficit)
    
    
    (Loss)Balance at September 24, 2006
    
    
    
    
    
    
    36,895
    
    
    $
    
    
    
    $
    9,382
    
    
    $
    
    
    
    $
    (20,461
    )
    
    $
    (11,079
    )Net income for 53 weeks ended
September 30, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49,395
    
    
    
    49,395
    
    
    $
    49,395Cummulative other
comprehensive loss (net
of tax of $6,214)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,037
    )
    
    
    
    
    
    
    (9,037
    )
    
    
    Dividend paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,000
    )
    
    
    (5,000
    )
    
    
    Stock redemption
    
    
    
    
    
    
    (1,125
    )
    
    
    
    
    
    
    (286
    )
    
    
    
    
    
    
    (14,714
    )
    
    
    (15,000
    )
    
    
    Balance at September 30, 2007
    
    
    
    
    
    
    35,770
    
    
    
    
    
    
    
    9,096
    
    
    
    (9,037
    )
    
    
    9,220
    
    
    
    9,279
    
    
    $
    49,395Net income for 52 weeks ended
September 28, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,630
    
    
    
    40,630
    
    
    $
    40,630Other comprehensive income
(net of tax of $2,638)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,837
    
    
    
    
    
    
    
    3,837
    
    
    
    3,837Dividend paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,000
    )
    
    
    (5,000
    )
    
    
    Stock redemption
    
    
    
    
    
    
    (618
    )
    
    
    
    
    
    
    (157
    )
    
    
    
    
    
    
    (8,083
    )
    
    
    (8,240
    )
    
    
    Balance at September 28, 2008
    
    
    
    
    
    
    35,152
    
    
    
    
    
    
    
    8,939
    
    
    
    (5,200
    )
    
    
    36,767
    
    
    
    40,506
    
    
    $
    44,467Net income for 52 weeks ended
September 27, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34,769
    
    
    
    34,769
    
    
    $
    34,769Other comprehensive loss
(net of tax of $7,922)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,520
    )
    
    
    
    
    
    
    (11,520
    )
    
    
    (11,520
    )Balance at September 27, 2009
    
    
    
    
    
    
    35,152
    
    
    $
    
    
    
    $
    8,939
    
    
    $
    (16,720
    )
    
    $
    71,536
    
    
    $
    63,755
    
    
    $
    23,249
  F-7




---



##### Table of Contents



STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 27, 2009
 Note 1  The Company and Summary of Significant Accounting Policies
 Description of Business
  Principles
of Consolidation and Subsequent Events
  Reclassifications
  Use of Estimates
  Fiscal Year
  Cash and Cash Equivalents
  Restricted Cash
  Inventories
  F-8




---



##### Table of Contents



STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (contd.)
 Note 1  The Company and Summary of Significant Accounting Policies (contd.)
 Receivables
  Long-Lived Assets
  Property and Equipment
   Range
    
    Most PrevalentBuildings and improvements
    
    5 - 40 Years
    
    20 YearsStore furniture and equipment
    
    3 - 10 Years
    
    8 YearsProperty subject to capital leases
    
    Life of Lease
    
    20 Years
 Deferred Debt Issuance Costs
  Deferred Compensation Plan
  Self-Insurance Reserves
  Income Taxes
  F-9




---



##### Table of Contents



STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (contd.)
 Note 1  The Company and Summary of Significant Accounting Policies (contd.)
 Revenue Recognition
  Cost of Goods Sold
  Selling, General and Administrative Expenses
   Vendor Rebates and Allowances
  Advertising
  F-10




---



##### Table of Contents



STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (contd.)
 Note 1  The Company and Summary of Significant Accounting Policies (contd.)
 Advertising Allowances
  Leases
  Recent Accounting Pronouncements
  F-11




---



##### Table of Contents



STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (contd.)
 Note 2  Goodwill
  Note 3  Debt
  Fiscal Year EndedSept. 28,
    
    
    Sept. 27,2008
    
    
    2009(In thousands)8.125% Senior Notes due 2012
    
    $
    525,000
    
    
    $
    525,0007.75% Senior Notes due 2015
    
    
    285,000
    
    
    
    285,000Total long-term debt
    
    $
    810,000
    
    
    $
    810,000
      F-12




---



##### Table of Contents



STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (contd.)
 Note 3  Debt (contd.)
  Note 4  Credit Facilities
 Markets Credit Facility
      F-13




---



##### Table of Contents



STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (contd.)
 Note 4  Credit Facilities (contd.)
 Santees Revolver
        Note 5  Leases
   F-14




---



##### Table of Contents



STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (contd.)
 Note 5  Leases (contd.)
  OperatingLeases
    
    
    NoncancelableCapital
    
    
    Minimum
    
    
    SubleaseLeases
    
    Payments
    
    Income(In thousands)2010
    
    $
    2,095
    
    
    $
    37,185
    
    
    $
    4,3502011
    
    
    2,095
    
    
    
    34,238
    
    
    
    4,2582012
    
    
    1,403
    
    
    
    30,650
    
    
    
    3,3022013
    
    
    943
    
    
    
    28,339
    
    
    
    3,1312014
    
    
    315
    
    
    
    22,597
    
    
    
    2,456Thereafter
    
    
    
    
    
    
    204,960
    
    
    
    21,199Total minimum lease payments
    
    
    6,851
    
    
    $
    357,969
    
    
    $
    38,696Less amounts representing interest
    
    
    1,747Present value of minimum lease
payments
    
    
    5,104Less current portion
    
    
    1,336Long-term portion
    
    $
    3,768
  Fiscal
Year EndedSept. 30, 2007
    
    Sept. 28, 2008
    
    Sept. 27, 2009(In thousands)Minimum rentals
    
    $
    33,014
    
    
    $
    33,454
    
    
    $
    30,326Rentals based on sales
    
    $
    14,368
    
    
    $
    15,020
    
    
    $
    16,210Sublease income
    
    $
    1,303
    
    
    $
    1,383
    
    
    $
    4,092
  F-15




---



##### Table of Contents



STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (contd.)
 Note 6  Income Taxes
  Sept. 30, 2007
    
    
    Sept. 28, 2008
    
    
    Sept. 27, 2009(in thousands)CurrentFederal
    
    $
    34,141
    
    
    $
    23,756
    
    
    $
    16,302State
    
    
    8,876
    
    
    
    6,095
    
    
    
    3,71043,017
    
    
    
    29,851
    
    
    
    20,012DeferredFederal
    
    
    (8,209
    )
    
    
    (2,826
    )
    
    
    (152
    )State
    
    
    (1,529
    )
    
    
    (1,025
    )
    
    
    (379
    )(9,738
    )
    
    
    (3,851
    )
    
    
    (531
    )Income tax expense
    
    $
    33,279
    
    
    $
    26,000
    
    
    $
    19,481A reconciliation of the provision for income taxes to amounts computed at the federal
statutory rate is as follows:Sept. 30, 2007
    
    
    Sept. 28, 2008
    
    
    Sept. 27, 2009Federal statutory income tax rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %State franchise tax rate,
net of federal
income tax benefit
    
    
    5.8
    
    
    
    5.8
    
    
    
    5.8Tax credits
    
    
    (1.1
    )
    
    
    (2.3
    )
    
    
    (2.2
    )Other
    
    
    0.6
    
    
    
    0.5
    
    
    
    (2.7
    )Effective tax rate
    
    
    40.3
    %
    
    
    39.0
    %
    
    
    35.9
    %
 F-16




---



##### Table of Contents



STATER
BROS. HOLDINGS INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (contd.)
 Note 6  Income Taxes (contd.)
  Sept. 28, 2008
    
    
    Sept. 27, 2009(In thousands)Deferred income tax assets:Self-insurance reserves
    
    $
    23,486
    
    
    $
    25,252Deferred compensation
    
    
    28,488
    
    
    
    31,504Payroll liabilities
    
    
    14,812
    
    
    
    20,447State franchise tax
    
    
    2,282
    
    
    
    1,377Inventories
    
    
    2,248
    
    
    
    2,254Income deferred for book purposes
    
    
    2,230
    
    
    
    2,602Tax credits and operating loss carry forwards
    
    
    3,261
    
    
    
    2,561Other, net
    
    
    904
    
    
    
    2,144Total deferred income tax assets
    
    
    77,711
    
    
    
    88,141Deferred income tax liabilities:Property and equipment
    
    
    (32,602
    )
    
    
    (36,235
    )Other assets
    
    
    (2,153
    )
    
    
    (2,255
    )Investment in unconsolidated affiliate
    
    
    (1,681
    )
    
    
    Total deferred income tax liabilities
    
    
    (36,436
    )
    
    
    (38,490
    )Net deferred income tax assets
    
    $
    41,275
    
    
    $
    49,651
      F-17




---



##### Table of Contents



STATER
BROS. HOLDINGS INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (contd.)
 Note 7  Retirement Plans
 Pension and Medical Plans
    Retirement BenefitsBefore
    
    Change due to
    
    AfterImplementation
    
    Implementation
    
    Implementation(in thousands)Deferred tax assets
    
    $
    40,614
    
    
    $
    6,214
    
    
    $
    46,828Pre-paid pension
    
    $
    1,904
    
    
    $
    (1,904
    )
    
    $
    Total assets
    
    $
    1,265,968
    
    
    $
    4,310
    
    
    $
    1,270,278Pension liability
    
    $
    
    
    
    $
    12,403
    
    
    $
    12,403Other post retirement liability
    
    $
    496
    
    
    $
    944
    
    
    $
    1,440Total liabilities
    
    $
    1,247,652
    
    
    $
    13,347
    
    
    $
    1,260,999Accumulated other comprehensive loss, net
of tax
    
    $
    
    
    
    $
    (9,037
    )
    
    $
    (9,037
    )Total stockholders equity
    
    $
    18,316
    
    
    $
    (9,037
    )
    
    $
    9,279Total liabilities and stockholders equity
    
    $
    1,265,968
    
    
    $
    4,310
    
    
    $
    1,270,278
  Pension Plan
    
    
    Medical PlanSept. 28,
    
    
    Sept. 27,
    
    
    Sept. 28,
    
    
    Sept. 27,2008
    
    
    2009
    
    
    2008
    
    
    2009(in thousands)Prior service cost
    
    $
    2
    
    
    $
    2
    
    
    $
    (78
    )
    
    $
    (78
    )Net actuarial (gain) loss
    
    
    (6,269
    )
    
    
    19,258
    
    
    
    (130
    )
    
    $
    260Total recognized in
accumulated other
comprehensive (gain)
loss, before tax
    
    $
    (6,267
    )
    
    $
    19,260
    
    
    $
    (208
    )
    
    $
    182
 F-18




---



##### Table of Contents



STATER
BROS. HOLDINGS INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (contd.)
 Note 7  Retirement Plans (contd.)
 Pension and Medical Plans (contd.)
  Pension Plan
    
    
    Medical PlanSept. 28,
    
    
    Sept. 27,
    
    
    Sept. 28,
    
    
    Sept. 27,2008
    
    
    2009
    
    
    2008
    
    
    2009(in thousands)Change in benefit obligation:Beginning balance
    
    $
    58,273
    
    
    $
    52,850
    
    
    $
    1,440
    
    
    $
    1,364Service cost
    
    
    2,632
    
    
    
    2,294
    
    
    
    41
    
    
    
    34Interest cost
    
    
    3,504
    
    
    
    3,857
    
    
    
    88
    
    
    
    98Actuarial (gain) loss
    
    
    (10,173
    )
    
    
    18,318
    
    
    
    (123
    )
    
    
    260Benefit payments
    
    
    (1,386
    )
    
    
    (1,215
    )
    
    
    (82
    )
    
    
    (58
    )Ending balance
    
    $
    52,850
    
    
    $
    76,104
    
    
    $
    1,364
    
    
    $
    1,698Change in fair value of plan assets:Beginning balance
    
    $
    45,870
    
    
    $
    47,997
    
    
    $
    
    
    
    $
    Actual return on plan assets
    
    
    (1,413
    )
    
    
    2,064
    
    
    
    
    
    
    
    Employer contributions
    
    
    4,926
    
    
    
    4,434
    
    
    
    82
    
    
    
    58Benefit payments
    
    
    (1,386
    )
    
    
    (1,215
    )
    
    
    (82
    )
    
    
    (58
    )Ending balance
    
    $
    47,997
    
    
    $
    53,280
    
    
    $
    
    
    
    $
    Funded status:Fair value of plan assets
    
    $
    47,997
    
    
    $
    53,280
    
    
    $
    
    
    
    $
    Projected benefit obligation
    
    
    52,850
    
    
    
    76,104
    
    
    
    1,364
    
    
    
    1,698Under funded
    
    $
    (4,853
    )
    
    $
    (22,824
    )
    
    $
    (1,364
    )
    
    $
    (1,698
    )
  F-19




---



##### Table of Contents



STATER
BROS. HOLDINGS INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (contd.)
  Note 7  Retirement Plans (contd.)
 Pension Plan
  Sept. 30,
    
    
    Sept. 28,
    
    
    Sept. 27,2007
    
    
    2008
    
    
    2009(in thousands)Expected return on assets
    
    $
    (2,652
    )
    
    $
    (3,076
    )
    
    $
    (3,201
    )Service cost
    
    
    2,659
    
    
    
    2,632
    
    
    
    2,294Interest cost
    
    
    3,250
    
    
    
    3,504
    
    
    
    3,857Amortization of prior service cost
    
    
    (2
    )
    
    
    (2
    )
    
    
    (2
    )Amortization of recognized losses
    
    
    892
    
    
    
    584
    
    
    
    197Net pension expense
    
    $
    4,147
    
    
    $
    3,642
    
    
    $
    3,145
  Discount rate
    
    
    5.80
    %
    
    
    6.25
    %
    
    
    7.50
    %Rate of increase in compensation levels
    
    
    3.00
    %
    
    
    3.00
    %
    
    
    3.00
    %Expected long-term rate of return on
assets
    
    
    6.50
    %
    
    
    6.50
    %
    
    
    6.50
    %
  Weighted-average discount rate
    
    
    6.25
    %
    
    
    7.50
    %
    
    
    5.50
    %Weighted-average rate of compensation increase
    
    
    3.00
    %
    
    
    3.00
    %
    
    
    3.00
    %
   Sept. 28,
    
    Sept. 27,Target
    
    2008
    
    2009Asset category:Fixed income
    
    
    65
    %
    
    
    67
    %
    
    
    70
    %Equity
    
    
    35
    %
    
    
    33
    %
    
    
    28
    %Cash and other
    
    
    0
    %
    
    
    0
    %
    
    
    2
    %Total
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
 F-20




---



##### Table of Contents



STATER BROS. HOLDINGS INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (contd.)
 Note 7  Retirement Plans (contd.)
 Pension Plan (contd.)
   Estimated Future Benefit Payments
  PensionBenefits(in thousands)2010
    
    $
    2,6042011
    
    $
    2,7092012
    
    $
    3,1132013
    
    $
    4,0732014
    
    $
    3,7962015 - 2019
    
    $
    26,846
 Medical Plan
  Sept. 30,
    
    
    Sept. 28,
    
    
    Sept. 27,2007
    
    
    2008
    
    
    2009(in thousands)Service cost
    
    $
    43
    
    
    $
    41
    
    
    $
    34Interest cost
    
    
    81
    
    
    
    88
    
    
    
    98Amortization of prior service cost
    
    
    78
    
    
    
    78
    
    
    
    78Amortization of recognized losses
    
    
    10
    
    
    
    7
    
    
    
    Net periodic benefit costs
    
    $
    212
    
    
    $
    214
    
    
    $
    210Actuarial assumptions used to determine net periodic benefit costs were:Discount rate
    
    
    5.80
    %
    
    
    6.25
    %
    
    
    7.50
    %Actuarial assumptions used to determine year-end projected benefit obligation were:Weighted-average discount rate
    
    
    6.25
    %
    
    
    7.50
    %
    
    
    5.50
    %
 F-21




---



##### Table of Contents



STATER BROS. HOLDINGS INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (contd.)
 Note 7  Retirement Plans (contd.)
 Medical Plan (contd.)
   Estimated Future Benefit Payments
  MedicalBenefits(in thousands)2010
    
    $
    952011
    
    $
    1092012
    
    $
    1222013
    
    $
    1352014
    
    $
    1352015 - 2019
    
    $
    644
 Profit Sharing Plan
  Multi-Employer Plans
   Sept. 30,
    
    
    Sept. 28,
    
    
    Sept. 27,2007
    
    
    2008
    
    
    2009(in thousands)Multi-Employer Pension Plans
    
    $
    38,548
    
    
    $
    40,508
    
    
    $
    40,294Multi-Employer Health and Welfare
    
    
    74,376
    
    
    
    71,342
    
    
    
    73,459Total Multi-Employer Benefits
    
    $
    112,924
    
    
    $
    111,850
    
    
    $
    113,753
  F-22




---



##### Table of Contents



STATER BROS. HOLDINGS INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (contd.)
 Note 8  Segment Information
  Retail
    
    
    All Other
    
    
    Total(in thousands)Fiscal year ended September 30, 2007Sales to external customers
    
    $
    3,573,075
    
    
    $
    101,352
    
    
    $
    3,674,427Intersegment sales
    
    $
    
    
    
    $
    88,337
    
    
    $
    88,337Depreciation and amortization
    
    $
    48,597
    
    
    $
    118
    
    
    $
    48,715Operating profit (loss)
    
    $
    133,882
    
    
    $
    (1,596
    )
    
    $
    132,286Interest income
    
    $
    10,536
    
    
    $
    3,615
    
    
    $
    14,151Interest expense
    
    $
    (1,237
    )
    
    $
    (62,302
    )
    
    $
    (63,539
    )Income tax expense (benefit)
    
    $
    58,692
    
    
    $
    (25,413
    )
    
    $
    33,279Net income (loss)
    
    $
    84,085
    
    
    $
    (34,690
    )
    
    $
    49,395Total assets
    
    $
    1,588,772
    
    
    $
    (318,494
    )
    
    $
    1,270,278Capital expenditures
    
    $
    191,873
    
    
    $
    
    
    
    $
    191,873
 Retail
    
    
    All Other
    
    
    Total(in thousands)Fiscal year ended September 28, 2008Sales to external customers
    
    $
    3,636,125
    
    
    $
    105,129
    
    
    $
    3,741,254Intersegment sales
    
    $
    
    
    
    $
    100,745
    
    
    $
    100,745Depreciation and amortization
    
    $
    52,898
    
    
    $
    89
    
    
    $
    52,987Operating profit (loss)
    
    $
    115,499
    
    
    $
    (3
    )
    
    $
    115,496Interest income
    
    $
    3,184
    
    
    $
    2,551
    
    
    $
    5,735Interest expense
    
    $
    (1,103
    )
    
    $
    (56,361
    )
    
    $
    (57,464
    )Income tax expense (benefit)
    
    $
    48,381
    
    
    $
    (22,381
    )
    
    $
    26,000Net income (loss)
    
    $
    71,117
    
    
    $
    (30,487
    )
    
    $
    40,630Total assets
    
    $
    1,659,996
    
    
    $
    (383,121
    )
    
    $
    1,276,875Capital expenditures
    
    $
    168,886
    
    
    $
    
    
    
    $
    168,886
 F-23




---



##### Table of Contents



STATER BROS. HOLDINGS INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (contd.)
 Note 8  Segment Information (contd.)
 Retail
    
    
    All Other
    
    
    Total(in thousands)Fiscal year ended September 27, 2009Sales to external customers
    
    $
    3,669,251
    
    
    $
    96,789
    
    
    $
    3,766,040Intersegment sales
    
    $
    
    
    
    $
    80,676
    
    
    $
    80,676Depreciation and amortization
    
    $
    53,210
    
    
    $
    326
    
    
    $
    53,536Operating profit
    
    $
    120,147
    
    
    $
    1,161
    
    
    $
    121,308Interest income
    
    $
    313
    
    
    $
    158
    
    
    $
    471Interest expense
    
    $
    (946
    )
    
    $
    (67,306
    )
    
    $
    (68,252
    )Income tax expense (benefit)
    
    $
    47,051
    
    
    $
    (27,570
    )
    
    $
    19,481Net income (loss)
    
    $
    73,006
    
    
    $
    (38,237
    )
    
    $
    34,769Total assets
    
    $
    1,690,030
    
    
    $
    (375,295
    )
    
    $
    1,314,735Capital expenditures
    
    $
    76,970
    
    
    $
    
    
    
    $
    76,970
 Note 9  Labor Relations
  Note 10  Fair Value of Financial Instruments
  Cash and Cash Equivalents
  Receivables
  Note Receivable
  Long-Term Receivable
  F-24




---



##### Table of Contents



STATER BROS. HOLDINGS INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (contd.)
 Note 10  Fair Value of Financial Instruments (contd.)
 Long-Term Debt and Capital Lease Obligations
   As ofSeptember 27, 2009(In thousands)Carrying
    
    FairAmount
    
    ValueCash and cash equivalents
    
    $
    196,914
    
    
    $
    196,914Receivables
    
    $
    40,720
    
    
    $
    40,720Note Receivable
    
    $
    793
    
    
    $
    793Long-term receivable
    
    $
    18,867
    
    
    $
    18,867Long-term debt
    
    $
    810,000
    
    
    $
    806,101Capitalized lease obligations
    
    $
    5,104
    
    
    $
    5,104
 Note 11  Litigation Matters
    F-25




---



##### Table of Contents



STATER BROS. HOLDINGS INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (contd.)
 Note 12  Deferred Compensation Plan
  Note 13  Related Party Transactions
   Note 14  Stock Redemption
    Note 15  Asset Sale
  F-26




---



##### Table of Contents



STATER BROS. HOLDINGS INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (contd.)
 Note 16  Quarterly Results (unaudited)
  AverageGross
    
    
    Operating
    
    
    Net
    
    
    Shares
    
    
    EarningsSales
    
    
    Profit
    
    
    Profit
    
    
    Income
    
    
    Outstanding
    
    
    Per ShareFiscal 2007 Quarters13 weeks ended
12/24/06
    
    $
    904,354
    
    
    $
    241,890
    
    
    $
    28,205
    
    
    $
    9,902
    
    
    
    36,895
    
    
    $
    268.3813 weeks ended
03/25/07
    
    
    866,062
    
    
    
    249,444
    
    
    
    33,674
    
    
    
    13,460
    
    
    
    36,895
    
    
    
    364.8213 weeks ended
06/24/07
    
    
    910,229
    
    
    
    253,787
    
    
    
    41,625
    
    
    
    15,602
    
    
    
    36,178
    
    
    
    431.2614 weeks ended
09/30/07
    
    
    993,782
    
    
    
    254,743
    
    
    
    28,782
    
    
    
    10,431
    
    
    
    35,770
    
    
    
    291.61$
    3,674,427
    
    
    $
    999,864
    
    
    $
    132,286
    
    
    $
    49,395
    
    
    
    36,422
    
    
    $
    1,356.19Fiscal 2008 Quarters13 weeks ended
12/30/07
    
    $
    943,030
    
    
    $
    244,429
    
    
    $
    27,203
    
    
    $
    10,751
    
    
    
    35,770
    
    
    $
    300.5613 weeks ended
03/30/08
    
    
    925,361
    
    
    
    256,278
    
    
    
    34,581
    
    
    
    13,531
    
    
    
    35,770
    
    
    
    378.2813 weeks ended
06/29/08
    
    
    932,668
    
    
    
    249,221
    
    
    
    28,372
    
    
    
    9,179
    
    
    
    35,770
    
    
    
    256.6113 weeks ended
09/28/08
    
    
    940,195
    
    
    
    248,252
    
    
    
    25,340
    
    
    
    7,169
    
    
    
    35,750
    
    
    
    200.53$
    3,741,254
    
    
    $
    998,180
    
    
    $
    115,496
    
    
    $
    40,630
    
    
    
    35,765
    
    
    $
    1,136.03Fiscal 2009 Quarters13 weeks ended
12/28/08
    
    $
    959,253
    
    
    $
    246,862
    
    
    $
    22,498
    
    
    $
    3,541
    
    
    
    35,152
    
    
    $
    100.7313 weeks ended
03/29/09
    
    
    930,996
    
    
    
    255,826
    
    
    
    35,962
    
    
    
    11,121
    
    
    
    35,152
    
    
    
    316.3713 weeks ended
06/28/09
    
    
    928,641
    
    
    
    254,216
    
    
    
    37,793
    
    
    
    15,142
    
    
    
    35,152
    
    
    
    430.7613 weeks ended
09/27/09
    
    
    947,150
    
    
    
    245,132
    
    
    
    25,055
    
    
    
    4,965
    
    
    
    35,152
    
    
    
    141.24$
    3,766,040
    
    
    $
    1,002,036
    
    
    $
    121,308
    
    
    $
    34,769
    
    
    
    35,152
    
    
    $
    989.10
 F-27