10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 25, 2012

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition from             to             

Commission file number 001-13222

STATER BROS. HOLDINGS INC.

(Exact name of registrant as specified in its charter)

Delaware	33-0350671
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
301 S. Tippecanoe Avenue San Bernardino, California	92408
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (909) 733-5000

Not Applicable

(Former name, former address and former fiscal year, if changed since last report.)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	x	Smaller Reporting Company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x.

As of May 8, 2012, there were issued and outstanding 33,179 shares of the registrant’s Class A Common Stock.

STATER BROS. HOLDINGS INC.

March 25, 2012

INDEX

PART I	FINANCIAL INFORMATION	Page
Item 1.	Financial Statements
	Consolidated Balance Sheets as of September 25, 2011 and March 25, 2012 (Unaudited)	3
	Consolidated Statements of Income (Unaudited) for the 13 weeks ended March 27, 2011 and March 25, 2012	5
	Consolidated Statements of Income (Unaudited) for the 26 weeks ended March 27, 2011 and March 25, 2012	6
	Consolidated Statements of Cash Flows (Unaudited) for the 26 weeks ended March 27, 2011 and March 25, 2012	7
	Notes to Consolidated Financial Statements (Unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosure about Market Risk	21
Item 4.	Controls and Procedures	22
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	22
Item 1A.	Risk Factors	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 3.	Defaults Upon Senior Securities	23
Item 4.	(Removed and Reserved)	23
Item 5.	Other Information	23
Item 6.	Exhibits	23
SIGNATURES		24

PART I - FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

STATER BROS. HOLDINGS INC.

CONSOLIDATED BALANCE SHEETS

(In thousands)

ASSETS

	Sept. 25, 2011		Mar. 25, 2012
			(Unaudited)
Current assets
Cash and cash equivalents	$	235,784	$	215,918
Restricted cash		3,121		—
Receivables, net of allowance of $984 and $1,014		32,166		35,332
Inventories		231,121		231,773
Prepaid expenses		11,705		12,416
Deferred income taxes		30,994		32,990
Note receivable, current portion		600		600
Total current assets		545,491		529,029
Property and equipment
Land		105,039		109,271
Buildings and improvements		573,625		577,621
Store fixtures and equipment		448,845		458,053
Property subject to capital leases		9,983		11,410
		1,137,492		1,156,355
Less accumulated depreciation and amortization		512,069		537,791
		625,423		618,564
Deferred income taxes, long-term		40,241		40,306
Deferred debt issuance cost, net		10,690		9,559
Note receivable, less current portion		2,165		1,734
Other assets		8,757		8,765
		61,853		60,364
Total assets	$	1,232,767	$	1,207,957

See accompanying notes to unaudited consolidated financial statements.

3

STATER BROS. HOLDINGS INC.

CONSOLIDATED BALANCE SHEETS (contd.)

(In thousands, except share amounts)

LIABILITIES AND STOCKHOLDER’S EQUITY

	Sept. 25, 2011			Mar. 25, 2012
				(Unaudited)
Current liabilities
Accounts payable	$	141,030		$	139,510
Accrued payroll and related expenses		106,023			110,894
Accrued interest		17,768			17,581
Other accrued liabilities		34,004			32,917
Income taxes payable		6,732			1,192
Current portion of capital lease obligations		1,107			1,106
Current portion of long-term debt		38,798			10,875
Total current liabilities		345,462			314,075
Capital lease obligations, less current portion		1,099			1,651
Long-term debt, less current portion		642,577			637,690
Long-term portion of self-insurance and other reserves		41,553			47,036
Long-term deferred benefits		75,853			73,513
Other long-term liabilities		45,459			41,555
Total liabilities		1,152,003			1,115,520
Commitments and contingencies
Stockholder’s equity
Common Stock, $.01 par value: Authorized shares - 100,000 Issued and outstanding shares - 0 in 2011, 0 in 2012		—			—
Class A Common Stock, $.01 par value: Authorized shares - 100,000 Issued and outstanding shares - 33,837 in 2011, 33,179, in 2012		—			—
Additional paid-in capital		8,604			8,437
Accumulated other comprehensive loss		(23,045	)		(23,045	)
Retained earnings		95,205			107,045
Total stockholder’s equity		80,764			92,437
Total liabilities and stockholder’s equity	$	1,232,767		$	1,207,957

See accompanying notes to unaudited consolidated financial statements.

4

STATER BROS. HOLDINGS INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share and share amounts)

	13 Weeks Ended
	Mar. 27, 2011			Mar. 25, 2012
Sales	$	913,397		$	937,663
Cost of goods sold		668,260			676,977
Gross profit		245,137			260,686
Operating expenses
Selling, general and administrative expenses		204,990			209,829
Depreciation and amortization		12,071			11,371
Total operating expenses		217,061			221,200
Operating profit		28,076			39,486
Interest income		216			28
Interest expense		(12,637	)		(11,735	)
Other income (expense), net		2			(27	)
Income before income taxes		15,657			27,752
Income taxes		6,309			11,319
Net income	$	9,348		$	16,433
Earnings per average common share outstanding	$	273.29		$	486.70
Average common shares outstanding		34,206			33,764
Shares outstanding at end of period		33,837			33,179

See accompanying notes to unaudited consolidated financial statements.

5

STATER BROS. HOLDINGS INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share and share amounts)

	26 Weeks Ended
	Mar. 27, 2011			Mar. 25, 2012
Sales	$	1,812,434		$	1,898,387
Cost of goods sold		1,328,524			1,378,020
Gross profit		483,910			520,367
Operating expenses
Selling, general and administrative expenses		405,846			431,700
Depreciation and amortization		24,515			22,783
Total operating expenses		430,361			454,483
Operating profit		53,549			65,884
Interest income		475			64
Interest expense		(31,835	)		(23,684	)
Interest expense related to purchase of debt		(1,775	)		—
Other income (expense), net		(90	)		612
Income before income taxes		20,324			42,876
Income taxes		8,135			17,433
Net income	$	12,189		$	25,443
Earnings per average common share outstanding	$	354.55		$	752.73
Average common shares outstanding		34,379			33,801
Shares outstanding at end of period		33,837			33,179

See accompanying notes to unaudited consolidated financial statements.

6

STATER BROS. HOLDINGS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	26 Weeks Ended
	Mar. 27, 2011			Mar. 25, 2012
Operating activities:
Net income	$	12,189		$	25,443
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		30,169			28,192
Amortization of debt issuance costs		4,871			1,131
Premium paid on debt purchase		1,775			—
(Increase) decrease in deferred income taxes		2,224			(2,061	)
(Gain) loss on disposals of assets		93			(612	)
Changes in operating assets and liabilities:
Decrease in restricted cash		—			3,121
Increase in receivables		(4,536	)		(3,166	)
Increase in income tax receivables		(919	)		—
Increase in inventories		(31,906	)		(652	)
(Increase) decrease in prepaid expenses		621			(711	)
(Increase) decrease in other assets		160			(8	)
Increase (decrease) in accounts payable		4,017			(1,520	)
Decrease in income taxes payable		(527	)		(5,540	)
Increase (decrease) in other current liabilities		(12,058	)		3,597
Increase (decrease) in other long-term liabilites		7,415			(761	)
Net cash provided by operating activities		13,588			46,453
Financing activities:
Proceeds from issuance of long-term debt		400,000			—
Proceeds from capital lease financing		—			724
Debt issuance costs		(8,526	)		—
Principal payments on long-term debt		(525,000	)		(32,810	)
Principal payments on capital lease obligations		(750	)		(173	)
Stock redemption		(9,540	)		(8,770	)
Dividend paid		(5,000	)		(5,000	)
Net cash used in financing activities		(148,816	)		(46,029	)
Investing activities:
Payment on long-term note receivable		—			431
Payment on long-term receivable		500			—
Purchase of property and equipment		(17,531	)		(21,761	)
Proceeds from sale of property and equipment		142			1,040
Net cash used in investing activities		(16,889	)		(20,290	)
Net decrease in cash and cash equivalents		(152,117	)		(19,866	)
Cash and cash equivalents at beginning of period		325,005			235,784
Cash and cash equivalents at end of period	$	172,888		$	215,918
Interest paid	$	33,014		$	22,981
Income taxes paid	$	7,355		$	25,050

See accompanying notes to unaudited consolidated financial statements.

7

STATER BROS. HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

MARCH 25, 2012

Note 1 – Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the twenty-six weeks ended March 25, 2012 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2012.

The consolidated balance sheet at September 25, 2011 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements.

For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s report on Form 10-K for the fiscal year ended September 25, 2011.

Note 2 – Principles of Consolidation

The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Stater Bros. Markets (“Markets”) and Stater Bros. Development, Inc. (“Development”) and Markets’ wholly-owned subsidiaries, Super Rx, Inc. (“Super Rx”) and SBM Dairies, Inc. (“Dairies”). All significant inter-company transactions have been eliminated in consolidation.

Note 3 – Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Note 4 – Income Taxes

The Company establishes deferred tax liabilities for anticipated tax timing differences where payment of tax is anticipated. Such amounts represent a reasonable provision for taxes ultimately expected to be paid, and the amounts may be adjusted over time as additional information becomes known.

The Company does not have any material tax positions that do not meet a “more-likely-than-not” recognition threshold. As such, the Company has not recorded any liabilities for uncertain tax positions. During the twenty-six weeks ended March 25, 2012, there have been no material changes to the amount of uncertain tax positions.

The Company recognizes interest and penalties related to income tax deficiencies or assessments by taxing authorities for any underpayment of income taxes separately from income tax expenses as interest expense or other operating expenses.

For federal tax purposes, the Company is subject to review of its fiscal 2008 through fiscal 2011 tax returns. During the second quarter of 2012, the Franchise Tax Board concluded their audit of the Company’s 2008 and 2009 state tax returns and made no significant changes to the Company’s reported taxes. For state tax purposes, the Company is subject to review of its fiscal 2010 and fiscal 2011 tax returns.

8

STATER BROS. HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

MARCH 25, 2012

Note 5 – Pension Plan

The Company has a Noncontributory Defined Benefit Pension Plan (the “Plan”) covering substantially all non-union employees. The Plan provides for benefits based on an employee’s compensation during the eligibility period while employed with the Company. The Company’s funding policy for this Plan is to contribute annually at a rate that is intended to provide sufficient assets to meet future benefit payment requirements. The market value of Plan assets is calculated using fair market values as provided by a third-party trustee. The Plan’s investments include cash, which earns interest, governmental securities, and corporate bonds and securities.

The following table provides the components of net periodic pension expense:

	Thirteen Weeks Ended						Twenty-Six Weeks Ended
	Mar. 27, 2011			Mar. 25, 2012			Mar. 27, 2011			Mar. 25, 2012
	(in thousands)						(inthousands)
Expected return on assets	$	(954	)	$	(1,052	)	$	(1,909	)	$	(2,047	)
Service cost		883			917			1,766			1,951
Interest cost		1,047			1,074			2,094			2,183
Amortization of prior service cost		—			1			1			2
Amortization of recognized losses		384			535			768			1,057
Net pension expense	$	1,360		$	1,475		$	2,720		$	3,146
Actuarial assumptions used to determine net pension expense were:
Discount rate		5.00%			4.50%			5.00%			4.50%
Rate of increase in compensation levels		3.00%			3.00%			3.00%			3.00%
Expected long-term rate of return on assets		6.50%			6.50%			6.50%			6.50%

The Company made approximately $6.2 million of contributions to the Plan during the twenty-six weeks ended March 25, 2012 which included an additional $5.5 million above the Company’s funding requirement. The Company expects to contribute an additional $1.4 million to the Plan during the remainder of fiscal 2012.

9

STATER BROS. HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

MARCH 25, 2012

Note 6 – Debt Issuance and Early Extinguishment of Debt

Issuance of Notes

On November 29, 2010, the Company completed the sale of $255.0 million in aggregate principal amount of 7.375% Senior Notes due November 15, 2018 (the “Notes”) in a private offering. At the time of issuance, these Notes were unregistered and are unsecured obligations of the Company. On September 20, 2011, the Company completed the exchange of the unregistered 7.375% Senior Notes for virtually identical registered $255.0 million 7.375% Senior Notes due November 15, 2018 collectively (the “7.375% Senior Notes”). The Company incurred approximately $6.6 million of debt issuance costs related to the issuance of the Notes and registration of the 7.375% Senior Notes, which will be amortized to interest expense over the term of the 7.375% Senior Notes.

Issuance of Credit Facility

On November 29, 2010, the Company and Markets entered into a $245.0 million senior secured credit facility (the “Credit Facility”) with Bank of America, N.A., as administrative agent and a lender. Lenders under the Credit Facility consist of a consortium of banks. The Credit Facility consists of a four-year $145.0 million term loan (the “Term Loan”) and a $100.0 million revolving credit facility (the “Revolving Credit Facility”). The Credit Facility replaced the Company’s existing $100.0 million credit facility. The Credit Facility is secured by substantially all of the Company’s personal property excluding certain intangible assets consisting of trademarks and shares of capital stock. The Credit Facility is guaranteed by the Company, its direct subsidiary Development and by its indirect subsidiaries Super Rx and Dairies.

The Term Loan bears interest at the “Eurodollar Rate” (defined as the British Bankers Association LIBOR Rate adjusted for the maximum reserve requirement for Eurocurrency funding), plus 2.50% or the Base Rate plus 1.50% (as defined in the Credit Facility) and the interest under the Term Loan is payable quarterly in arrears and includes mandatory quarterly principal payments of 5.0%, of the original outstanding balance, in each of the first two years of the agreement and 10.0%, of the original outstanding balance, in each of the years three and four of the agreement. The Term Loan also includes additional mandatory principal payments based on a percentage of “excess cash flow” as defined in the Credit Facility. The Term Loan is due November 29, 2014 with any remaining outstanding principal amounts under the Term Loan due as of that date. The security held under the Credit Facility is held until the Term Loan is paid in full. The Company incurred approximately $2.0 million of debt issuance costs related to the Term Loan, which will be amortized to interest expense over the term of the Term Loan.

As of March 25, 2012, the interest rate on the Term Loan was based on the Eurodollar Rate and consisted of a ninety day rate of approximately 3.079% on approximately $5.4 million of outstanding principal amount and a twelve month rate of approximately 3.627% on approximately $103.2 million of outstanding principal amount.

Subject to certain restrictions, the entire amount of the Revolving Credit Facility may be used for loans, letters of credit or a combination thereof. Borrowings under the Revolving Credit Facility are secured and will be used for working capital, certain capital expenditures and other general corporate purposes. Letters of credit issued under the Revolving Credit Facility are expected to be used for workers’ compensation insurance obligations and may be used for new store construction and certain other corporate purposes. The availability of the loans and letters of credit are subject to certain borrowing restrictions.

Loans under the Revolving Credit Facility bear interest at a rate based upon either (i) the “Base Rate” (defined as the higher of (a) the federal funds rate plus 0.50% and (b) the Bank of America “prime rate”), plus 1.50%, or (ii) the Eurodollar Rate plus 2.50%. For Eurodollar Rate loans, the Company will be entitled to select interest periods of one, two, three, six, nine or twelve months, subject to availability.

10

STATER BROS. HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

MARCH 25, 2012

Note 6 – Debt Issuance and Early Extinguishment of Debt (contd.)

Issuance of Credit Facility (contd.)

The Credit Facility requires the Company and Markets to meet certain financial tests, including minimum net worth and the maintenance of minimum earnings levels. The Credit Facility contains covenants which, among other things, limit the ability of the Company and its subsidiaries to (i) incur indebtedness, grant liens and guarantee obligations, (ii) enter into mergers, consolidations, liquidations and dissolutions, asset sales, investments, leases and transactions with affiliates, (iii) make restricted payments and (iv) make certain amendments to the Indentures governing the 7.375% Senior Notes and 7.75% Senior Notes (“Notes Indentures”). Markets and the Company’s other direct and indirect subsidiaries are not limited in their ability to transfer assets in the form of loans, advances or cash dividends to the Company. As of March 25, 2012, the Company and Markets were in compliance with all restrictive covenants under the Credit Facility.

The Company had no short-term borrowings outstanding under the Revolving Credit Facility as of March 25, 2012 and the Company did not incur any short-term borrowings under the Revolving Credit Facility during the twenty-six weeks ended March 25, 2012.

Early Extinguishment of Debt

The Company used the proceeds from the 7.375% Senior Notes and the Term Loan and cash on hand to purchase and retire early its $525.0 million 8.125% Senior Notes due June 15, 2012 (“Retired Notes”). On November 29, 2010, the Company paid approximately $479.2 million to purchase and make a tender payment on approximately $477.5 million outstanding balance of Retired Notes that had been validly tendered as of that date. The payment included a tender premium of approximately $1.8 million that has been recorded under “Interest expense related to purchase of debt” in the Company’s consolidated statements of income for fiscal 2011. On December 13, 2010, the Company paid approximately $2.4 million to purchase approximately $2.4 million of outstanding Retired Notes that had been tendered as of that date. On January 14, 2011, the Company called all remaining outstanding Retired Notes and paid approximately $45.1 million to retire the remaining notes. In fiscal 2011, the Company recorded to “Interest expense” approximately $3.5 million in unamortized deferred offering costs related to the Retired Notes.

Note 7 – Subsidiaries Guarantee

As of March 25, 2012, the Company had $285.0 million of outstanding 7.75% Senior Notes due April 15, 2015 and $255.0 million of outstanding 7.375% Senior Notes due November 15, 2018, collectively (the “Notes”).

The Notes are guaranteed by the Company’s subsidiaries Markets and Development and the Company’s indirect subsidiaries Super Rx and Dairies (each a “subsidiary guarantor”, and collectively, the “subsidiary guarantors”). Condensed consolidating financial information with respect to the subsidiary guarantors is not provided because the Company has no independent assets or operations, the subsidiary guarantees are full and unconditional and joint and several and there are no subsidiaries of the Company other than the subsidiary guarantors.

11

STATER BROS. HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

MARCH 25, 2012

Note 8 – Litigation Matters

In the ordinary course of business, the Company is party to various legal actions which it believes are incidental to the operation of its business and the business of its subsidiaries. The Company records an appropriate provision when the occurrence of loss is probable and can be reasonably estimated. The Company believes that the outcome of such legal proceedings to which it is currently a party will not have a material adverse effect upon its results of operations or its consolidated financial condition.

On November 5, 2010, an action by Diego De Jesus Martinez was filed in the Superior Court of the State of California for the County of Los Angeles against Markets (“Martinez Case”) seeking individual and potential class action monetary damages for alleged discrepancies between the actual time worked by certain employees and the amounts recorded on Markets’ time clock reports. On October 26, 2011, following a mediation, the Martinez Case was settled subject to final court approval of the settlement and the full settlement amount was recorded in the Company’s consolidated financial statements for the fiscal year ended September 25, 2011.

In May of 2011, Markets was served with an action filed in the Superior Court of the State of California for the County of Riverside (“Harold F. Lunsford et al. v. Stater Bros. Markets”) seeking individual and potential class action damages including associated penalties for Markets’ alleged failure to provide meal periods, rest periods or compensation in lieu thereof and alleged failure to pay certain wages for terminated employees. On January 26, 2012, following a mediation, this case was settled subject to final court approval of the settlement and the full settlement amount has been recorded in the Company’s consolidated financial statements for fiscal 2012.

Note 9 – Note Receivable

During the construction of the Company’s Corporate Offices and Distribution Center, the Company paid for certain construction costs at the Company’s Support Services building which were the responsibility of the Inland Valley Development Agency (the “IVDA”). These costs, which included the construction of an exterior wall of the building and asbestos removal, were needed before the building was habitable. The Company agreed to expend the funds on behalf of the IVDA with the understanding that the IVDA would reimburse these funds after the completion of construction. During the second quarter of fiscal 2011, the amount of reimbursement was agreed to by the IVDA and the Company reclassified approximately $3.0 million from building and improvements to long-term notes receivable on its consolidated balance sheets. The note bears an interest rate of 4.0% per annum and has a maturity date of April 2015 and includes quarterly principal and interest payments.

Note 10 – Dividends and Stock Redemptions

On December 28, 2010, the Company paid a $5.0 million dividend to La Cadena Investments (“La Cadena”), the sole shareholder of the Company. On December 21, 2011, the Company declared a $5.0 million dividend to La Cadena which was paid on December 23, 2011.

On February 11, 2011, the Company redeemed 715 shares of its Class A Common Stock for approximately $9.5 million. The redemption was for shares held by the Moseley Family Revocable Trust (the “Trust”) which La Cadena had distributed to the Trust prior to the redemption of the shares.

On March 16, 2012, the Company redeemed 658 shares of its Class A Common Stock for approximately $8.8 million. The redemption was for shares held by the Trust which La Cadena had distributed to the Trust prior to the redemption of the shares.

As of March 25, 2012, the Company had the ability and right under the Credit Facility to make restricted payments, including dividends, of up to $31.5 million.

12

STATER BROS. HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

MARCH 25, 2012

Note 11 – Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

Cash and Cash Equivalents

The carrying amount approximates fair value because of the short-term maturity of these instruments.

Receivables

The carrying amount approximates fair value because of the short-term maturity of these instruments.

Note Receivable

Although market quotes for the fair value of the Company’s note receivable is not readily available, the Company believes the stated value approximates fair value.

Long-Term Debt and Capital Lease Obligations

The fair value of the Company’s 7.75% Senior Notes and 7.375% Senior Notes are determined based on observable inputes that are corroborated by market data (Level 2 as defined by ASC Topic 820, “Fair Value Measurements and Disclosures”) Although market quotes for the fair value of the Company’s Term Loan and capitalized lease obligations are not readily available, the Company believes their carrying value approximates fair value. As of March 25, 2012, the estimated fair value of the Company’s Long-Term debt was $675.9 million.

13

STATER BROS. HOLDINGS INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

PART I - FINANCIAL INFORMATION (contd.)

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

CRITICAL ACCOUNTING POLICIES

We have chosen accounting policies that we believe are appropriate to report accurately and fairly our operating results and financial position, and we apply those accounting policies in a consistent manner. Our critical accounting policies are summarized in our report on Form 10-K for the fiscal year ended September 25, 2011.

Our discussion and analysis of financial condition and results of operations are based upon our unaudited consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles. The preparation of the financial statements requires the use of estimates and judgments on the part of management. We base our estimates on our historical experience combined with management’s understanding of current facts and circumstances.

SIGNIFICANT ACCOUNTING POLICIES

There are certain accounting policies that we have adopted that may differ from policies of other companies within our industry and other companies as a whole. Such differences in the treatment of these policies may be important to the readers of our report on Form 10-Q and our unaudited consolidated financial statements contained herein. For further information regarding our accounting policies, refer to the significant accounting policies included in the notes to the unaudited consolidated financial statements contained herein and in our report on Form 10-K for the fiscal year ended September 25, 2011.

14

STATER BROS. HOLDINGS INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OWNERSHIP OF THE COMPANY

La Cadena Investments (“La Cadena”), a California general partnership whose sole voting partner is the Jack H. Brown Revocable Trust, holds all of our issued and outstanding capital stock. Mr. Jack H. Brown, the Chairman of the Board, President and Chief Executive Officer of the Company, is the Managing General Partner of La Cadena with the power to vote the shares of our capital stock held by La Cadena on all matters, including with respect to the election of our Board of Directors, and any other matters requiring shareholder approval.

AVAILABLE INFORMATION

We file quarterly and annual reports electronically with the Securities and Exchange Commission (“SEC”) under forms 10-Q and 10-K and we file current reports on form 8-K and amendments to these reports. The SEC maintains an internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. These electronic files can be found at the SEC’s website at http://www.sec.gov. The public may read and copy any of our reports filed with the SEC at the SEC’s Public Reference Room at 100 F Street, NE., Washington, DC 20549. The public may obtain information on the Public Reference Room by calling the SEC at 1-800-SEC-0330.

EXECUTIVE OVERVIEW

We are the largest privately owned supermarket chain in Southern California. Our revenues are generated from retail sales through our supermarkets. Our success is a result of our marketing strategy of offering everyday low prices while providing our customers with friendly and outstanding service on each of their visits to our stores which has been a seventy-six (“76”) year Stater Bros. tradition.

Our strategy in the near term is to retain customer counts during these challenging economic times by continuing to provide exceptional customer service and value to our customers on their purchases from our supermarkets.

Our marketing area of Southern California is highly competitive and constantly changing. With the current economic conditions, our marketing area has seen job losses and business closures which has put and will continue to put pressure on our gross margin as we endeavor to retain our customer base. We anticipate continued competitive pressures from “big box” format competitors including Walmart, Costco, Target and Winco and from our traditional grocery format competitors Vons, Albertsons and Ralphs and from independent supermarket operators.

15

STATER BROS. HOLDINGS INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Sales and Cost of Goods Sold

	Thirteen Weeks Ended				Change
	Mar. 27, 2011		Mar. 25, 2012		2012 to 2011
($ in thousands)					Dollar		%
Sales	$	913,397	$	937,663	$	24,266		2.66	%
Gross Profit	$	245,137	$	260,686	$	15,549		6.34	%
as a % of sales		26.84%		27.80%

	Twenty-Six Weeks Ended				Change
	Mar. 27, 2011		Mar. 25, 2012		2012 to 2011
($ in thousands)					Dollar		%
Sales	$	1,812,434	$	1,898,387	$	85,953		4.74	%
Gross Profit	$	483,910	$	520,367	$	36,457		7.53	%
as a % of sales		26.70%		27.41%

Sales

Our sales increased $24.3 million and $86.0 million for the thirteen and twenty-six week periods of fiscal 2012, respectively, an increase over prior year sales of 2.66% and 4.74%, respectively.

Like Store Sales

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 periods, we only include the current year’s weekly sales that correspond to the weeks the stores were opened in the previous year. For stores that have been closed, we only include the prior year’s weekly sales that correspond to the weeks the stores were opened in the current year. Replacement store sales are included in like store sales. In the fourth quarter of fiscal 2011, we opened a replacement store in Grand Terrace, California that replaced an existing older store. In the second quarter of fiscal 2012, we opened a replacement store in Lake Elsinore, California that replaced an existing older store. We have had no new store openings nor any store closures in either fiscal 2011 or fiscal 2012

Like store sales are affected by various factors including, but not limited to, inflation, deflation, promotional discounting, customer traffic, buying trends, pricing pressures from competitors and competitive openings and closings.

Like store sales for the second quarter of fiscal 2012 compared to the second quarter of fiscal 2011 increased $24.3 million or 2.66%. For the twenty-six week period of fiscal 2012, like store sales increased $86.0 million or 4.74% from the twenty-six week period of fiscal 2011.

16

STATER BROS. HOLDINGS INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS (contd.)

Gross Profit

Our gross profit margin in the second quarter of fiscal 2012, as a percentage of sales, was 27.80%, an increase of 0.96% when compared to the second quarter fiscal 2011 gross profit margin of 26.84%. Our twenty-six week period of fiscal 2012 gross profit margin was 27.41%, an increase of 0.71% over the 26.70% for the twenty-six week period of fiscal 2011. We attribute the increase in gross profit margin for both the thirteen week and twenty-six week periods to our being able to pass on some of the cost inflation we have been experiencing and to more focused marketing promotions in fiscal 2012 compared to fiscal 2011. While we have experienced increased gross margins to date, we anticipate that the current economic conditions and continued competitive pressures could limit our ability to further pass on cost inflation which could put pressure on our gross margin in the foreseeable future.

Operating Expenses and Operating Profit

	Thirteen Weeks Ended				Change
	Mar. 27,		Mar. 25,		2012 to 2011
($ in thousands)	2011		2012		Dollar			%
Operating Expenses:
Selling, general and administrative expenses	$	204,990	$	209,829	$	4,839		2.36%
as a % of sales		22.45%		22.38%
Depreciation and amortization	$	12,071	$	11,371	$	(700	)	(5.80)%
as a % of sales		1.32%		1.21%
Operating profit	$	28,076	$	39,486	$	11,410		40.64%
as a % of sales		3.07%		4.21%

17

STATER BROS. HOLDINGS INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS (contd.)

Operating Expenses and Operating Profit (contd.)

	Twenty-Six Weeks Ended				Change
	Mar. 27,		Mar. 25,		2012 to 2011
($ in thousands)	2011		2012		Dollar			%
Operating Expenses:
Selling, general and administrative expenses	$	405,846	$	431,700	$	25,854			6.37	%
as a % of sales		22.40%		22.74%
Depreciation and amortization	$	24,515	$	22,783	$	(1,732	)		(7.07	)%
as a % of sales		1.35%		1.20%
Operating profit	$	53,549	$	65,884	$	12,335			23.03	%
as a % of sales		2.95%		3.47%

Selling, General and Administrative Expenses

Selling, general and administrative expenses, as a percentage of sales, in the thirteen week period of fiscal 2012 compared to the same period of fiscal 2011 decreased 0.07% and consisted primarily of reductions, as a percentage of sales, of 0.11%, 0.09% and 0.07% in supply expense, electronic fund transfer expense and electricity expense, respectively, offset by a 0.13% increase in payroll related costs, as a percentage of sales.

Selling, general and administrative expenses increased 0.34%, as a percentage of sales, for the twenty-six weeks of fiscal 2012 compared to the twenty-six weeks of fiscal 2011. The increase in the twenty-six week period was primarily composed of a 0.26% increase, as a percentage of sales, in payroll related expenses and to a litigation settlement in the first quarter of fiscal 2012. Payroll related expense increase was primarily the result of union insurance rate increases under our union contracts.

The amount of salaries, wages and administrative costs associated with the purchase of our products included in selling, general and administrative expenses for the second quarters of fiscal 2012 and fiscal 2011 is $290,000 and $312,000, respectively, and $583,000 and $611,000 for the twenty-six weeks ended March 25, 2012 and March 27, 2011, respectively.

Depreciation and Amortization

Depreciation and amortization expense in the second quarter of fiscal 2012 was $11.4 million compared to $12.1 million for the second quarter of fiscal 2011. Depreciation for the twenty-six week periods of fiscal 2012 and 2011 was $22.8 million and $24.5 million, respectively. Included in the second quarters of fiscal 2012 and 2011 cost of goods sold is $2.7 million and $2.8 million, respectively, and $5.4 million and $5.7 million for the twenty-six week fiscal 2012 and 2011, respectively, of depreciation and amortization related to our warehousing and distribution activities.

18

STATER BROS. HOLDINGS INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS (contd.)

Interest Income

Interest income was $28,000 and $216,000 for the second quarters of fiscal 2012 and 2011, respectively, and $64,000 and $475,000 for the twenty-six week periods of fiscal 2012 and 2011, respectively. We anticipate that our interest income will continue to be low as interest rates continue to be depressed.

Interest Expense

Prior to the effect of capitalized interest, interest expense was $11.9 million and $12.7 million for the second quarter of fiscal 2012 and 2011, respectively, and $23.9 million and $33.7 million for the twenty-six week periods for fiscal 2012 and 2011, respectively. Interest expense in fiscal 2011 included $3.5 million from the write off of unamortized deferred offering cost on our early retired $525.0 million 8.125% Senior Notes in fiscal 2011.

Interest Expense Related to Purchase of Debt

In the first quarter of fiscal 2011, we paid approximately $1.8 million in tender premium related to our tender offer to early redeem a significant portion of our $525.0 million 8.125% Senior Notes.

Income Before Income Taxes

Income before income taxes amounted to $27.8 million and $15.7 million for the second quarters of fiscal 2012 and fiscal 2011, respectively, and was $42.9 million and $20.3 million for the twenty-six week periods of fiscal 2012 and fiscal 2011, respectively.

Income Taxes

Income taxes amounted to $11.3 million and $6.3 million in the second quarters of fiscal 2012 and 2011, respectively, and $17.4 million and $8.1 million in the twenty-six week periods of fiscal 2012 and 2011, respectively. Our effective tax rate was 40.8% and 40.3% for the second quarters of fiscal 2012 and 2011, respectively, and 40.7% and 40.0% for the twenty-six week periods of fiscal 2012 and 2011, respectively. The change in our effective tax rate in the second quarter and year-to-date periods of fiscal 2012 compared to the same periods of fiscal 2011 is attributed primarily to tax credits being applied against lower taxable income in the prior year versus the current year.

Net Income

Net income amounted to $16.4 million and $9.3 million in the second quarters of fiscal 2012 and 2011, respectively. Net income for the twenty-six weeks ended March 25, 2012 amounted to $25.4 million compared to $12.2 million for the twenty-six weeks ended March 27, 2011.

LIQUIDITY AND CAPITAL RESOURCES

We have historically funded our daily cash flow requirements through funds provided by operations. We have the ability to borrow under our short-term revolving credit facility. Our credit facility expires in November 2014 and includes a revolving credit facility for working capital and letters of credit of $100.0 million. The letters of credit are maintained pursuant to our workers’ compensation and general liability self-insurance requirements.

As of March 25, 2012, we had approximately $57.4 million of outstanding letters of credit and we had approximately $42.6 million available under the revolving credit facility.

We had no short-term borrowings outstanding under our revolving credit facility as of March 25, 2012. We did not incur any short-term borrowings under our revolving credit facility during the twenty-six week period of fiscal 2012.

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STATER BROS. HOLDINGS INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

LIQUIDITY AND CAPITAL RESOURCES (contd.)

The following table sets forth our contractual cash obligations and commercial commitments as of March 25, 2012.

	Contractual Cash Obligations (in thousands)
	Total		Less than 1 Year		1-3 Years		4-5 Years		After 5 Years
Term Loan due November 2014 (1)
Principal	$	108,565	$	10,875	$	97,690	$	—	$	—
Interest		10,109		4,802		5,307		—		—
		118,674		15,677		102,997		—		—
7.75% Senior Notes due April 2015
Principal		285,000		—		—		285,000		—
Interest		77,307		22,088		44,175		11,044		—
		362,307		22,088		44,175		296,044		—
7.375% Senior Notes due November 2018
Principal		255,000		—		—		—		255,000
Interest		131,645		18,806		37,613		37,613		37,613
		386,645		18,806		37,613		37,613		292,613
Capital lease obligations (2)
Principal		2,757		1,106		1,550		101		—
Interest		435		293		141		1		—
		3,192		1,399		1,691		102		—
Operating leases (2)		334,470		38,989		64,592		51,353		179,536
Total contractual cash obligations	$	1,205,288	$	96,959	$	251,068	$	385,112	$	472,149
	Other Commercial Commitments (in thousands)
	Total		Less than 1 Year		1-3 Years		4-5 Years		After 5 Years
Standby letters of credit (3)	$	57,358	$	57,358	$	—	$	—	$	—
Total other commercial commitments	$	57,358	$	57,358	$	—	$	—	$	—

⁽¹⁾ As of March 25, 2012, interest on our Term Loan is based on the Eurodollar Rate plus 2.500% and consisted of a ninety day rate of 3.079% on approximately $5.4 million of outstanding principal amount and a twelve month rate of 3.627% on approximately $103.2 million of outstanding principal amount. For purposes of contractual cash obligations shown here, we have assumed the ninety day and twelve month interest rates as of March 25, 2012 for the respective assumed short-term and long-term portions of our Term Loan.

⁽²⁾ We lease the majority of our retail stores. We have subleased our former headquarters building and certain former distribution facilities located in Colton, California under an initial 15 year term for an amount equal to our lease payment. For purposes of contractual cash obligations shown here, minimum lease payments for this lease are shown without sub-lease offsets. Certain of our operating leases provide for minimum annual payments that change over the primary term of the lease. For purposes of contractual cash obligations shown here, contractual step increases or decreases are shown in the period they are due. Certain leases provide for additional rents based on sales. Primary lease terms range from 3 to 55 years and substantially all leases provide for renewal options.

⁽³⁾ Standby letters of credit are committed as security for workers’ compensation obligations. Outstanding letters of credit expire between September 2012 and February 2013.

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STATER BROS. HOLDINGS INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

LIQUIDITY AND CAPITAL RESOURCES (contd.)

Working capital amounted to $215.0 million at March 25, 2012 and $200.0 million at September 25, 2011 and our current ratios were 1.68:1 and 1.58:1, respectively. Fluctuations in working capital and current ratios are not unusual in our industry.

Net cash provided by operating activities for the twenty-six week periods ended March 25, 2012 and March 27, 2011 was $46.5 million and $13.6 million, respectfully. Significant sources of cash provided by operating activities in fiscal 2012 was net income before the effect of non-cash depreciation.

In fiscal 2011, we had cash used in financing activities of $148.8 million. We retired early all of our $525.0 million 8.125% Senior Notes. This was financed by issuances of $400.0 million in new debt that was comprised of $255.0 million of 7.375% Senior Notes due 2018 and a $145.0 million Term Loan due 2014.

As of March 25, 2012, we had the ability and right under our Credit Facility to pay a restricted payment, including dividends, of up to $31.5 million.

We believe that operating cash flows and current cash reserves will be sufficient to meet our currently identified operating needs and scheduled capital expenditures, for at least the next 12 months. However, we may elect to fund some capital expenditures through capital leases, operating leases or debt financing. There can be no assurance that such debt and lease financing will be available to us in the future.

Labor Relations

Our collective bargaining agreement with the United Food and Commercial Workers was renewed in October 2011 and expires in March 2014. Our collective bargaining agreements with the International Brotherhood of Teamsters were renewed in October 2010 and expire in September 2015. We believe we have good relations with our employees.

CAUTIONARY STATEMENT FOR PURPOSES OF “SAFE HARBOR PROVISIONS” OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Certain information contained in our filings with the Securities and Exchange Commission (as well as information included in oral statements or other written statements made or to be made by us) includes statements that are forward-looking, such as statements relating to plans for future activities. Such forward-looking information involves important risks and uncertainties that could significantly affect results in the future and, accordingly, such results may differ from those expressed in any forward-looking statements made by us or on our behalf. These risks and uncertainties include, but are not limited to, those relating to domestic economic conditions, seasonal and weather fluctuations, labor unrest, expansion and other activities of competitors, changes in federal or state laws and the administration of such laws and the general condition of the economy.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

We are subject to interest rate risk on our fixed interest rate debt obligations. Our fixed rate debt obligations are comprised of our Term Loan due November 2014, our 7.75% Senior Notes due April 2015, our 7.375% Senior Notes due November 2018 and capital lease obligations. In general, the fair value of fixed rate debt will increase as the market rate of interest decreases and will decrease as the market rate of interest increases. While interest rate changes will impact the market value risk of our bonds, such changes in the market value of our bonds do not affect our earnings or cash flows. Our earnings and our cash flows may be affected to the extent the interest rate on our Term Loan changes at each interest rate renewal period. We have not engaged in any interest rate swap agreements, derivative financial instruments or other type of financial transactions to manage interest rate risk.

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STATER BROS. HOLDINGS INC.

MARCH 25, 2012

PART I - FINANCIAL INFORMATION (contd.)

Item 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of March 25, 2012. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 25, 2012. There were no material changes in our internal control over financial reporting during the thirteen and twenty-six week periods ended March 25, 2012.

Because of the inherent limitation of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

PART II - OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

In the ordinary course of business, we are party to various legal actions which we believe are incidental to the operation of our business and the business of our subsidiaries. We record an appropriate provision when the occurrence of loss is probable and can be reasonably estimated. We believe that the outcome of such legal proceedings to which we are currently a party will not have a material adverse effect upon our results of operations or our consolidated financial condition.

On November 5, 2010, an action by Diego De Jesus Martinez was filed in the Superior Court of the State of California for the County of Los Angeles against Markets (“Martinez Case”) seeking individual and potential class action monetary damages for alleged discrepancies between the actual time worked by certain employees and the amounts recorded on Markets’ time clock reports. On October 26, 2011, following a mediation, the Martinez Case was settled subject to final court approval of the settlement and the full settlement amount was recorded in our consolidated financial statements for the fiscal year ended September 25, 2011.

In May of 2011, Markets was served with an action filed in the Superior Court of the State of California for the County of Riverside (“Harold F. Lunsford et al. v. Stater Bros. Markets”) seeking individual and potential class action damages including associated penalties for Markets’ alleged failure to provide meal periods, rest periods or compensation in lieu thereof and alleged failure to pay certain wages for terminated employees. On January 26, 2012, following a mediation, this case was settled subject to final court approval of the settlement and the full settlement amount has been recorded in our consolidated financial statements for fiscal 2012.

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STATER BROS. HOLDINGS INC.

MARCH 25, 2012

Item 1A. RISK FACTORS

We have included in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended September 25, 2011, a description of certain risks and uncertainties that could affect our business, future performance or financial condition (the “Risk Factors”). There are no material changes from the disclosure provided in the Form 10-K for the fiscal year ended September 25, 2011, as supplemented by our Form 10-Q for the thirteen and twenty-six weeks ended March 25, 2012, with respect to the Risk Factors.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

Item 3. DEFAULTS UPON SENIOR SECURITIES

None

Item 4. (REMOVED AND RESERVED)

Item 5. OTHER INFORMATION

None

Item 6. EXHIBITS

(a) Exhibits

31.1	Certification of Principal Executive Officer pursuant to Section 302 (a) of the Sarbanes-Oxley Act.
31.2	Certification of Principal Financial Officer pursuant to Section 302 (a) of the Sarbanes-Oxley Act.
32.1	Certification of Principal Executive Officer and Principal Financial Officer pursuant to18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act.
101.INS	-XBRL Instance Document.
101.SCH	-XBRL Taxonomy Extension Schema Document.
101.CAL	-XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	-XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	-XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	-XBRL Taxonomy Extension Presentation Linkbase Document.

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STATER BROS. HOLDINGS INC.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: May 8, 2012	/s/ Jack H. Brown
	Jack H. Brown Chairman of the Board, President, and Chief Executive Officer (Principal Executive Officer)

Date: May 8, 2012	/s/ Phillip J. Smith
	Phillip J. Smith Executive Vice President and Chief Financial Officer (Principal Financial Officer) (Principal Accounting Officer)

24

EX-31.1

Exhibit 31.1

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

I, Jack H. Brown, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Stater Bros. Holdings Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 8, 2012

/s/ Jack H. Brown

Jack H. Brown

Chairman of the Board, President,

and Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

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

I, Phillip J. Smith, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Stater Bros. Holdings Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 8, 2012

/s/ Phillip J. Smith

Phillip J. Smith

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

(Principal Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Each of the undersigned hereby certifies, in his capacity as an officer of Stater Bros. Holdings Inc. (the “Company”), for purposes of 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

• the Quarterly Report of the Company on Form 10-Q for the period ended March 25, 2012 fully complies with the requirements of Section 13(a) or 15(b) of the Securities Exchange Act of 1934; and

• the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operation of the Company.

Date: May 8, 2012

/s/ Jack H. Brown

Jack H. Brown

Chairman, President, and

Chief Executive Officer

(Principal Executive Officer)

May 8, 2012

/s/ Phillip J. Smith

Phillip J. Smith

Executive Vice President, and

Chief Financial Officer

(Principal Financial Officer)

(Principal Accounting Officer)

May 8, 2012

XML

Income Taxes

6 Months Ended

Mar. 25, 2012

Income Taxes [Abstract]

Income Taxes

Note 4 – Income Taxes

The Company establishes deferred tax liabilities for anticipated tax timing differences where payment of tax is anticipated. Such amounts represent a reasonable provision for taxes ultimately expected to be paid, and the amounts may be adjusted over time as additional information becomes known.

The Company does not have any material tax positions that do not meet a "more-likely-than-not" recognition threshold. As such, the Company has not recorded any liabilities for uncertain tax positions. During the twenty-six weeks ended March 25, 2012, there have been no material changes to the amount of uncertain tax positions.

The Company recognizes interest and penalties related to income tax deficiencies or assessments by taxing authorities for any underpayment of income taxes separately from income tax expenses as interest expense or other operating expenses.

For federal tax purposes, the Company is subject to review of its fiscal 2008 through fiscal 2011 tax returns. During the second quarter of 2012, the Franchise Tax Board concluded their audit of the Company's 2008 and 2009 state tax returns and made no significant changes to the Company's reported taxes. For state tax purposes, the Company is subject to review of its fiscal 2010 and fiscal 2011 tax returns.

XML

Use Of Estimates

6 Months Ended

Mar. 25, 2012

Use Of Estimates [Abstract]

Use Of Estimates

Note 3 – Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Mar. 25, 2012	Sep. 25, 2011
ASSETS
Cash and cash equivalents	$ 215,918	$ 235,784
Restricted cash		3,121
Receivables, net of allowance of $1,014 and $984	35,332	32,166
Inventories	231,773	231,121
Prepaid expenses	12,416	11,705
Deferred income taxes	32,990	30,994
Note receivable, current portion	600	600
Total current assets	529,029	545,491
Property and equipment
Land	109,271	105,039
Buildings and improvements	577,621	573,625
Store fixtures and equipment	458,053	448,845
Property subject to capital leases	11,410	9,983
Total property and equipment (gross)	1,156,355	1,137,492
Less accumulated depreciation and amortization	537,791	512,069
Total property and equipment (net)	618,564	625,423
Deferred income taxes, long-term	40,306	40,241
Deferred debt issuance cost, net	9,559	10,690
Note receivable, less current portion	1,734	2,165
Other assets	8,765	8,757
Total of deferred income taxes, deferred debt issuance cost and other assets	60,364	61,853
Total assets	1,207,957	1,232,767
LIABILITIES AND STOCKHOLDER'S EQUITY
Accounts payable	139,510	141,030
Accrued payroll and related expenses	110,894	106,023
Accrued interest	17,581	17,768
Other accrued liabilities	32,917	34,004
Income taxes payable	1,192	6,732
Current portion of capital lease obligations	1,106	1,107
Current portion of long-term debt	10,875	38,798
Total current liabilities	314,075	345,462
Capital lease obligations, less current portion	1,651	1,099
Long-term debt, less current portion	637,690	642,577
Long-term portion of self-insurance and other reserves	47,036	41,553
Long-term deferred benefits	73,513	75,853
Other long-term liabilities	41,555	45,459
Total liabilities	1,115,520	1,152,003
Commitments and contingencies
Stockholder's equity
Common Stock
Additional paid-in capital	8,437	8,604
Accumulated other comprehensive loss	(23,045)	(23,045)
Retained earnings	107,045	95,205
Total stockholder's equity	92,437	80,764
Total liabilities and stockholder's equity	1,207,957	1,232,767
Class A Common Stock [Member]
Stockholder's equity
Common Stock

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Basis Of Presentation

6 Months Ended

Mar. 25, 2012

Basis Of Presentation [Abstract]

Basis Of Presentation

Note 1 – Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the twenty-six weeks ended March 25, 2012 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2012.

The consolidated balance sheet at September 25, 2011 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements.

For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's report on Form 10-K for the fiscal year ended September 25, 2011.

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Principles Of Consolidation

6 Months Ended

Mar. 25, 2012

Principles Of Consolidation [Abstract]

Principles Of Consolidation

Note 2 – Principles of Consolidation

The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Stater Bros. Markets ("Markets") and Stater Bros. Development, Inc. ("Development") and Markets' wholly-owned subsidiaries, Super Rx, Inc. ("Super Rx") and SBM Dairies, Inc. ("Dairies"). All significant inter-company transactions have been eliminated in consolidation.

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Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Mar. 25, 2012	Sep. 25, 2011
Allowance for receivables	$ 1,014	$ 984
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	100,000	100,000
Common stock, shares issued	0	0
Common stock, shares outstanding	0	0
Class A Common Stock [Member]
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	100,000	100,000
Common stock, shares issued	33,179	33,837
Common stock, shares outstanding	33,179	33,837

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Document And Entity Information	6 Months Ended
	Mar. 25, 2012	May 08, 2012
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 25, 2012
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q2
Entity Registrant Name	STATER BROS HOLDINGS INC
Entity Central Index Key	0000882829
Current Fiscal Year End Date	--09-30
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		33,179

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Consolidated Statements Of Income (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Mar. 25, 2012	Mar. 27, 2011	Mar. 25, 2012	Mar. 27, 2011
Consolidated Statements Of Income [Abstract]
Sales	$ 937,663	$ 913,397	$ 1,898,387	$ 1,812,434
Cost of goods sold	676,977	668,260	1,378,020	1,328,524
Gross profit	260,686	245,137	520,367	483,910
Operating expenses
Selling, general and administrative expenses	209,829	204,990	431,700	405,846
Depreciation and amortization	11,371	12,071	22,783	24,515
Total operating expenses	221,200	217,061	454,483	430,361
Operating profit	39,486	28,076	65,884	53,549
Interest income	28	216	64	475
Interest expense	(11,735)	(12,637)	(23,684)	(31,835)
Interest expense related to purchase of debt				(1,775)
Other income (expense), net	(27)	2	612	(90)
Income before income taxes	27,752	15,657	42,876	20,324
Income taxes	11,319	6,309	17,433	8,135
Net income	$ 16,433	$ 9,348	$ 25,443	$ 12,189
Earnings per average common share outstanding	$ 486.70	$ 273.29	$ 752.73	$ 354.55
Average common shares outstanding	33,764	34,206	33,801	34,379
Shares outstanding at end of period	33,179	33,837	33,179	33,837

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Subsidiaries Guarantee

6 Months Ended

Mar. 25, 2012

Subsidiaries Guarantee [Abstract]

Subsidiaries Guarantee

Note 7 – Subsidiaries Guarantee

As of March 25, 2012, the Company had $285.0 million of outstanding 7.75% Senior Notes due April 15, 2015 and $255.0 million of outstanding 7.375% Senior Notes due November 15, 2018, collectively (the "Notes").

The Notes are guaranteed by the Company's subsidiaries Markets and Development and the Company's indirect subsidiaries Super Rx and Dairies (each a "subsidiary guarantor", and collectively, the "subsidiary guarantors"). Condensed consolidating financial information with respect to the subsidiary guarantors is not provided because the Company has no independent assets or operations, the subsidiary guarantees are full and unconditional and joint and several and there are no subsidiaries of the Company other than the subsidiary guarantors.

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Debt Issuance And Early Extinguishment Of Debt

6 Months Ended

Mar. 25, 2012

Debt Issuance And Early Extinguishment Of Debt [Abstract]

Debt Issuance And Early Extinguishment Of Debt

Note 6 – Debt Issuance and Early Extinguishment of Debt

Issuance of Notes

On November 29, 2010, the Company completed the sale of $255.0 million in aggregate principal amount of 7.375% Senior Notes due November 15, 2018 (the "Notes") in a private offering. At the time of issuance, these Notes were unregistered and are unsecured obligations of the Company. On September 20, 2011, the Company completed the exchange of the unregistered 7.375% Senior Notes for virtually identical registered $255.0 million 7.375% Senior Notes due November 15, 2018 collectively (the "7.375% Senior Notes"). The Company incurred approximately $6.6 million of debt issuance costs related to the issuance of the Notes and registration of the 7.375% Senior Notes, which will be amortized to interest expense over the term of the 7.375% Senior Notes.

Issuance of Credit Facility

On November 29, 2010, the Company and Markets entered into a $245.0 million senior secured credit facility (the "Credit Facility") with Bank of America, N.A., as administrative agent and a lender. Lenders under the Credit Facility consist of a consortium of banks. The Credit Facility consists of a four-year $145.0 million term loan (the "Term Loan") and a $100.0 million revolving credit facility (the "Revolving Credit Facility"). The Credit Facility replaced the Company's existing $100.0 million credit facility. The Credit Facility is secured by substantially all of the Company's personal property excluding certain intangible assets consisting of trademarks and shares of capital stock. The Credit Facility is guaranteed by the Company, its direct subsidiary Development and by its indirect subsidiaries Super Rx and Dairies.

The Term Loan bears interest at the "Eurodollar Rate" (defined as the British Bankers Association LIBOR Rate adjusted for the maximum reserve requirement for Eurocurrency funding), plus 2.50% or the Base Rate plus 1.50% (as defined in the Credit Facility) and the interest under the Term Loan is payable quarterly in arrears and includes mandatory quarterly principal payments of 5.0%, of the original outstanding balance, in each of the first two years of the agreement and 10.0%, of the original outstanding balance, in each of the years three and four of the agreement. The Term Loan also includes additional mandatory principal payments based on a percentage of "excess cash flow" as defined in the Credit Facility. The Term Loan is due November 29, 2014 with any remaining outstanding principal amounts under the Term Loan due as of that date. The security held under the Credit Facility is held until the Term Loan is paid in full. The Company incurred approximately $2.0 million of debt issuance costs related to the Term Loan, which will be amortized to interest expense over the term of the Term Loan.

As of March 25, 2012, the interest rate on the Term Loan was based on the Eurodollar Rate and consisted of a ninety day rate of approximately 3.079% on approximately $5.4 million of outstanding principal amount and a twelve month rate of approximately 3.627% on approximately $103.2 million of outstanding principal amount.

Subject to certain restrictions, the entire amount of the Revolving Credit Facility may be used for loans, letters of credit or a combination thereof. Borrowings under the Revolving Credit Facility are secured and will be used for working capital, certain capital expenditures and other general corporate purposes. Letters of credit issued under the Revolving Credit Facility are expected to be used for workers' compensation insurance obligations and may be used for new store construction and certain other corporate purposes. The availability of the loans and letters of credit are subject to certain borrowing restrictions.

Loans under the Revolving Credit Facility bear interest at a rate based upon either (i) the "Base Rate" (defined as the higher of (a) the federal funds rate plus 0.50% and (b) the Bank of America "prime rate"), plus 1.50%, or (ii) the Eurodollar Rate plus 2.50%. For Eurodollar Rate loans, the Company will be entitled to select interest periods of one, two, three, six, nine or twelve months, subject to availability.

The Credit Facility requires the Company and Markets to meet certain financial tests, including minimum net worth and the maintenance of minimum earnings levels. The Credit Facility contains covenants which, among other things, limit the ability of the Company and its subsidiaries to (i) incur indebtedness, grant liens and guarantee obligations, (ii) enter into mergers, consolidations, liquidations and dissolutions, asset sales, investments, leases and transactions with affiliates, (iii) make restricted payments and (iv) make certain amendments to the Indentures governing the 7.375% Senior Notes and 7.75% Senior Notes ("Notes Indentures"). Markets and the Company's other direct and indirect subsidiaries are not limited in their ability to transfer assets in the form of loans, advances or cash dividends to the Company. As of March 25, 2012, the Company and Markets were in compliance with all restrictive covenants under the Credit Facility.

The Company had no short-term borrowings outstanding under the Revolving Credit Facility as of March 25, 2012 and the Company did not incur any short-term borrowings under the Revolving Credit Facility during the twenty-six weeks ended March 25, 2012.

Early Extinguishment of Debt

The Company used the proceeds from the 7.375% Senior Notes and the Term Loan and cash on hand to purchase and retire early its $525.0 million 8.125% Senior Notes due June 15, 2012 ("Retired Notes"). On November 29, 2010, the Company paid approximately $479.2 million to purchase and make a tender payment on approximately $477.5 million outstanding balance of Retired Notes that had been validly tendered as of that date. The payment included a tender premium of approximately $1.8 million that has been recorded under "Interest expense related to purchase of debt" in the Company's consolidated statements of income for fiscal 2011. On December 13, 2010, the Company paid approximately $2.4 million to purchase approximately $2.4 million of outstanding Retired Notes that had been tendered as of that date. On January 14, 2011, the Company called all remaining outstanding Retired Notes and paid approximately $45.1 million to retire the remaining notes. In fiscal 2011, the Company recorded to "Interest expense" approximately $3.5 million in unamortized deferred offering costs related to the Retired Notes.

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Dividends And Stock Redemptions

6 Months Ended

Mar. 25, 2012

Dividends And Stock Redemptions [Abstract]

Dividends And Stock Redemptions

Note 10 – Dividends and Stock Redemptions

On December 28, 2010, the Company paid a $5.0 million dividend to La Cadena Investments ("La Cadena"), the sole shareholder of the Company. On December 21, 2011, the Company declared a $5.0 million dividend to La Cadena which was paid on December 23, 2011.

On February 11, 2011, the Company redeemed 715 shares of its Class A Common Stock for approximately $9.5 million. The redemption was for shares held by the Moseley Family Revocable Trust (the "Trust") which La Cadena had distributed to the Trust prior to the redemption of the shares.

On March 16, 2012, the Company redeemed 658 shares of its Class A Common Stock for approximately $8.8 million. The redemption was for shares held by the Trust which La Cadena had distributed to the Trust prior to the redemption of the shares.

As of March 25, 2012, the Company had the ability and right under the Credit Facility to make restricted payments, including dividends, of up to $31.5 million.

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Litigation Matters

6 Months Ended

Mar. 25, 2012

Litigation Matters [Abstract]

Litigation Matters

Note 8 – Litigation Matters

In the ordinary course of business, the Company is party to various legal actions which it believes are incidental to the operation of its business and the business of its subsidiaries. The Company records an appropriate provision when the occurrence of loss is probable and can be reasonably estimated. The Company believes that the outcome of such legal proceedings to which it is currently a party will not have a material adverse effect upon its results of operations or its consolidated financial condition.

On November 5, 2010, an action by Diego De Jesus Martinez was filed in the Superior Court of the State of California for the County of Los Angeles against Markets ("Martinez Case") seeking individual and potential class action monetary damages for alleged discrepancies between the actual time worked by certain employees and the amounts recorded on Markets' time clock reports. On October 26, 2011, following a mediation, the Martinez Case was settled subject to final court approval of the settlement and the full settlement amount was recorded in the Company's consolidated financial statements for the fiscal year ended September 25, 2011.

In May of 2011, Markets was served with an action filed in the Superior Court of the State of California for the County of Riverside ("Harold F. Lunsford et al. v. Stater Bros. Markets") seeking individual and potential class action damages including associated penalties for Markets' alleged failure to provide meal periods, rest periods or compensation in lieu thereof and alleged failure to pay certain wages for terminated employees. On January 26, 2012, following a mediation, this case was settled subject to final court approval of the settlement and the full settlement amount has been recorded in the Company's consolidated financial statements for fiscal 2012.

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Note Receivable

6 Months Ended

Mar. 25, 2012

Note Receivable [Abstract]

Note Receivable

Note 9 – Note Receivable

During the construction of the Company's Corporate Offices and Distribution Center, the Company paid for certain construction costs at the Company's Support Services building which were the responsibility of the Inland Valley Development Agency (the "IVDA"). These costs, which included the construction of an exterior wall of the building and asbestos removal, were needed before the building was habitable. The Company agreed to expend the funds on behalf of the IVDA with the understanding that the IVDA would reimburse these funds after the completion of construction. During the second quarter of fiscal 2011, the amount of reimbursement was agreed to by the IVDA and the Company reclassified approximately $3.0 million from building and improvements to long-term notes receivable on its consolidated balance sheets. The note bears an interest rate of 4.0% per annum and has a maturity date of April 2015 and includes quarterly principal and interest payments.

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Fair Value Of Financial Instruments

6 Months Ended

Mar. 25, 2012

Fair Value Of Financial Instruments [Abstract]

Fair Value Of Financial Instruments

Note 11 – Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

Cash and Cash Equivalents

The carrying amount approximates fair value because of the short-term maturity of these instruments.

Receivables

The carrying amount approximates fair value because of the short-term maturity of these instruments.

Note Receivable

Although market quotes for the fair value of the Company's note receivable is not readily available, the Company believes the stated value approximates fair value.

Long-Term Debt and Capital Lease Obligations

The fair value of the Company's 7.75% Senior Notes and 7.375% Senior Notes are determined based on observable inputes that are corroborated by market data (Level 2 as defined by ASC Topic 820, "Fair Value Measurements and Disclosures") Although market quotes for the fair value of the Company's Term Loan and capitalized lease obligations are not readily available, the Company believes their carrying value approximates fair value. As of March 25, 2012, the estimated fair value of the Company's Long-Term debt was $675.9 million.

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Consolidated Statements Of Cash Flows (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Mar. 25, 2012	Mar. 27, 2011
Operating activities:
Net income	$ 25,443	$ 12,189
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	28,192	30,169
Amortization of debt issuance costs	1,131	4,871
Premium paid on debt purchase		1,775
(Increase) decrease in deferred income taxes	(2,061)	2,224
(Gain) loss on disposals of assets	(612)	93
Changes in operating assets and liabilities:
Decrease in restricted cash	3,121
Increase in receivables	(3,166)	(4,536)
Increase in income tax receivables		(919)
Increase in inventories	(652)	(31,906)
(Increase) decrease in prepaid expenses	(711)	621
(Increase) decrease in other assets	(8)	160
Increase (decrease) in accounts payable	(1,520)	4,017
Decrease in income taxes payable	(5,540)	(527)
Increase (decrease) in other current liabilities	3,597	(12,058)
Increase (decrease) in other long-term liabilites	(761)	7,415
Net cash provided by operating activities	46,453	13,588
Financing activities:
Proceeds from issuance of long-term debt		400,000
Proceeds from capital lease financing	724
Debt issuance costs		(8,526)
Principal payments on long-term debt	(32,810)	(525,000)
Principal payments on capital lease obligations	(173)	(750)
Stock redemption	(8,770)	(9,540)
Dividend paid	(5,000)	(5,000)
Net cash used in financing activities	(46,029)	(148,816)
Investing activities:
Payment on long-term note receivable	431
Payment on long-term receivable		500
Purchase of property and equipment	(21,761)	(17,531)
Proceeds from sale of property and equipment	1,040	142
Net cash used in investing activities	(20,290)	(16,889)
Net decrease in cash and cash equivalents	(19,866)	(152,117)
Cash and cash equivalents at beginning of period	235,784	325,005
Cash and cash equivalents at end of period	215,918	172,888
Interest paid	22,981	33,014
Income taxes paid	$ 25,050	$ 7,355

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Pension Plan

6 Months Ended

Mar. 25, 2012

Pension Plan [Abstract]

Pension Plan

Note 5 – Pension Plan

The Company has a Noncontributory Defined Benefit Pension Plan (the "Plan") covering substantially all non-union employees. The Plan provides for benefits based on an employee's compensation during the eligibility period while employed with the Company. The Company's funding policy for this Plan is to contribute annually at a rate that is intended to provide sufficient assets to meet future benefit payment requirements. The market value of Plan assets is calculated using fair market values as provided by a third-party trustee. The Plan's investments include cash, which earns interest, governmental securities, and corporate bonds and securities.

The following table provides the components of net periodic pension expense:

	Thirteen Weeks Ended						Twenty-Six Weeks Ended
	Mar. 27, 2011			Mar. 25, 2012			Mar. 27, 2011			Mar. 25, 2012
	(in thousands)						(inthousands)
Expected return on assets	$	(954	)	$	(1,052	)	$	(1,909	)	$	(2,047	)
Service cost		883			917			1,766			1,951
Interest cost		1,047			1,074			2,094			2,183
Amortization of prior service cost		—			1			1			2
Amortization of recognized losses		384			535			768			1,057
Net pension expense	$	1,360		$	1,475		$	2,720		$	3,146
Actuarial assumptions used to determine net pension expense were:
Discount rate		5.00%			4.50%			5.00%			4.50%
Rate of increase in compensation levels		3.00%			3.00%			3.00%			3.00%
Expected long-term rate of return on assets		6.50%			6.50%			6.50%			6.50%

The Company made approximately $6.2 million of contributions to the Plan during the twenty-six weeks ended March 25, 2012 which included an additional $5.5 million above the Company's funding requirement. The Company expects to contribute an additional $1.4 million to the Plan during the remainder of fiscal 2012.