STATER SETTLES OVERTIME PAY SUITS

COLTON, Calif. -- Stater Bros. Holdings here said it has reached an agreement to settle two lawsuits regarding overtime pay for salaried store managers.Phil Smith, senior vice president, chief financial officer and chief accounting officer, said the settlements could cost the company up to $4 million, with an estimated minimum of $3.1 million, depending on the number of plaintiffs that ultimately

COLTON, Calif. -- Stater Bros. Holdings here said it has reached an agreement to settle two lawsuits regarding overtime pay for salaried store managers.

Phil Smith, senior vice president, chief financial officer and chief accounting officer, said the settlements could cost the company up to $4 million, with an estimated minimum of $3.1 million, depending on the number of plaintiffs that ultimately participate.

The suits, filed approximately three years ago, stemmed from allegations by existing and former store managers and assistant managers that they were entitled to overtime pay, Smith said.

"We felt the cases were without merit, but we decided to settle because of the escalating litigation expense," he explained. Smith said Stater took a onetime third-quarter charge of $1.1 million for liabilities from the settlement.

In the wake of the lawsuits, Jack Brown, chairman, president and chief executive officer, said Stater has initiated a new program in which store managers certify every six months they are exempt from overtime as part of an effort to comply "with California's quirky law," he explained.

Brown and Smith made their remarks to investors during a recent quarterly conference call following release of the chain's financial results for the third quarter and 39 weeks ended June 29.

Sales rose 1.3% to $688.1 million -- a record level -- for the 13-week quarter and 2.9% to $2.05 billion for the 39 weeks, while same-store sales rose 1.8% for the quarter and 2.4% for the year to date. Net income fell 73.6% to $769,000 for the quarter and 32.4% to $7.5 million for the 39-week period.

Operating cash flow fell 11.7% to $23.3 million for the quarter and 4.9% to $77.5 million for the year to date.