##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K/A
 (Mark One)
 þ
    
    ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended: September 24, 2006
 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.)
 21700 Barton Road 
Colton, California
    
    92324(Address of principal executive offices)
    
    (Zip Code)
 (909) 783-5000
 
 
 o þ
 o þ
 þ o
 þ o
  o o þ
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE
 None




---



##### Table of Contents



2




---



##### 



Page NumberPART IItem 1
    
    Business
    
    
    4Item 1A
    
    Risk Factors
    
    
    11Item 1B
    
    Unresolved Staff Comments
    
    
    11Item 2
    
    Properties
    
    
    12Item 3
    
    Legal Proceedings
    
    
    13Item 4
    
    Submission of Matters to a Vote of Security Holders
    
    
    13PART IIItem 5
    
    Market for the Registrants Common Equity, Related
Stockholder
Matters and Issuer Purchases of Equity Securities
    
    
    13Item 6
    
    Selected Financial Data
    
    
    14Item 7
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    17Item 7A
    
    Quantitative and Qualitative Disclosure about Market Risk
    
    
    30Item 8
    
    Financial Statements and Supplementary Data
    
    
    31Item 9
    
    Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
    
    
    31Item 9A
    
    Controls and Procedures
    
    
    31Item 9B
    
    Other Information
    
    
    31PART IIIItem 10
    
    Directors and Executive Officers of the Registrant
    
    
    32Item 11
    
    Executive Compensation
    
    
    34Item 12
    
    Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
    
    
    36Item 13
    
    Certain Relationships and Related Transactions
    
    
    38Item 14
    
    Principal Accounting Fees and Services
    
    
    38PART IVItem 15
    
    Exhibits and Financial Statement Schedules
    
    
    39Signatures
    
    
    44EXHIBIT 12.1EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1
  3




---



##### Table of Contents



PART I
 
 Item 1. Business
 General
    Ownership of the Company
  Issuance of Debt and Early Extinguishment of Debt
   4




---



##### Table of Contents



Item 1. Business (contd.)
 Store Profile and Locations
   Store Expansion and Remodeling
    5




---



##### Table of Contents



Item 1. Business (contd.)
 Store Expansion and Remodeling (contd.)
  Fiscal Year EndedSept. 29,
    
    Sept. 28,
    
    Sept. 26,
    
    Sept. 25,
    
    Sept. 24,2002
    
    2003
    
    2004
    
    2005
    
    2006Number of supermarkets:Opened
    
    
    1
    
    
    
    1
    
    
    
    2
    
    
    
    4
    
    
    
    3Closed
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )
    
    
    (2
    )Total at end of year
    
    
    156
    
    
    
    157
    
    
    
    158
    
    
    
    161
    
    
    
    162Minor remodel
    
    
    11
    
    
    
    20
    
    
    
    31
    
    
    
    47
    
    
    
    34Major remodel
    
    
    3
    
    
    
    4
    
    
    
    5
    
    
    
    8
    
    
    
    14
  Corporate Office and Distribution Facilities
    6




---



##### Table of Contents



Item 1. Business (contd.)
 Corporate Office and Distribution Facilities (contd.)
    7




---



##### Table of Contents



Item 1. Business (contd.)
 Purchasing and Marketing
   Retail Operations
  Store Management
 Customer Service
 Santee Dairies, Inc.
  8




---



##### Table of Contents



Item 1. Business (contd.)
 Santee Dairies, Inc. (contd)
 ® ® ® ® ® ®
  Employees
    Southern California Labor Dispute
    9




---



##### Table of Contents



Item 1. Business (contd.)
 Competition
   Financial Information about Segments
  Government Regulation
   Environmental
  10




---



##### Table of Contents



Item 1A. Risk Factors
    
 Item 1B. Unresolved Staff Comments
 None
 11




---



##### Table of Contents



Item 2. Properties
  SquareFacility
    
    FeetGrocery
    
    
    960,000Health and beauty care and general
merchandise
    
    
    188,000Frozen
    
    
    146,000Dairy manufacturing
    
    
    118,000Produce, meat and meat deli
    
    
    118,000Grocery deli
    
    
    116,000Dairy cold storage
    
    
    67,000Bakery
    
    
    40,000Support and administrative offices
    
    
    146,000Total
    
    
    1,899,000
  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
    
    
    51
    
    
    
    11
    
    
    
    40
    
    
    
    5
    
    
    
    16
    
    
    
    6
    
    
    
    14
    
    
    
    10Riverside
    
    
    43
    
    
    
    11
    
    
    
    32
    
    
    
    9
    
    
    
    13
    
    
    
    4
    
    
    
    5
    
    
    
    12Orange
    
    
    30
    
    
    
    11
    
    
    
    19
    
    
    
    4
    
    
    
    13
    
    
    
    1
    
    
    
    4
    
    
    
    8Los Angeles
    
    
    26
    
    
    
    8
    
    
    
    18
    
    
    
    4
    
    
    
    7
    
    
    
    1
    
    
    
    3
    
    
    
    11San Diego
    
    
    10
    
    
    
    5
    
    
    
    5
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    2
    
    
    
    7Kern
    
    
    2
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1
    
    
    
    Total
    
    
    162
    
    
    
    46
    
    
    
    116
    
    
    
    22
    
    
    
    50
    
    
    
    13
    
    
    
    29
    
    
    
    48
  12




---



##### Table of Contents



Item 3. Legal Proceedings
    
 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
    Authorized
    
    OutstandingCommon Stock
    
    100,000
    
    0Class A Common Stock
    
    100,000
    
    36,895
     13




---



##### Table of Contents



Item 6. Selected Financial Data
  Fiscal Year EndedSept. 29,
    
    
    Sept. 28,
    
    
    Sept. 26,
    
    
    Sept. 25,
    
    
    Sept. 24,2002
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2006(as restated)
    
    
    (as restated)
    
    
    (as restated)(In thousands, except per share and store data amounts)Statement of Earnings Data:Sales
    
    $
    2,666,346
    
    
    $
    2,753,774
    
    
    $
    3,705,209
    
    
    $
    3,372,844
    
    
    $
    3,508,794Cost of goods sold
    
    
    1,957,526
    
    
    
    1,999,361
    
    
    
    2,653,139
    
    
    
    2,468,736
    
    
    
    2,578,435Gross profit
    
    
    708,820
    
    
    
    754,413
    
    
    
    1,052,070
    
    
    
    904,108
    
    
    
    930,359Selling, general and administrative
expenses
    
    
    615,317
    
    
    
    659,547
    
    
    
    820,329
    
    
    
    772,885
    
    
    
    790,756Depreciation and amortization
    
    
    25,052
    
    
    
    27,660
    
    
    
    33,284
    
    
    
    39,575
    
    
    
    46,642Total operating expenses
    
    
    640,369
    
    
    
    687,207
    
    
    
    853,613
    
    
    
    812,460
    
    
    
    837,398Operating profit
    
    
    68,451
    
    
    
    67,206
    
    
    
    198,457
    
    
    
    91,648
    
    
    
    92,961Interest and other income (expense)
    
    
    142
    
    
    
    (44
    )
    
    
    855
    
    
    
    5,402
    
    
    
    8,288Interest expense
    
    
    (52,814
    )
    
    
    (53,254
    )
    
    
    (53,951
    )
    
    
    (57,142
    )
    
    
    (57,238
    )Interest expense related to debt
purchase
    
    
    
    
    
    
    
    
    
    
    (35,647
    )
    
    
    
    
    
    
    Equity in income from unconsolidatd
affiliate
    
    
    2,914
    
    
    
    1,330
    
    
    
    929
    
    
    
    
    
    
    
    Income before income taxes
    
    
    18,693
    
    
    
    15,238
    
    
    
    110,643
    
    
    
    39,908
    
    
    
    44,011Income taxes
    
    
    7,252
    
    
    
    5,471
    
    
    
    39,202
    
    
    
    13,662
    
    
    
    17,945Net income
    
    $
    11,441
    
    
    $
    9,767
    
    
    $
    71,441
    
    
    $
    26,246
    
    
    $
    26,066Earnings per common share
    
    $
    272.63
    
    
    $
    255.01
    
    
    $
    1,865.25
    
    
    $
    685.26
    
    
    $
    697.21
 14




---



##### Table of Contents



Item 6. Selected Financial Data (contd.)
 Fiscal Year EndedSept. 29,
    
    Sept. 28,
    
    Sept. 26,
    
    Sept. 25,
    
    Sept. 24,2002
    
    2003
    
    2004
    
    2005
    
    2006(In thousands, except per share and store data amounts)Balance Sheet Data (end of fiscal year):Working capital
    
    $
    119,643
    
    
    $
    124,517
    
    
    $
    319,855
    
    
    $
    277,154
    
    
    $
    233,280Total assets
    
    
    630,921
    
    
    
    663,836
    
    
    
    1,014,121
    
    
    
    1,055,369
    
    
    
    1,058,092Long-term notes
    
    
    458,750
    
    
    
    458,750
    
    
    
    700,000
    
    
    
    700,000
    
    
    
    700,000Long-term capitalized lease obligations
    
    
    10,981
    
    
    
    9,926
    
    
    
    9,470
    
    
    
    8,292
    
    
    
    7,294Other long-term liabilities
    
    
    43,533
    
    
    
    53,014
    
    
    
    83,112
    
    
    
    83,799
    
    
    
    80,316Common stockholders deficit
    
    
    (75,849
    )
    
    
    (66,082
    )
    
    
    (39,641
    )
    
    
    (13,395
    )
    
    
    (11,079
    )Dividends paid per share, Class A
common stock
    
    $
    117.49
    
    
    $
    
    
    
    $
    1,174.90
    
    
    $
    
    
    
    $
    135.52Cash Flow Data (as restated):Cash provided by operating activities
    
    
    51,168
    
    
    
    82,950
    
    
    
    133,125
    
    
    
    83,565
    
    
    
    89,130Cash provided by (used in)
financing activities
    
    
    (31,218
    )
    
    
    (1,116
    )
    
    
    119,481
    
    
    
    (1,235
    )
    
    
    (24,884
    )Cash used in investing activities
    
    
    (40,543
    )
    
    
    (51,725
    )
    
    
    (61,811
    )
    
    
    (120,880
    )
    
    
    (129,098
    )Other Operating and Financial Data:Sales increases (decreases):Total sales (as restated)
    
    
    3.6
    %
    
    
    3.3
    %
    
    
    34.6
    %
    
    
    (9.0
    )%
    
    
    4.0
    %Like stores sales(1)
    
    
    5.3
    %
    
    
    2.8
    %
    
    
    30.3
    %
    
    
    (12.1
    )%
    
    
    1.5
    %Operating profit
    
    $
    68,451
    
    
    $
    67,206
    
    
    $
    198,457
    
    
    $
    91,648
    
    
    $
    92,961Ratio of earnings to fixed charges(2)
    
    
    1.24x
    
    
    
    1.21x
    
    
    
    1.97x
    
    
    
    1.47x
    
    
    
    1.47xGross profit as a percentage of sales
    
    
    26.58
    %
    
    
    27.40
    %
    
    
    28.40
    %
    
    
    26.81
    %
    
    
    26.52
    %Selling, general and administrative
expenses as a percentage of sales
    
    
    23.08
    %
    
    
    23.96
    %
    
    
    22.14
    %
    
    
    22.92
    %
    
    
    22.54
    %Store Data(3):Number of stores (at end of fiscal year)
    
    
    156
    
    
    
    157
    
    
    
    158
    
    
    
    161
    
    
    
    162Average sales per store (000s)
    
    $
    17,092
    
    
    $
    17,619
    
    
    $
    23,014
    
    
    $
    20,404
    
    
    $
    20,937Average store size:Total square feet
    
    
    33,083
    
    
    
    33,111
    
    
    
    33,206
    
    
    
    33,474
    
    
    
    33,778Selling square feet
    
    
    23,675
    
    
    
    23,693
    
    
    
    23,746
    
    
    
    23,872
    
    
    
    24,028Total square feet (at end of
fiscal year) (000s)
    
    
    5,161
    
    
    
    5,205
    
    
    
    5,267
    
    
    
    5,415
    
    
    
    5,491Total selling square feet (at end of
fiscal year) (000s)
    
    
    3,693
    
    
    
    3,724
    
    
    
    3,764
    
    
    
    3,860
    
    
    
    3,904Sales per average square foot
    
    $
    517
    
    
    $
    532
    
    
    $
    693
    
    
    $
    610
    
    
    $
    620Sales per average selling square foot
    
    $
    722
    
    
    $
    744
    
    
    $
    969
    
    
    $
    855
    
    
    $
    871
 
 (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)
 15




---



##### 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. Included in earnings and
fixed charges for fiscal years 2002 and 2003 is our 50% share of Santee. For fiscal 2004,
included in earnings and fixed charges is our 50% share of fixed charges and earnings of
Santee through February 6, 2004. Santee has been consolidated into our consolidated results
since that date.(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. 16




---



##### Table of Contents



Item 7.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations
 Critical Accounting Policies
  Self-Insurance Reserves
  Employee Benefit Plans
    17




---



##### Table of Contents



Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations (contd.)
 Critical Accounting Policies (contd.)
 Long-Lived Assets
   Income Taxes
  Goodwill
  Store Closing Costs
  18




---



##### Table of Contents



Item 7.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations (contd.)
 Critical Accounting Policies (contd.)
 Advertising Allowances
   Gift Cards and Certificates
  Significant Accounting Policies
  19




---



##### Table of Contents



Item 7.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations (contd.)
 Ownership of the Company
  Executive Overview
        20




---



##### Table of Contents



Item 7.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations (contd.)
 Results of Operations
 Fiscal Year Ended
    
    ChangeSept. 26,
    
    Sept. 25,
    
    Sept. 24,
    
    2005 to
    
    2006 to2004
    
    2005
    
    2006
    
    2004
    
    2005(as restated)
    
    (as restated)
    
    (as restated)
    
    Dollar
    
    %
    
    Dollar
    
    %Sales
    
    $
    3,705,209
    
    
    $
    3,372,844
    
    
    $
    3,508,794
    
    
    $
    (332,365
    )
    
    
    (8.97
    )%
    
    $
    135,950
    
    
    
    4.03
    %Gross Profit
    
    $
    1,052,070
    
    
    $
    904,108
    
    
    $
    930,359
    
    
    $
    (147,962
    )
    
    
    (14.06
    )%
    
    $
    26,251
    
    
    
    2.90
    %as a % of sales
    
    
    28.39
    %
    
    
    26.81
    %
    
    
    26.52
    %
 Sales
   Like Store Sales
     Santee Sales
  21




---



##### 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
 Fiscal Year Ended
    
    ChangeSept. 26,
    
    Sept. 25,
    
    Sept. 24,
    
    2005 to
    
    2006 to2004
    
    2005
    
    2006
    
    2004
    
    2005Dollar
    
    %
    
    Dollar
    
    %Operating Expenses:Selling, general and
administrative expenses
    
    $
    820,329
    
    
    $
    772,885
    
    
    $
    790,756
    
    
    $
    (47,444
    )
    
    
    (5.78
    )%
    
    $
    17,871
    
    
    
    2.31
    %as a % of sales
    
    
    22.13
    %
    
    
    22.92
    %
    
    
    22.54
    %Depreciation and amortization
    
    $
    33,284
    
    
    $
    39,575
    
    
    $
    46,642
    
    
    $
    6,291
    
    
    
    18.90
    %
    
    $
    7,067
    
    
    
    17.86
    %as a % of sales
    
    
    0.90
    %
    
    
    1.17
    %
    
    
    1.33
    %Operating profit
    
    $
    198,457
    
    
    $
    91,648
    
    
    $
    92,961
    
    
    $
    (106,809
    )
    
    
    (53.82
    )%
    
    $
    1,313
    
    
    
    1.43
    %as a % of sales
    
    
    5.36
    %
    
    
    2.72
    %
    
    
    2.65
    %
 Selling, General and Administrative Expenses
    22




---



##### 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
   Equity in Income from Unconsolidated Affiliate
  Income Before Income Taxes
  Income Taxes
  Net Income
  23




---



##### Table of Contents



Item 7.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations (contd.)
 Liquidity and Capital Resources
         24




---



##### 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 2007
 New corporate office and distribution facilities
    
    $
    189,282New store construction, less reimbursements
    
    
    19,496Store remodels
    
    
    24,835MIS equipment and software
    
    
    7,369Store equipment
    
    
    14,993Transportation equipment
    
    
    2,220Production equipment
    
    
    2,000Distribution equipment
    
    
    353Office equipment and other
    
    
    344$
    260,892
    Credit Facilities
  25




---



##### Table of Contents



Item 7.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations (contd.)
 Liquidity and Capital Resources (contd.)
 Credit Facilities (contd.)
        26




---



##### Table of Contents



Item 7.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations (contd.)
 Liquidity and Capital Resources (contd.)
 Credit Facilities (contd.)
    Labor Relations
   Off-Balance Sheet Arrangements
  27




---



##### 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
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    525,000Interest
    
    
    255,937
    
    
    
    42,656
    
    
    
    85,313
    
    
    
    85,313
    
    
    
    42,655780,937
    
    
    
    42,656
    
    
    
    85,313
    
    
    
    85,313
    
    
    
    567,655Floating Rate Senior Notes due 2010(1)Principal
    
    
    175,000
    
    
    
    
    
    
    
    
    
    
    
    175,000
    
    
    
    Interest
    
    
    59,162
    
    
    
    15,774
    
    
    
    31,590
    
    
    
    11,798
    
    
    
    234,162
    
    
    
    15,774
    
    
    
    31,590
    
    
    
    186,798
    
    
    
    Capital lease obligations (2)Principal
    
    
    8,348
    
    
    
    1,054
    
    
    
    2,170
    
    
    
    2,917
    
    
    
    2,207Interest
    
    
    5,043
    
    
    
    1,243
    
    
    
    2,052
    
    
    
    1,292
    
    
    
    45613,391
    
    
    
    2,297
    
    
    
    4,222
    
    
    
    4,209
    
    
    
    2,663Operating leases (2)
    
    
    268,558
    
    
    
    36,286
    
    
    
    52,946
    
    
    
    37,346
    
    
    
    141,980Total contractual cash obligations
    
    $
    1,297,048
    
    
    $
    97,013
    
    
    $
    174,071
    
    
    $
    313,666
    
    
    $
    712,298Other Commercial Commitments(in thousands)Less than
    
    
    
    
    
    
    
    
    
    
    AfterTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    4-5 Years
    
    
    5 YearsStandby letters of credit (3)
    
    $
    57,733
    
    
    $
    57,733
    
    
    $
    
    
    
    $
    
    
    
    $
    Total other commercial commitments
    
    $
    57,733
    
    
    $
    57,733
    
    
    $
    
    
    
    $
    
    
    
    $
    
 
 (1)
    
    Interest on 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 September 24, 2006 was
8.89%.(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
and as security for current rent obligations. Outstanding letters of credit expire between
December 2006 and October 2007. 28




---



##### Table of Contents



Item 7.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations (contd.)
 Recent Accounting Pronouncements
    Cautionary Statement
  29




---



##### Table of Contents



Item 7A. Quantitative and Qualitative Disclosure about Market Risk
  Expected Year of Maturity(In thousands)Fair2007
    
    2008
    
    2009
    
    2010
    
    2011
    
    Thereafter
    
    ValueLong-term debt and
Capital lease obligations
    
    $
    1,243
    
    
    $
    1,131
    
    
    $
    1,155
    
    
    $
    176,336
    
    
    $
    1,567
    
    
    $
    527,207
    
    
    $
    712,723Average interest rate
    
    
    8.40
    %
    
    
    8.39
    %
    
    
    8.38
    %
    
    
    8.37
    %
    
    
    8.18
    %
    
    
    8.19
    %
 30




---



##### Table of Contents



Item 8. Financial Statements and Supplementary Data
  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 Page NumberReport of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets at September 26, 2004, September 25, 2005
and September 24, 2006
    
    
    F-3Fiscal years ended September 26, 2004, September 25, 2005 and
September 24, 2006:Consolidated Statements of Income (as restated)
    
    
    F-5Consolidated Statements of Cash Flows (as restated)
    
    
    F-6Consolidated Statements of Stockholders 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
    
 Item 9B. Other Information
  31




---



##### Table of Contents



PART III
 
 Item 10. Directors and Executive Officers of the Registrant
  Name
    
    Age
    
    PositionJack H. Brown
    
    
    67
    
    
    Chairman of the Board, President
and Chief Executive OfficerDonald I. Baker
    
    
    65
    
    
    President and Chief Operating Officer
of MarketsPhillip J. Smith
    
    
    59
    
    
    Executive Vice President and Chief Financial OfficerJames W. Lee
    
    
    55
    
    
    Executive Vice President of Retail Operations
and Administration of MarketsDennis L. McIntyre
    
    
    46
    
    
    Group Senior Vice President of Marketing of MarketsBruce D. Varner
    
    
    70
    
    
    Director and SecretaryThomas W. Field, Jr.
    
    
    72
    
    
    Vice Chairman of the Board of DirectorsC. Dale Warman
    
    
    77
    
    
    Director
 Background of Directors and Executive Officers
 Jack H. Brown
 Donald I. Baker
 32




---



##### Table of Contents



Item 10. Directors and Executive Officers of the Registrant (contd.)
 Background of Directors and Executive Officers (contd.)
 Phillip J. Smith
 James W. Lee
 Dennis L. McIntyre
 Bruce D. Varner
 Thomas W. Field, Jr.
 C. Dale Warman
 33




---



##### Table of Contents



Item 11. Executive Compensation
  Annual CompensationName and
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other Annual
    
    All Other(1)(2)(3)(7)Principal Position
    
    Year
    
    Salary
    
    Bonuses(4)(5)(6)
    
    Compensation
    
    CompensationJack H. Brown
    
    
    2006
    
    
    $
    1,551,000
    
    
    $
    
    
    
    $
    
    
    
    $
    51,000Chairman, President and
    
    
    2005
    
    
    $
    1,505,000
    
    
    $
    7,500,000
    
    
    $
    
    
    
    $
    54,348Chief Executive Officer
    
    
    2004
    
    
    $
    1,350,000
    
    
    $
    3,125,000
    
    
    $
    
    
    
    $
    54,478Donald I. Baker
    
    
    2006
    
    
    $
    680,000
    
    
    $
    
    
    
    $
    
    
    
    $
    President and Chief Operating
    
    
    2005
    
    
    $
    665,000
    
    
    $
    350,000
    
    
    $
    
    
    
    $
    1,003,348Officer of Markets
    
    
    2004
    
    
    $
    553,000
    
    
    $
    480,000
    
    
    $
    
    
    
    $
    2,978Phillip J. Smith
    
    
    2006
    
    
    $
    277,000
    
    
    $
    
    
    
    $
    
    
    
    $
    Executive Vice President and
    
    
    2005
    
    
    $
    256,000
    
    
    $
    155,000
    
    
    $
    
    
    
    $
    303,348Chief Financial Officer
    
    
    2004
    
    
    $
    231,000
    
    
    $
    510,000
    
    
    $
    
    
    
    $
    2,978James W. Lee
    
    
    2006
    
    
    $
    314,000
    
    
    $
    
    
    
    $
    
    
    
    $
    Excecutive Vice President of Retail
    
    
    2005
    
    
    $
    283,000
    
    
    $
    110,000
    
    
    $
    
    
    
    $
    3,348Operations and Administration of Markets
    
    
    2004
    
    
    $
    252,000
    
    
    $
    170,000
    
    
    $
    
    
    
    $
    2,978Dennis L. McIntyre
    
    
    2006
    
    
    $
    295,000
    
    
    $
    
    
    
    $
    
    
    
    $
    Group Senior Vice President
    
    
    2005
    
    
    $
    290,000
    
    
    $
    110,000
    
    
    $
    
    
    
    $
    3,348of Marketing of Markets
    
    
    2004
    
    
    $
    257,000
    
    
    $
    170,000
    
    
    $
    
    
    
    $
    2,978
 
 (1)
    
    The dollar value of perquisites and other personal benefits, if any, for each of the
Named Executive Officers was less than the reporting thresholds established by the
Securities and Exchange Commission.(2)
    
    Amounts shown for the Named Executive Officers represent contributions to the Companys
Profit Sharing Plan, a defined contribution plan, for the account of each Named Executive
Officer. Plan participants become fully vested in the plan after seven years of service.(3)
    
    Includes Mr. Browns Director Fees for 2004, 2005 and 2006, which amounted to $51,500,
$51,000 and $51,000, respectively.(4)
    
    Annual performance bonuses to be paid to the Named Executive Officers for fiscal 2006 had
neither been calculated nor awarded as of March 30, 2007, the latest practical date.(5)
    
    Amounts shown for fiscal 2004 include performance bonuses earned during the Southern
California labor dispute. Amounts shown for fiscal 2004 for Mr. Smith also include bonuses
for the Santee transaction and successful bond offering.(6)
    
    Amount shown for fiscal 2005 for Mr. Brown included a bonus paid for a successful $700
million bond offering in fiscal 2004.(7)
    
    One-time payment election pursuant to the Phantom Stock Plan for Mr. Baker and Mr. Smith. Stock Options and SARs
  34




---



##### Table of Contents



Item 11. Executive Compensation (contd.)
 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
    
    
    
    11,966
    
    
    
    15,954
    
    
    
    19,943
    
    
    
    23,931
    
    
    
    27,920100,000
    
    
    
    20,028
    
    
    
    26,704
    
    
    
    33,380
    
    
    
    40,056
    
    
    
    46,732125,000
    
    
    
    28,091
    
    
    
    37,454
    
    
    
    46,818
    
    
    
    56,181
    
    
    
    65,545150,000
    
    
    
    36,153
    
    
    
    48,204
    
    
    
    60,255
    
    
    
    72,306
    
    
    
    84,357175,000
    
    
    
    44,216
    
    
    
    58,954
    
    
    
    73,693
    
    
    
    88,431
    
    
    
    103,170200,000
    
    
    
    52,278
    
    
    
    69,704
    
    
    
    87,130
    
    
    
    104,556
    
    
    
    121,982210,000
    
    
    
    55,503
    
    
    
    74,004
    
    
    
    92,505
    
    
    
    111,006
    
    
    
    129,507
 Board of Directors
    Code of Ethics
  35




---



##### Table of Contents



Item 11. Executive Compensation (contd.)
 Employment and Severance Agreements
    Phantom Stock Plan
   36




---



##### 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)
    
    
    36,895
    
    
    
    100
    %Jack H. Brown(1)(2)
    
    
    36,895
    
    
    
    100
    %Donald I. Baker(2)
    
    
    
    
    
    
    Phillip J. Smith(2)
    
    
    
    
    
    
    Dennis L. McIntyre(2)
    
    
    
    
    
    
    James W. Lee(2)
    
    
    
    
    
    
    Bruce D. Varner(2)
    
    
    
    
    
    
    Thomas W. Field, Jr.(2)
    
    
    
    
    
    
    C. Dale Warman(2)
    
    
    
    
    
    
    All Directors and executive officers
as a group (10 persons)(1)
    
    
    36,895
    
    
    
    100
    %
 
 (1)
    
    The 36,895 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 partner
of La Cadena is The Jack H. Brown Revocable Trust dated June 29, 2000. Mr. Browns Trust
has the sole 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, McIntyre, Lee, Varner, Field and Warman is c/o
Stater Bros. at 21700 Barton Road, Colton, California 92324. Change of Control Arrangements
  37




---



##### Table of Contents



Item 13. Certain Relationships and Related Transactions
    
 Item 14. Principal Accounting Fees and Services
 Audit Fees
  Audit Related Fees
  Tax Fees
  All Other Fees
  38




---



##### Table of Contents



PART IV
 
 Item 15. Exhibits and Financial Statement Schedules
  (1)
    
    Financial StatementsSee Financial Statement Index included in Item 8 of Part II of this Form
10-K/A.(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
    
    
    
    (9
    )
    
    Articles of Incorporation of Stater Bros. Markets3.4
    
    
    
    (9
    )
    
    By-Laws of Stater Bros. Markets3.5
    
    
    
    (9
    )
    
    Articles of Incorporation of Stater Bros. Development, Inc.3.6
    
    
    
    (9
    )
    
    By-Laws of Stater Bros. Development, Inc.3.7
    
    
    
    (9
    )
    
    Articles of Incorporation of Santee Dairies, Inc3.8
    
    
    
    (9
    )
    
    By-Laws of Santee Dairies, Inc.3.9
    
    
    
    (12
    )
    
    Articles of Incorporation of Super Rx, Inc.3.10
    
    
    
    (12
    )
    
    By-Laws of Super Rx, Inc.4.1
    
    
    
    (9
    )
    
    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
    
    
    
    (9
    )
    
    Registration Rights Agreement dated as of June
17, 2004 between Stater Bros. Holdings Inc., as Issuer, Stater Bros.
Markets, Stater Bros. Development, Inc. and Santee Dairies, Inc., as
Guarantors and Bank of America Securities LLC, as Initial Purchaser4.3
    
    
    
    (9
    )
    
    Specimen Form of Fixed Rate Global Note4.4
    
    
    
    (9
    )
    
    Specimen Form of Floating Rate Global Note
 39




---



##### Table of Contents



Item 15. Exhibits and Financial Statement Schedules (contd.)
  exhibit no.
    
    
    
    
    
    description4.5
    
    
    
    (9
    )
    
    First Supplemental Indenture, dated as of
January 11, 2002, between Stater Bros. Holdings Inc. and The Bank of
New York, as successor in interest to IBJ Whitehall Bank & Trust
Company, as Trustee for the 10.75% Senior Notes due 20064.6
    
    
    
    (8
    )
    
    Second Supplemental Indenture, dated as of May
27, 2004 between Stater Bros. Holdings Inc. and The Bank of New York,
as successor in interest to IBJ Whitehall Bank & Trust Company, as
Trustee for the 10.75% Senior Notes due 20065.1
    
    
    
    (9
    )
    
    Opinion of Gibson, Dunn & Crutcher LLP10.1
    
    
    
    (1
    )
    
    Reclassification Agreement dated September 3,
1993, by and among Stater Bros., Craig and La Cadena10.2
    
    
    
    (1
    )
    
    Amendment to Reclassification Agreement, dated
January 12, 1994, by and among Stater Bros., Craig and La Cadena10.3
    
    
    
    (1
    )
    
    Agreement of Stockholders dated May 10, 1989,
by and among Stater Bros., Craig and La Cadena10.4
    
    
    
    (1
    )
    
    Amendment to Agreement of Stockholders dated
September 3, 1993, by and among Stater Bros., Craig, Craig Management,
Inc. and La Cadena10.5
    
    
    
    (1
    )
    
    Option Agreement dated September 3, 1993, by
and between Stater Bros. and Craig10.6
    
    
    
    (1
    )
    
    Amendment to Option Agreement dated January
12, 1994, by and between Stater Bros. and Craig10.7
    
    
    
    (1
    )
    
    Consulting Agreement dated September 3, 1993,
by and between Stater Bros., Craig and CMI10.8
    
    
    
    (1
    )
    
    Letter Agreement regarding Consulting
Agreement, dated March 8,1994, by and between Stater Bros., Craig and
CMI10.9
    
    
    
    (1
    )
    
    Second Amended and Restated Stock Agreement
dated January 12, 1994, by and among Stater Bros., Craig, CMI, La
Cadena and James J. Cotter10.10
    
    
    
    (1
    )
    
    Security Agreement dated March 8, 1994, by
and between Stater Bros. and Craig10.11
    
    
    
    (1
    )
    
    Credit Agreement dated March 8, 1994, by and
between Stater Bros. Markets and Bank of America Trust and Savings
Association10.12
    
    
    
    (2
    )
    
    Amendment dated June 23, 1995 to the Credit
Agreement dated March 8, 1994, by and between Stater Bros. Markets and
Bank of America Trust and Savings Association10.13
    
    
    
    (2
    )
    
    Amendment dated July 22, 1996 to the Credit
Agreement dated March 8, 1994, by and between Stater Bros. Markets and
Bank of America Trust and Savings Association
 40




---



##### Table of Contents



Item 15. Exhibits and Financial Statement Schedules (contd.)
  exhibit no.
    
    
    
    
    
    description10.14
    
    
    
    (9
    )
    
    Credit Agreement dated as of June 17, 2004 by
and among Stater Bros. Markets, Stater Bros. and Bank of America, N.A10.15
    
    
    
    (1
    )
    
    Continuing Guaranty dated March 8, 1994, of
Stater Bros. Development, Inc. in favor of Bank of America Trust and
Savings Association10.16
    
    
    
    (1
    )
    
    Subordination Agreement dated March 8, 1994,
by and among Stater Bros., Stater Bros. Markets and Bank of America
Trust and Savings Association10.17
    
    
    
    (1
    )
    
    Amended and Restated Sublease Agreement dated
June 1, 1983, between Wren Leasing Corp., as Lessor, and Stater Bros.
Markets, as Lessee10.18
    
    
    
    (1
    )
    
    Preferred Stock Agreement dated March 22,
1983, between Stater Bros. Markets and Petrolane Incorporated10.19
    
    
    
    (1
    )
    
    Escrow Agreement dated September 19, 1985, by
and among Stater Bros. Markets, Petrolane Incorporated and First
Interstate Bank of California10.20
    
    
    
    (2
    )
    
    Dealer Manager Agreement dated as of July 1,
1999, by and between Stater Bros. and Banc of America Securities LLC10.21
    
    
    
    (3
    )
    
    Employment contract dated June 1, 2000 by and
between Stater Bros. Markets and Jack H. Brown10.22
    
    
    
    (4
    )
    
    Employment contract dated June 1, 2000, as
amended, by and between Stater Bros. Markets and Donald I. Baker10.23
    
    
    
    (4
    )
    
    Employment contract dated June 1, 2000, as
amended, by and between Stater Bros. Markets and A. Gayle Paden10.24
    
    
    
    (4
    )
    
    Employment contract dated June 1, 2000 by and
between Stater Bros. Markets and H. Harrison Lightfoot10.25
    
    
    
    (4
    )
    
    Employment contract dated June 1, 2000 by and
between Stater Bros. Markets and Phillip J. Smith10.26
    
    
    
    (4
    )
    
    Stater Bros. Holdings Inc. Phantom Stock Plan10.27
    
    
    
    (5
    )
    
    First Amendment dated September 15, 2000 to
the Credit Agreement dated as of August 6, 1999 by and among Stater
Bros. Markets, Stater Bros. Holdings Inc. and Bank of America, N.A.10.28
    
    
    
    (5
    )
    
    Second Amendment dated December 13, 2001 to
the Credit Agreement dated as of August 6, 1999 by and among Stater
Bros. Markets, Stater Bros. Holdings Inc. and Bank of America, N.A.10.29
    
    
    
    (5
    )
    
    Third Amendment dated January 18, 2002 to the
Credit Agreement dated as of August 6, 1999 by and among Stater Bros.
Markets, Stater Bros. Holdings Inc. and Bank of America, N.A.10.30
    
    
    
    (5
    )
    
    Subordinated Note for $20,000,000 dated
January 22, 2002 between Stater Bros. and H. Harrison Lightfoot with an
interest rate of 5% due March 31, 2007
 41




---



##### Table of Contents



Item 15. Exhibits and Financial Statement Schedules (contd.)
  exhibit no.
    
    
    
    
    
    description10.31
    
    
    
    (6
    )
    
    Employment contract dated June 1, 2000 by and
between Stater Bros. Markets and Dennis L. McIntyre10.32
    
    
    
    (6
    )
    
    Employment contract dated June 1, 2000 by and
between Stater Bros. Markets and Edward A. Stater10.33
    
    
    
    (6
    )
    
    Employment contract dated August 1, 2002 by
and between Stater Bros. Markets and James W. Lee10.34
    
    
    
    (7
    )
    
    Fourth Amendment dated February 4, 2003 to
the Credit Agreement dated as of August 6, 1999 by and among Stater
Bros. Markets, Stater Bros. Holdings Inc. and Bank of America, N.A.10.35
    
    
    
    (8
    )
    
    Owner Participation Agreement, dated as of
April 14, 2004 between Stater Bros. Markets and the Inland Valley
Development Agency10.36
    
    
    
    (8
    )
    
    Development Parcel Disposition Agreement,
dated as of June 16, 2004 between Stater Bros. Markets and Hillwood/San
Bernardino, LLC10.37
    
    
    
    (9
    )
    
    Subsidiary Guaranty entered into as of June
17, 2004 by Stater Bros. Holdings Inc., Stater Bros. Development, Inc.
and Santee Dairies, Inc.10.38
    
    
    
    (11
    )
    
    Asset Purchase Agreement dated as of July
11, 2005 by and between Super Rx, Inc. and California Pharmacy Systems,
Inc.10.39
    
    
    
    (12
    )
    
    Amendment No. 1 to Amended and Restated
Stater Bros. Holdings Inc. Phantom Stock Plan dated September 30, 200512.1
    
    
    
    (13
    )
    
    Computation of ratio of earnings to fixed charges.14.1
    
    
    
    (10
    )
    
    Copy of Financial Code of Ethics.21.1
    
    
    
    (9
    )
    
    Subsidiaries of Stater Bros. Holdings Inc.21.2
    
    
    
    (12
    )
    
    Subsidiaries of Stater Bros. Markets31.1
    
    
    
    (13
    )
    
    Certification of Principal Executive Officer
pursuant to Section 302 (a) of the Sarbanes-Oxley Act of 2002.31.2
    
    
    
    (13
    )
    
    Certification of Principal Financial Officer
pursuant to Section 302 (a) of the Sarbanes-Oxley Act of 2002.32.1
    
    
    
    (13
    )
    
    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. 33-77296
dated July 21, 1994.(2
    )
    
    Previously filed with the Securities and Exchange
Commission as an exhibit to the Registration Statement S-4 No.
333-85723 dated August 20, 1999(3
    )
    
    Previously 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.
 42




---



##### Table of Contents



Item 15. Exhibits and Financial Statement Schedules (contd.)
  exhibit no.
    
    description(4
    )
    
    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.(5
    )
    
    Previously filed with the Securities and Exchange
Commission as exhibits to the Registrants Quarterly Report on Form
10-Q dated December 31, 2001.(6
    )
    
    Previous 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.(7
    )
    
    Previously filed with the Securities and Exchange
Commission as exhibits to the Registrants Quarterly Report on Form
10-Q dated December 29, 2002.(8
    )
    
    Incorporated by reference to Exhibit 10.35 to the
Quarterly Report on Form 10-Q for the quarter ended June 27, 2004.(9
    )
    
    Previously filed with the Securities and Exchange
Commission as an exhibit to the Registration Statement S-4 No.
333-118436 dated August 27, 2004, as amended.(10
    )
    
    Filed with the Securities and Exchange Commission
as exhibits with the Annual Report on Form 10-K for the fiscal year
ended September 26, 2004.(11
    )
    
    Previously filed with the Securities and Exchange
Commission as an exhibit to the Registrants Quarterly Report on
Form
10-Q dated June 26, 2005.(12
    )
    
    Filed with the Securities and Exchange Commission
as exhibits with the Annual Report on Form 10-K for the fiscal year
ended September 25, 2005.(13
    )
    
    Filed with the Securities and Exchange Commission
as exhibits with the Annual Report on Form 10-K/A for the fiscal year
ended September 24, 2006.
 Copies of Exhibits listed herein can be obtained by writing and requesting
Exhibits from: Corporate Secretary, P. O. Box 150, Colton, California
92324.
 43




---



##### Table of Contents



STATER BROS. HOLDINGS INC.
FOR THE FISCAL YEAR ENDED SEPTEMBER 24, 2006
FORM 10-K/A
 
 SIGNATURES
 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
 March 30,
2007
    
    Stater Bros. Holdings Inc.DateBy:
    
    /s/ Jack H. BrownJack H. BrownChairman of the Board,
President and Chief
Executive Officer
 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the capacities and on the
dates indicated.
 Signature
    
    Title
    
    Date/s/     Jack H. Brown

Jack H. Brown
    
    Chairman of the Board, President and Chief
Executive Officer and Director

(Principal Executive Officer)
    
    March 30, 2007/s/     Thomas W. Field, Jr.

Thomas W. Field, Jr.
    
    Vice Chairman of the Board and
Director
    
    March 30, 2007/s/     Bruce D. Varner

Bruce D. Varner
    
    Secretary and Director
    
    March 30, 2007/s/     Phillip J. Smith

Phillip J. Smith
    
    Executive Vice President and Chief
Financial Officer
(Principal Financial Officer)
    
    March 30, 2007
 44




---



##### Table of Contents



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 Page NumberReport of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets at September 26, 2004, September 25, 2005
and September 24, 2006
    
    
    F-3Fiscal years ended September 26, 2004, September 25, 2005
and September 24, 2006:Consolidated Statements of Income (as restated)
    
    
    F-5Consolidated Statements of Cash Flows (as restated)
    
    
    F-6Consolidated Statements of Stockholders 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. 26,
    
    
    Sept. 25,
    
    
    Sept. 24,2004
    
    
    2005
    
    
    2006Current assetsCash and cash equivalents
    
    $
    301,947
    
    
    $
    263,397
    
    
    $
    198,545Restricted cash
    
    
    20,000
    
    
    
    29,000
    
    
    
    24,121Short-term investments
    
    
    
    
    
    
    
    
    
    
    26,849Receivables, net of allowance of $736, $897, and $936
    
    
    39,258
    
    
    
    42,556
    
    
    
    35,310Income tax receivables
    
    
    
    
    
    
    2,450
    
    
    
    3,863Inventories
    
    
    185,567
    
    
    
    185,302
    
    
    
    196,031Prepaid expenses
    
    
    8,847
    
    
    
    8,663
    
    
    
    8,513Deferred income taxes
    
    
    25,416
    
    
    
    22,459
    
    
    
    21,609Total current assets
    
    
    581,035
    
    
    
    553,827
    
    
    
    514,841Property and equipmentLand
    
    
    68,120
    
    
    
    89,518
    
    
    
    110,479Buildings and improvements
    
    
    252,715
    
    
    
    297,228
    
    
    
    323,805Store fixtures and equipment
    
    
    337,589
    
    
    
    376,239
    
    
    
    397,491Property subject to capital leases
    
    
    25,891
    
    
    
    25,903
    
    
    
    25,836684,315
    
    
    
    788,888
    
    
    
    857,611Less accumulated depreciation and amortization
    
    
    279,459
    
    
    
    320,951
    
    
    
    360,538404,856
    
    
    
    467,937
    
    
    
    497,073Goodwill
    
    
    
    
    
    
    2,894
    
    
    
    2,894Deferred income taxes, long-term
    
    
    
    
    
    
    5,302
    
    
    
    8,845Long-term receivable
    
    
    
    
    
    
    
    
    
    
    12,160Deferred debt issuance costs, net
    
    
    21,891
    
    
    
    19,011
    
    
    
    15,972Other assets
    
    
    6,339
    
    
    
    6,398
    
    
    
    6,30728,230
    
    
    
    33,605
    
    
    
    46,178Total assets
    
    $
    1,014,121
    
    
    $
    1,055,369
    
    
    $
    1,058,092
  F-3




---



##### Table of Contents



STATER BROS. HOLDINGS INC.
 CONSOLIDATED BALANCE SHEETS (contd.)
  LIABILITIES AND STOCKHOLDERS DEFICIT
 Sept. 26,
    
    
    Sept. 25,
    
    
    Sept. 24,2004
    
    
    2005
    
    
    2006Current liabilitiesAccounts payable
    
    $
    144,612
    
    
    $
    144,298
    
    
    $
    155,827Accrued payroll and related expenses
    
    
    55,049
    
    
    
    59,951
    
    
    
    55,582Other accrued liabilities
    
    
    60,210
    
    
    
    71,234
    
    
    
    69,098Accrued income taxes
    
    
    62
    
    
    
    
    
    
    
    Current portion of capital lease obligations
    
    
    1,247
    
    
    
    1,190
    
    
    
    1,054Total current liabilities
    
    
    261,180
    
    
    
    276,673
    
    
    
    281,561Deferred income taxes
    
    
    2,209
    
    
    
    
    
    
    
    Long-term debt
    
    
    700,000
    
    
    
    700,000
    
    
    
    700,000Capital lease obligations, less current portion
    
    
    9,470
    
    
    
    8,292
    
    
    
    7,294Long-term portion of self-insurance and other reserves
    
    
    35,654
    
    
    
    35,442
    
    
    
    33,112Long-term deferred benefits
    
    
    40,268
    
    
    
    44,312
    
    
    
    43,573Other long-term liabilities
    
    
    4,981
    
    
    
    4,045
    
    
    
    3,631Total liabilities
    
    
    1,053,762
    
    
    
    1,068,764
    
    
    
    1,069,171Commitments and contingenciesStockholders deficitCommon Stock, $.01 par value:Authorized shares - 100,000Issued and outstanding shares - 0 in 2004, 2005 and 2006
    
    
    
    
    
    
    
    
    
    
    Class A Common Stock, $.01 par value:Authorized shares - 100,000Issued and outstanding shares - 38,301 in 2004 and 2005
and 36,895 in 2006
    
    
    
    
    
    
    
    
    
    
    Additional paid-in capital
    
    
    9,740
    
    
    
    9,740
    
    
    
    9,382Retained deficit
    
    
    (49,381
    )
    
    
    (23,135
    )
    
    
    (20,461
    )Total stockholders deficit
    
    
    (39,641
    )
    
    
    (13,395
    )
    
    
    (11,079
    )Total liabilities and stockholders deficit
    
    $
    1,014,121
    
    
    $
    1,055,369
    
    
    $
    1,058,092
  F-4




---



##### Table of Contents



STATER BROS. HOLDINGS INC.
 
 CONSOLIDATED STATEMENTS OF INCOME
  Fiscal Year EndedSept. 26,
    
    
    Sept. 25,
    
    
    Sept. 24,2004
    
    
    2005
    
    
    2006(as restated)
    
    
    (as restated)
    
    
    (as restated)Sales
    
    $
    3,705,209
    
    
    $
    3,372,844
    
    
    $
    3,508,794Cost of goods sold
    
    
    2,653,139
    
    
    
    2,468,736
    
    
    
    2,578,435Gross profit
    
    
    1,052,070
    
    
    
    904,108
    
    
    
    930,359Operating expenses:Selling, general and administrative expenses
    
    
    820,329
    
    
    
    772,885
    
    
    
    790,756Depreciation and amortization
    
    
    33,284
    
    
    
    39,575
    
    
    
    46,642Total operating expenses
    
    
    853,613
    
    
    
    812,460
    
    
    
    837,398Operating profit
    
    
    198,457
    
    
    
    91,648
    
    
    
    92,961Interest income
    
    
    2,198
    
    
    
    6,816
    
    
    
    10,284Interest expense
    
    
    (53,951
    )
    
    
    (57,142
    )
    
    
    (57,238
    )Interest expense related to debt purchase
    
    
    (35,647
    )
    
    
    
    
    
    
    Equity in income from unconsolidated affiliate
    
    
    929
    
    
    
    
    
    
    
    Other expenses, net
    
    
    (1,343
    )
    
    
    (1,414
    )
    
    
    (1,996
    )Income before income taxes
    
    
    110,643
    
    
    
    39,908
    
    
    
    44,011Income taxes
    
    
    39,202
    
    
    
    13,662
    
    
    
    17,945Net income
    
    $
    71,441
    
    
    $
    26,246
    
    
    $
    26,066Earnings per average common shares outstanding
    
    $
    1,865.25
    
    
    $
    685.26
    
    
    $
    697.21Dividends per common share outstanding at end of year
    
    $
    1,174.90
    
    
    $
    
    
    
    $
    135.52Average common shares outstanding
    
    
    38,301
    
    
    
    38,301
    
    
    
    37,386Common shares outstanding at end of year
    
    
    38,301
    
    
    
    38,301
    
    
    
    36,895
  F-5




---



##### Table of Contents



STATER BROS. HOLDINGS INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
  Fiscal Year EndedSept. 26,
    
    
    Sept. 25,
    
    
    Sept. 24,2004
    
    
    2005
    
    
    2006(as restated)
    
    
    (as restated)
    
    
    (as restated)Operating activities:Net income
    
    $
    71,441
    
    
    $
    26,246
    
    
    $
    26,066Adjustments to reconcile net income to net cash provided
by operating activities:Depreciation and amortization
    
    
    43,735
    
    
    
    51,754
    
    
    
    58,570Amortization of debt issuance costs
    
    
    11,318
    
    
    
    3,042
    
    
    
    3,038Gain from litigation settlement
    
    
    (22,371
    )
    
    
    
    
    
    
    Deferred income taxes
    
    
    (17,064
    )
    
    
    (4,554
    )
    
    
    (2,693
    )Loss on disposals of assets
    
    
    1,488
    
    
    
    1,594
    
    
    
    2,176Premium, fees and make-whole payments related to debt purchase
    
    
    (26,519
    )
    
    
    
    
    
    
    Net undistributed income in unconsolidated affiliate
    
    
    (929
    )
    
    
    
    
    
    
    Changes in operating assets and liabilities:(Increase) decrease in restricted cash
    
    
    (20,000
    )
    
    
    (9,000
    )
    
    
    4,879(Increase) decrease in receivables
    
    
    (4,749
    )
    
    
    (3,298
    )
    
    
    7,246(Increase) decrease in income tax receivables
    
    
    4,354
    
    
    
    (2,512
    )
    
    
    (1,413
    )(Increase) decrease in inventories
    
    
    (10,604
    )
    
    
    1,994
    
    
    
    (10,729
    )(Increase) decrease in prepaid expenses
    
    
    (721
    )
    
    
    100
    
    
    
    116(Increase) decrease in other assets
    
    
    11,477
    
    
    
    (171
    )
    
    
    92Increase (decrease) in accounts payable
    
    
    24,520
    
    
    
    (314
    )
    
    
    11,529Increase in accrued income taxes
    
    
    62
    
    
    
    
    
    
    
    Increase (decrease) in other accrued liabilities
    
    
    39,075
    
    
    
    15,926
    
    
    
    (6,264
    )Increase (decrease) in long-term reserves
    
    
    28,612
    
    
    
    2,758
    
    
    
    (3,483
    )Net cash provided by operating activities
    
    
    133,125
    
    
    
    83,565
    
    
    
    89,130Financing activities:Proceeds from issuance of long-term debt
    
    
    700,000
    
    
    
    
    
    
    
    Proceeds from equipment financing
    
    
    718
    
    
    
    
    
    
    
    Debt issuance costs
    
    
    (22,723
    )
    
    
    
    
    
    
    Dividends paid
    
    
    (45,000
    )
    
    
    
    
    
    
    (5,000
    )Stock redemption
    
    
    
    
    
    
    
    
    
    
    (18,750
    )Principal payments on long-term debt
    
    
    (512,250
    )
    
    
    
    
    
    
    Principal payments on capital lease obligations
    
    
    (1,264
    )
    
    
    (1,235
    )
    
    
    (1,134
    )Net cash provided by (used in) financing activities
    
    
    119,481
    
    
    
    (1,235
    )
    
    
    (24,884
    )Investing activities:Increase in short-term investments
    
    
    
    
    
    
    
    
    
    
    (26,849
    )Increase in long-term receivable
    
    
    
    
    
    
    
    
    
    
    (12,160
    )Acquisition of pharmacies
    
    
    
    
    
    
    (4,845
    )
    
    
    Purchase of property and equipment
    
    
    (61,986
    )
    
    
    (116,341
    )
    
    
    (95,797
    )Proceeds from sale of property and equipment
    
    
    175
    
    
    
    306
    
    
    
    5,708Net cash used in investing activities
    
    
    (61,811
    )
    
    
    (120,880
    )
    
    
    (129,098
    )Net increase (decrease) in cash and cash equivalents
    
    
    190,795
    
    
    
    (38,550
    )
    
    
    (64,852
    )Cash and cash equivalents at beginning of period
    
    
    111,152
    
    
    
    301,947
    
    
    
    263,397Cash and cash equivalents at end of period
    
    $
    301,947
    
    
    $
    263,397
    
    
    $
    198,545Interest paid
    
    $
    72,449
    
    
    $
    55,022
    
    
    $
    58,563Income taxes paid
    
    $
    51,656
    
    
    $
    20,821
    
    
    $
    22,050
  F-6




---



##### Table of Contents



STATER BROS. HOLDINGS INC.
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIT
 (In thousands except shares)
 AdditionalCommon
    
    
    Class A Common Stock
    
    
    Paid-in
    
    
    RetainedStock
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    TotalBalance at September 28, 2003
    
    
    
    
    
    
    38,301
    
    
    
    
    
    
    
    9,740
    
    
    
    (75,822
    )
    
    
    (66,082
    )Net income for 52 weeks ended
September 26, 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71,441
    
    
    
    71,441Dividend paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (45,000
    )
    
    
    (45,000
    )Balance at September 26, 2004
    
    
    
    
    
    
    38,301
    
    
    
    
    
    
    
    9,740
    
    
    
    (49,381
    )
    
    
    (39,641
    )Net income for 52 weeks ended
September 25, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,246
    
    
    
    26,246Balance at September 25, 2005
    
    
    
    
    
    
    38,301
    
    
    
    
    
    
    
    9,740
    
    
    
    (23,135
    )
    
    
    (13,395
    )Net income for 52 weeks ended
September 24, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,066
    
    
    
    26,066Dividend paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,000
    )
    
    
    (5,000
    )Stock Redemption
    
    
    
    
    
    
    (1,406
    )
    
    
    
    
    
    
    (358
    )
    
    
    (18,392
    )
    
    
    (18,750
    )Balance at September 24, 2006
    
    
    
    
    
    
    36,895
    
    
    $
    
    
    
    $
    9,382
    
    
    $
    (20,461
    )
    
    $
    (11,079
    )
 F-7




---



##### Table of Contents



STATER BROS. HOLDINGS INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 September 24, 2006
 Note 1  The Company and Summary of Significant Accounting Policies
 Description of Business
  Principles of Consolidation
  Reclassifications
  Use of Estimates
  Fiscal Year
  Cash and Cash Equivalents
  Restricted Cash
  Short-Term Investments
  Inventories
  Receivables
  Long-Lived Assets
  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.)
 Property and Equipment
   Range
    
    Most PrevalentBuildings and improvements
    
    5 - 20 Years
    
    20 YearsStore furniture and equipment
    
    3 - 10 Years
    
    5 YearsProperty subject to capital leases
    
    Life of Lease
    
    25 Years
 Deferred Debt Issuance Costs
  Phantom Stock Plan
  Self-Insurance Reserves
  Income Taxes
  Revenue Recognition
  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.)
 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  Restatement of Previously Issued Financial Statements
    As previouslyreported
    
    Adjustments
    
    RestatedFiscal year ended September 26, 2004Statement of IncomeSales
    
    $
    3,704,882
    
    
    $
    327
    
    
    $
    3,705,209Cost of goods sold
    
    
    2,652,812
    
    
    
    327
    
    
    
    2,653,139Statement of Cash FlowsOperating ActivitesAmortization of debt issuance costs
    
    $
    
    
    
    $
    11,318
    
    
    $
    11,318Premium, fees and make-whole payments
related to debt purchase
    
    
    
    
    
    
    (26,519
    )
    
    
    (26,519
    )(Increase) decrease in other assets
    
    
    13,667
    
    
    
    (2,190
    )
    
    
    11,477Net cash provided by operating
activities
    
    
    150,516
    
    
    
    (17,391
    )
    
    
    133,125Financing ActivitiesPremium, fees and make-whole payments
related to debt purchase
    
    $
    (26,519
    )
    
    $
    26,519
    
    
    $
    Amortization of debt issuance costs
related
to debt purchase
    
    
    9,128
    
    
    
    (9,128
    )
    
    
    Net cash provided by (used in)
financing activities
    
    
    102,090
    
    
    
    17,391
    
    
    
    119,481
 F-12




---



##### Table of Contents



STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (contd.)
 Note 2  Restatement of Previously Issued Financial Statements (contd.)
  As previouslyreported
    
    Adjustments
    
    RestatedFiscal year ended September 25, 2005Statement of IncomeSales
    
    $
    3,372,243
    
    
    $
    601
    
    
    $
    3,372,844Cost of goods sold
    
    
    2,468,135
    
    
    
    601
    
    
    
    2,468,736Statement of Cash FlowsAmortization of debt issuance costs
    
    $
    
    
    
    $
    3,042
    
    
    $
    3,042(Increase) decrease in other assets
    
    
    2,871
    
    
    
    (3,042
    )
    
    
    (171
    )Net cash
provided by operating activities
    
    
    83,565
    
    
    
    
    
    
    
    83,565
  As previouslyreported
    
    Adjustments
    
    RestatedFiscal year ended September 24, 2006Statement of IncomeSales
    
    $
    3,507,881
    
    
    $
    913
    
    
    $
    3,508,794Cost of goods sold
    
    
    2,577,522
    
    
    
    913
    
    
    
    2,578,435Statement of Cash FlowsAmortization of debt issuance costs
    
    $
    
    
    
    $
    3,038
    
    
    $
    3,038(Increase) decrease in other assets
    
    
    3,130
    
    
    
    (3,038
    )
    
    
    92Net cash provided by operating
activities
    
    
    89,130
    
    
    
    
    
    
    
    89,130
 F-13




---



##### Table of Contents



STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (contd.)
 Note 3  Santee
    F-14




---



##### Table of Contents



STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (contd.)
 Note 3  Santee (contd.)
  Feb. 6, 2004(in thousands)Current Assets
    
    $
    13,246Property and equipment
    
    
    47,630Other long-term assets
    
    
    550Total assets acquired
    
    
    61,426Current liabilities
    
    
    14,005Long-term liabilities
    
    
    25,600Total liabilities assumed
    
    
    39,605Net assets acquired
    
    $
    21,821
  F-15




---



##### Table of Contents



STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (contd.)
 Note 3  Santee (contd.)
  
 Fiscal Year EndedSept. 26,2004Sales
    
    $
    3,772,017Income before income taxes
    
    $
    112,541Net income
    
    $
    69,921Earnings per share
    
    $
    1,825.56
  Note 4  Acquisition of In-Store Pharmacies
     F-16




---



##### Table of Contents



STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (contd.)
 Note 4  Acquisition of In-Store Pharmacies (contd.)
  Inventories
    
    $
    1,729Property and equipment
    
    
    172Goodwill
    
    
    2,894Other assets
    
    
    50Total assets acquired
    
    
    4,845Total liabilities assumed
    
    
    Net assets acquired
    
    $
    4,845
  Note 5  Goodwill
  Note 6  Issuance of New Debt and Early Extinguishment of Debt
   F-17




---



##### Table of Contents



STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (contd.)
 Note 6  Issuance of New Debt and Early Extinguishment of Debt (contd.)
  Note 7  Debt
  Fiscal Year EndedSept. 26,
    
    
    Sept. 25,
    
    
    Sept. 24,2004
    
    
    2005
    
    
    2006(In thousands)Floating Rate Senior Notes due 2010
    
    $
    175,000
    
    
    $
    175,000
    
    
    $
    175,0008.125% Senior Notes due 2012
    
    
    525,000
    
    
    
    525,000
    
    
    
    525,000Total long-term debt
    
    $
    700,000
    
    
    $
    700,000
    
    
    $
    700,000
     F-18




---



##### Table of Contents



STATER BROS. HOLDINGS INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (contd.)
 Note 8  Bank Facilities
      F-19




---



##### Table of Contents



STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (contd.)
 Note 8  Bank Facilities (contd.)
        Note 9  Leases
  F-20




---



##### Table of Contents



STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (contd.)
 Note 9  Leases (contd.)
   OperatingLeasesCapital
    
    
    MinimumLeases
    
    
    Payments(In thousands)2007
    
    $
    2,297
    
    
    $
    36,2862008
    
    
    2,114
    
    
    
    30,7312009
    
    
    2,109
    
    
    
    22,2152010
    
    
    2,109
    
    
    
    20,1572011
    
    
    2,100
    
    
    
    17,189Thereafter
    
    
    2,662
    
    
    
    141,980Total minimum lease payments
    
    
    13,391
    
    
    $
    268,558Less amounts representing interest
    
    
    5,043Present value of minimum lease payments
    
    
    8,348Less current portion
    
    
    1,054Long-term portion
    
    $
    7,294
  Sept. 26, 2004
    
    Sept. 25, 2005
    
    Sept. 24, 2006Minimum rentals
    
    $
    27,854
    
    
    $
    29,491
    
    
    $
    30,827Rentals based on sales
    
    $
    13,427
    
    
    $
    12,838
    
    
    $
    14,092Sublease income
    
    $
    1,258
    
    
    $
    1,283
    
    
    $
    1,327
  F-21




---



##### Table of Contents



STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (contd.)
 Note 10  Income Taxes
  Sept. 26, 2004
    
    
    Sept. 25, 2005
    
    
    Sept. 24, 2006(in thousands)CurrentFederal
    
    $
    43,564
    
    
    $
    15,662
    
    
    $
    16,092State
    
    
    12,248
    
    
    
    5,190
    
    
    
    3,95755,812
    
    
    
    20,852
    
    
    
    20,049DeferredFederal
    
    
    (14,734
    )
    
    
    (4,564
    )
    
    
    (1,394
    )State
    
    
    (1,876
    )
    
    
    (2,626
    )
    
    
    (710
    )(16,610
    )
    
    
    (7,190
    )
    
    
    (2,104
    )Income tax expense
    
    $
    39,202
    
    
    $
    13,662
    
    
    $
    17,945
  Sept. 26, 2004
    
    Sept. 25, 2005
    
    Sept. 24, 2006Statutory federal income tax rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %State franchise tax rate, net of federal
income tax benefit
    
    
    5.8
    
    
    
    5.8
    
    
    
    5.8Change in valuation allowance
    
    
    
    
    
    
    (3.6
    )
    
    
    Change for contingent tax matters
    
    
    (5.5
    )
    
    
    
    
    
    
    Tax credits
    
    
    (0.4
    )
    
    
    (2.3
    )
    
    
    (1.4
    )Other
    
    
    0.5
    
    
    
    (0.7
    )
    
    
    1.4Effective tax rate
    
    
    35.4
    %
    
    
    34.2
    %
    
    
    40.8
    %
 F-22




---



##### Table of Contents



STATER BROS. HOLDINGS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (contd.)
 Note 10  Income Taxes (contd.)
  Sept. 26, 2004
    
    
    Sept. 25, 2005
    
    
    Sept. 24, 2006(in thousands)Deferred income tax assets:Self-insurance reserves
    
    $
    24,142
    
    
    $
    24,607
    
    
    $
    21,661Phantom stock
    
    
    16,407
    
    
    
    20,520
    
    
    
    21,661Payroll liabilities
    
    
    8,604
    
    
    
    9,477
    
    
    
    9,645State franchise tax
    
    
    4,388
    
    
    
    1,817
    
    
    
    1,385Inventories
    
    
    2,233
    
    
    
    2,349
    
    
    
    2,211Income deferred for book purposes
    
    
    1,472
    
    
    
    2,023
    
    
    
    1,775Tax credits and operating loss carry forwards
    
    
    9,134
    
    
    
    5,569
    
    
    
    4,718Total deferred income tax assets
    
    
    66,380
    
    
    
    66,362
    
    
    
    63,056Deferred income tax liabilities:Property and equipment
    
    
    (37,589
    )
    
    
    (34,096
    )
    
    
    (28,577
    )Other assets
    
    
    (1,751
    )
    
    
    (2,058
    )
    
    
    (2,058
    )Investment in unconsolidated affiliate
    
    
    (1,681
    )
    
    
    (1,681
    )
    
    
    (1,681
    )Other, net
    
    
    (56
    )
    
    
    (93
    )
    
    
    (286
    )Total deferred income tax liabilities
    
    
    (41,077
    )
    
    
    (37,928
    )
    
    
    (32,602
    )Net deferred taxes before valuation allowance
    
    
    25,303
    
    
    
    28,434
    
    
    
    30,454Valuation allowance
    
    
    (2,096
    )
    
    
    (673
    )
    
    
    Net deferred income tax assets
    
    $
    23,207
    
    
    $
    27,761
    
    
    $
    30,454
   F-23




---



##### Table of Contents



Note 11  Retirement Plans
 Pension Plan
   Sept. 26,
    
    
    Sept. 25,
    
    
    Sept. 24,2004
    
    
    2005
    
    
    2006(in thousands)Change in benefit obligation:Beginning balance
    
    $
    41,354
    
    
    $
    47,132
    
    
    $
    55,192Service cost
    
    
    2,218
    
    
    
    2,577
    
    
    
    2,715Interest cost
    
    
    2,489
    
    
    
    2,864
    
    
    
    2,970Actuarial (gain) loss
    
    
    1,754
    
    
    
    4,274
    
    
    
    (2,030
    )Benefit payments
    
    
    (683
    )
    
    
    (1,655
    )
    
    
    (1,469
    )Ending balance
    
    $
    47,132
    
    
    $
    55,192
    
    
    $
    57,378Change in fair value of plan assets:Beginning balance
    
    $
    27,792
    
    
    $
    29,811
    
    
    $
    31,648Actual return on plan assets
    
    
    515
    
    
    
    189
    
    
    
    1,188Employer contributions
    
    
    2,187
    
    
    
    3,303
    
    
    
    7,299Benefit payments
    
    
    (683
    )
    
    
    (1,655
    )
    
    
    (1,469
    )Ending balance
    
    $
    29,811
    
    
    $
    31,648
    
    
    $
    38,666Funded status:Fair value of plan assets
    
    $
    29,811
    
    
    $
    31,648
    
    
    $
    38,666Projected benefit obligation
    
    
    47,132
    
    
    
    55,192
    
    
    
    57,378Funded status
    
    
    (17,321
    )
    
    
    (23,544
    )
    
    
    (18,712
    )Adjustment for difference in book
and tax basis of assetsUnamortized prior service cost
    
    
    2
    
    
    
    5
    
    
    
    7Unrecognized loss
    
    
    15,843
    
    
    
    20,504
    
    
    
    17,920Prepaid pension cost
    
    $
    (1,476
    )
    
    $
    (3,035
    )
    
    $
    (785
    )
  F-24




---



##### Table of Contents



STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (contd.)
 Note 11  Retirement Plans (contd.)
  Sept. 26,
    
    
    Sept. 25,
    
    
    Sept. 24,2004
    
    
    2005
    
    
    2006(in thousands)Expected return on assets
    
    $
    (1,944
    )
    
    $
    (1,485
    )
    
    $
    (1,704
    )Service cost
    
    
    2,218
    
    
    
    2,577
    
    
    
    2,715Interest cost
    
    
    2,489
    
    
    
    2,864
    
    
    
    2,970Amortization of unrecognized obligations
    
    
    27
    
    
    
    
    
    
    
    Amortization of prior service cost
    
    
    (2
    )
    
    
    (2
    )
    
    
    (2
    )Amortization of recognized losses
    
    
    720
    
    
    
    908
    
    
    
    1,070Net pension expense
    
    $
    3,508
    
    
    $
    4,862
    
    
    $
    5,049Actuarial assumptions used to
determine net pension expense were:Discount rate
    
    
    6.00
    %
    
    
    6.00
    %
    
    
    5.50
    %Rate of increase in compensation levels
    
    
    4.00
    %
    
    
    4.00
    %
    
    
    3.00
    %Expected long-term rate of return on
assets
    
    
    7.00
    %
    
    
    5.00
    %
    
    
    5.00
    %Actuarial assumptions used to determine
year-end projected benefit obligation were:Weighted-average discount rate
    
    
    6.00
    %
    
    
    5.50
    %
    
    
    5.80
    %Weighted-average rate of
compensation increase
    
    
    4.00
    %
    
    
    3.00
    %
    
    
    3.00
    %
   Sept. 26,
    
    Sept. 25,
    
    Sept. 24,Target
    
    2004
    
    2005
    
    2006(in thousands)Asset category:U.S. government obligations
    
    
    89
    %
    
    
    99
    %
    
    
    99
    %
    
    
    88
    %Company notes and bonds
    
    
    10
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Cash and other
    
    
    1
    %
    
    
    1
    %
    
    
    1
    %
    
    
    12
    %Total
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
 F-25




---



##### Table of Contents



STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (contd.)
 Note 11  Retirement Plans (contd.)
   Estimated Future Benefit Payments
  PensionBenefits2007
    
    $
    2,0402008
    
    
    1,3692009
    
    
    1,9252010
    
    
    2,7222011
    
    
    2,9412012 - 2016
    
    
    19,823
 Profit Sharing Plan
  Multi-Employer Plans
   Sept. 26,
    
    
    Sept. 25,
    
    
    Sept. 24,2004
    
    
    2005
    
    
    2006(in thousands)Multi-Employer Pension Plans
    
    $
    36,030
    
    
    $
    34,344
    
    
    $
    38,022Multi-Employer Health and Welfare
    
    
    133,937
    
    
    
    102,518
    
    
    
    92,905Total Multi-Employer Benefits
    
    $
    169,967
    
    
    $
    136,862
    
    
    $
    130,927
  F-26




---



##### Table of Contents



STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (contd.)
 Note 12  Segment Information
  Retail
    
    
    All Other
    
    
    Total(in thousands)Fiscal year ended September 26, 2004Sales to external customers
    
    $
    3,629,265
    
    
    $
    75,944
    
    
    $
    3,705,209Intersegment sales
    
    
    
    
    
    
    52,742
    
    
    
    52,742Depreciation and amortization
    
    
    33,231
    
    
    
    53
    
    
    
    33,284Operating profit
    
    
    195,901
    
    
    
    2,556
    
    
    
    198,457Interest income
    
    
    2,050
    
    
    
    148
    
    
    
    2,198Interest expense
    
    
    (1,402
    )
    
    
    (88,196
    )
    
    
    (89,598
    )Income tax expense (benefit)
    
    
    74,238
    
    
    
    (35,036
    )
    
    
    39,202Net income (loss)
    
    
    121,760
    
    
    
    (50,319
    )
    
    
    71,441Total assets
    
    
    1,232,970
    
    
    
    (218,849
    )
    
    
    1,014,121Capital expenditures
    
    
    59,944
    
    
    
    2,042
    
    
    
    61,986
 Retail
    
    
    All Other
    
    
    Total(in thousands)Fiscal year ended September 25, 2005Sales to external customers
    
    $
    3,264,571
    
    
    $
    108,273
    
    
    $
    3,372,844Intersegment sales
    
    
    
    
    
    
    78,974
    
    
    
    78,974Depreciation and amortization
    
    
    39,416
    
    
    
    159
    
    
    
    39,575Operating profit
    
    
    86,964
    
    
    
    4,684
    
    
    
    91,648Interest income
    
    
    6,439
    
    
    
    377
    
    
    
    6,816Interest expense
    
    
    (412
    )
    
    
    (56,730
    )
    
    
    (57,142
    )Income tax expense (benefit)
    
    
    35,706
    
    
    
    (22,044
    )
    
    
    13,662Net income (loss)
    
    
    55,680
    
    
    
    (29,434
    )
    
    
    26,246Total assets
    
    
    1,329,081
    
    
    
    (273,712
    )
    
    
    1,055,369Capital expenditures
    
    
    114,187
    
    
    
    2,154
    
    
    
    116,341
 F-27




---



##### Table of Contents



STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (contd.)
 Note 12  Segment Information (contd.)
 Retail
    
    
    All Other
    
    
    Total(in thousands)Fiscal year ended September 24, 2006Sales to external customers
    
    $
    3,410,343
    
    
    $
    98,451
    
    
    $
    3,508,794Intersegment sales
    
    
    
    
    
    
    74,885
    
    
    
    74,885Depreciation and amortization
    
    
    46,527
    
    
    
    115
    
    
    
    46,642Operating profit
    
    
    91,902
    
    
    
    1,059
    
    
    
    92,961Interest income
    
    
    9,645
    
    
    
    639
    
    
    
    10,284Interest expense
    
    
    (1,376
    )
    
    
    (55,862
    )
    
    
    (57,238
    )Income tax expense (benefit)
    
    
    40,932
    
    
    
    (22,987
    )
    
    
    17,945Net income (loss)
    
    
    57,056
    
    
    
    (30,990
    )
    
    
    26,066Total assets
    
    
    1,415,146
    
    
    
    (357,054
    )
    
    
    1,058,092Capital expenditures
    
    
    94,193
    
    
    
    1,604
    
    
    
    95,797
 Note 13  Labor Relations
  Note 14  Fair Value of Financial Instruments
  Cash and Cash Equivalents
  Short-Term Investments
  Receivables
  Long-Term Receivable
  F-28




---



##### Table of Contents



STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (contd.)
 Note 14  Fair Value of Financial Instruments (contd.)
 Long-Term Debt and Capital Lease Obligations
   As ofSeptember 24, 2006(In thousands)Carrying
    
    FairAmount
    
    ValueCash and cash equivalents
    
    $
    198,545
    
    
    $
    198,545Short-term investments
    
    $
    26,849
    
    
    $
    26,849Receivables
    
    $
    39,173
    
    
    $
    39,173Long-term receivable
    
    $
    12,160
    
    
    $
    12,160Long-term debt
    
    $
    700,000
    
    
    $
    704,375Capitalized lease obligations
    
    $
    8,348
    
    
    $
    8,348
 Note 15  Litigation Matters
    F-29




---



##### Table of Contents



STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (contd.)
 Note 16  Phantom Stock Plan
  Note 17  Related Party Transactions
   Note 18  Stock Redemption
  Note 19  Corporate Office and Distribution Facilities
  F-30




---



##### Table of Contents



STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (contd.)
 Note 19  Corporate Office and Distribution Facilities (contd.)
   F-31




---



##### Table of Contents



STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (contd.)
 Note 20  Quarterly Results (unaudited)
  Net
    
    
    Average
    
    
    EarningsSales
    
    
    Gross
    
    
    Operating
    
    
    Income
    
    
    Shares
    
    
    (Loss)(as restated)
    
    
    Profit
    
    
    Profit
    
    
    (Loss)
    
    
    Outstanding
    
    
    Per ShareFiscal 2004 Quarters13 weeks ended 12/28/03
    
    $
    1,026,553
    
    
    $
    304,882
    
    
    $
    70,407
    
    
    $
    34,551
    
    
    
    38,301
    
    
    $
    902.0913 weeks ended 03/28/04
    
    
    989,489
    
    
    
    296,339
    
    
    
    72,538
    
    
    
    30,187
    
    
    
    38,301
    
    
    
    788.1513 weeks ended 06/27/04
    
    
    848,108
    
    
    
    224,723
    
    
    
    28,060
    
    
    
    (5,863
    )
    
    
    38,301
    
    
    
    (153.08
    )13 weeks ended 09/26/04
    
    
    841,059
    
    
    
    226,126
    
    
    
    27,452
    
    
    
    12,566
    
    
    
    38,301
    
    
    
    328.09$
    3,705,209
    
    
    $
    1,052,070
    
    
    $
    198,457
    
    
    $
    71,441
    
    
    
    38,301
    
    
    $
    1,865.25Fiscal 2005 Quarters13 weeks ended 12/26/04
    
    $
    839,175
    
    
    $
    217,009
    
    
    $
    18,400
    
    
    $
    3,263
    
    
    
    38,301
    
    
    $
    85.1913 weeks ended 03/27/05
    
    
    842,987
    
    
    
    218,242
    
    
    
    19,258
    
    
    
    3,600
    
    
    
    38,301
    
    
    
    93.9913 weeks ended 06/26/05
    
    
    840,597
    
    
    
    231,595
    
    
    
    25,125
    
    
    
    7,276
    
    
    
    38,301
    
    
    
    189.9713 weeks ended 09/25/05
    
    
    850,085
    
    
    
    237,262
    
    
    
    28,865
    
    
    
    12,107
    
    
    
    38,301
    
    
    
    316.11$
    3,372,844
    
    
    $
    904,108
    
    
    $
    91,648
    
    
    $
    26,246
    
    
    
    38,301
    
    
    $
    685.26Fiscal 2006 Quarters13 weeks ended 12/25/05
    
    $
    867,166
    
    
    $
    226,715
    
    
    $
    17,592
    
    
    $
    3,332
    
    
    
    38,301
    
    
    $
    87.0013 weeks ended 03/26/06
    
    
    863,751
    
    
    
    232,512
    
    
    
    23,442
    
    
    
    6,176
    
    
    
    37,442
    
    
    
    164.9513 weeks ended 06/25/06
    
    
    886,221
    
    
    
    229,700
    
    
    
    24,351
    
    
    
    5,742
    
    
    
    36,895
    
    
    
    155.6313 weeks ended 09/24/06
    
    
    891,656
    
    
    
    241,432
    
    
    
    27,576
    
    
    
    10,816
    
    
    
    36,895
    
    
    
    293.16$
    3,508,794
    
    
    $
    930,359
    
    
    $
    92,961
    
    
    $
    26,066
    
    
    
    37,386
    
    
    $
    697.21
 F-32