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

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

|   | Maryland                                                       |   | 13-1890974                           |   |
|--------|----------------------------------------------------------------|--------|--------------------------------------|--------|
|   | (State or other jurisdiction of incorporation or organization) |   | (I.R.S. Employer Identification No.) |   |

|                                                 | Montvale, New Jersey 07645 |   |
|------------------------------------------------------|----------------------------|--------|
| (Address of principal executive offices)             |
|                                                 |                       |   |
|                                                 | (201) 573-9700             |   |
| (Registrant's telephone number, including area code) |

----

|                                                              |   | 12 Weeks Ended |       |   | 40 Weeks Ended |       |
|-------------------------------------------------------------------|--------|----------------|------------|--------|----------------|------------|
|                                                              |   | Dec. 4, 2010   |       |   | Dec. 5, 2009   |       |   | Dec. 4, 2010 |   |   | Dec. 5, 2009 |   |
| Sales                                                             | $      | 1,793,805      |       |   | $              | 1,962,692  |   |  $ | 6,277,014 |   |   | $ | 6,817,996 |   |
| Cost of merchandise sold                                          |   | (1,259,568     | )          |   |           | (1,372,108 | ) |   | (4,416,258 | ) |   |   | (4,759,185 | ) |
| Gross margin                                                      |   | 534,237        |       |   |           | 590,584    |   |   | 1,860,756 |   |   |   | 2,058,811 |   |
| Store operating, general and administrative expense               |   | (635,586       | )          |   |           | (631,175   | ) |   | (2,087,826 | ) |   |   | (2,109,804 | ) |
| Goodwill, trademark and long-lived asset impairment               |   | (42,036        | )          |   |           | (412,560   | ) |   | (77,684 | ) |   |   | (412,560 | ) |
| Loss from operations                                              |   | (143,385       | )          |   |           | (453,151   | ) |   | (304,754 | ) |   |   | (463,553 | ) |
| Nonoperating (loss) income                                        |   | (213           | )          |   |           | (15,944    | ) |   | 10,241 |   |   |   | (24,898 | ) |
| Interest expense, net                                             |   | (40,038        | )          |   |           | (45,718    | ) |   | (147,306 | ) |   |   | (148,433 | ) |
| Loss from continuing operations before income taxes               |   | (183,636       | )          |   |           | (514,813   | ) |   | (441,819 | ) |   |   | (636,884 | ) |
| Benefit from income taxes                                         |   | 2,953          |       |   |           | 12,375     |   |   | 2,708 |   |   |   | 13,983 |   |
| Loss from continuing operations                                   |   | (180,683       | )          |   |           | (502,438   | ) |   | (439,111 | ) |   |   | (622,901 | ) |
| Discontinued operations:                                          |   |           |       |   |           |       |   |   |   |   |   |   |   |   |
| Loss from operations of discontinued businesses, net of tax of $0 |   | (18,687        | )          |   |           | (57,148    | ) |   | (36,655 | ) |   |   | (82,154 | ) |
| Gain on disposal of discontinued businesses, net of tax of $0     |   | -              |       |   |           | -          |   |   | 79 |   |   |   | - |   |
| Loss from discontinued operations                                 |   | (18,687        | )          |   |           | (57,148    | ) |   | (36,576 | ) |   |   | (82,154 | ) |
| Net loss                                                          |   | $              | (199,370   | )      |           | $          | (559,586 | ) |   | $ | (475,687 | ) |   | $ | (705,055 | ) |
| Net loss per share – basic:                                 |   |           |       |   |           |       |   |   |   |   |   |   |   |   |   |   |
| Continuing operations                                             |   | $              | (3.44      | )      |           | $          | (9.43 | ) |   | $ | (8.45 | ) |   | $ | (11.76 | ) |
| Discontinued operations                                           |   |           | (0.34      | )      |           |       | (1.07 | ) |   |   | (0.68 | ) |   |   | (1.55 | ) |
| Net loss per share – basic                                  |   | $              | (3.78      | )      |           | $          | (10.50 | ) |   | $ | (9.13 | ) |   | $ | (13.31 | ) |
| Net loss per share – diluted:                               |   |           |       |   |           |       |   |   |   |   |   |   |   |   |   |   |
| Continuing operations                                             |   | $              | (3.44      | )      |           | $          | (12.85 | ) |   |   | (32.09 | ) |   | $ | (22.36 | ) |
| Discontinued operations                                           |   |           | (0.34      | )      |           |       | (1.50 | ) |   |   | (2.53 | ) |   |   | (3.06 | ) |
| Net loss per share – diluted                                |   | $              | (3.78      | )      |           | $          | (14.35 | ) |   | $ | (34.62 | ) |   | $ | (25.42 | ) |
|                                                              |   |           |       |   |           |       |   |   |   |   |   |   |   |   |   |   |
| Weighted average number of common shares outstanding              |   |           |       |   |           |       |   |   |   |   |   |   |   |   |   |   |
| Basic                                                             |   |           | 53,852,470 |   |           |       | 53,420,248 |   |   |   | 53,688,540 |   |   |   | 53,139,840 |   |
| Diluted                                                           |   |           | 53,852,470 |   |           |       | 37,993,212 |   |   |   | 14,448,398 |   |   |   | 26,844,195 |   |

----

|                                                                                 |   | Common Stock |       |   | Additional Paid-in Capital |   |   | Accumulated Deficit |   |   | Accumulated Other Comprehensive Loss |   |   | Total Stockholders’ Deficit |       |
|--------------------------------------------------------------------------------------|--------|--------------|------------|--------|----------------------------|--------|--------|---------------------|--------|--------|--------------------------------------|--------|--------|-----------------------------------|------------|
|                                                                                 |   | Shares       |       |   | Amount                     |   |   |                |   |   |                                 |   |   |                              |
|                                                                                 |   |         |       |   |                       |   |   |                |   |   |                                 |   |   |                              |       |   |   |   |
| 40 Weeks Ended December 4, 2010                                                      |   |         |       |   |                       |   |   |                |   |   |                                 |   |   |                              |       |   |   |   |
| Balance as of 2/27/2010, as previously reported                                      |   |         | 55,868,129 |   |                       | $      | 55,868 |                |   | $      | 498,144                              |   |   | $                                 | (1,003,812 | ) |   | $ | (79,403 | ) |   | $ | (529,203 | ) |
| Retrospective adoption of new accounting guidance for own share-lending arrangements |   |         | -          |   |                       |   | -      |                |   |   | 28,277                               |   |   |                              | (28,277    | ) |   |   | - |   |   |   | - |   |
| Balance as of 2/27/2010, as adjusted                                                 |   |         | 55,868,129 |   |                       |   | 55,868 |                |   |   | 526,421                              |   |   |                              | (1,032,089 | ) |   |   | (79,403 | ) |   |   | (529,203 | ) |
| Net loss                                                                             |   |         |       |   |                       |   |   |                |   |   |                                 |   |   |                              | (475,687   | ) |   |   |   |   |   |   | (475,687 | ) |
| Beneficial conversion feature accretion on preferred stock                           |   |         |       |   |                       |   |   |                |   |   | (3,703                               | )      |   |                              |       |   |   |   |   |   |   |   | (3,703 | ) |
| Dividends on preferred stock                                                         |   |         |       |   |                       |   |   |                |   |   | (10,631                              | )      |   |                              |       |   |   |   |   |   |   |   | (10,631 | ) |
| Preferred stock financing fees amortization                                          |   |         |       |   |                       |   |   |                |   |   | (1,338                               | )      |   |                              |       |   |   |   |   |   |   |   | (1,338 | ) |
| Other comprehensive income                                                           |   |         |       |   |                       |   |   |                |   |   |                                 |   |   |                              |       |   |   |   | 543 |   |   |   | 543 |   |
| Stock options exercised                                                              |   |         | 4,834      |   |                       |   | 5      |                |   |   | 23                                   |   |   |                              |       |   |   |   |   |   |   |   | 28 |   |
| Other share based awards                                                             |   |         | 407,451    |   |                       |   | 407    |                |   |   | 541                                  |   |   |                              |       |   |   |   |   |   |   |   | 948 |   |
| Balance at end of period                                                             |   |         | 56,280,414 |   |                       | $      | 56,280 |                |   | $      | 511,313                              |   |   | $                                 | (1,507,776 | ) |   | $ | (78,860 | ) |   | $ | (1,019,043 | ) |
|                                                                                 |   |         |       |   |                       |   |   |                |   |   |                                 |   |   |                              |       |   |   |   |   |   |   |   |   |   |
| 40 Weeks Ended December 5, 2009                                                      |   |         |       |   |                       |   |   |                |   |   |                                 |   |   |                              |       |   |   |   |   |   |   |   |   |   |
| Balance as of 2/28/2009, as previously reported                                      |   |         | 57,674,799 |   |                       | $      | 57,675 |                |   | $      | 464,679                              |   |   | $                                 | (127,314   | ) |   | $ | (105,147 | ) |   | $ | 289,893 |   |
| Retrospective adoption of new accounting guidance for own share-lending arrangements |   |         | -          |   |                       |   | -      |                |   |   | 28,277                               |   |   |                              | (28,277    | ) |   |   | - |   |   |   | - |   |
| Balance as of 2/28/2009, as adjusted                                                 |   |         | 57,674,799 |   |                       |   | 57,675 |                |   |   | 492,956                              |   |   |                              | (155,591   | ) |   |   | (105,147 | ) |   |   | 289,893 |   |
| Net loss                                                                             |   |         |       |   |                       |   |   |                |   |   |                                 |   |   |                              | (705,055   | ) |   |   |   |   |   |   | (705,055 | ) |
| Other comprehensive loss                                                             |   |         |       |   |                       |   |   |                |   |   |                                 |   |   |                              |       |   |   |   | (188 | ) |   |   | (188 | ) |
| Beneficial conversion feature related to preferred stock                             |   |         |       |   |                       |   |   |                |   |   | 10,246                               |   |   |                              |       |   |   |   |   |   |   |   | 10,246 |   |
| Dividends on preferred stock                                                         |   |         |       |   |                       |   |   |                |   |   | (1,599                               | )      |   |                              |       |   |   |   |   |   |   |   | (1,599 | ) |
| Preferred stock financing fees amortization                                          |   |         |       |   |                       |   |   |                |   |   | (209                                 | )      |   |                              |       |   |   |   |   |   |   |   | (209 | ) |
| Returned shares under Share Lending Agreement                                        |   |         | (1,000,000 | )      |                       |   | (1,000 | )                   |   |   | 1,000                                |   |   |                              |       |   |   |   |   |   |   |   | - |   |
| Stock options exercised                                                              |   |         | 10,380     |   |                       |   | 10     |                |   |   | 33                                   |   |   |                              |       |   |   |   |   |   |   |   | 43 |   |
| Other share based awards                                                             |   |         | 673,934    |   |                       |   | 674    |                |   |   | 4,009                                |   |   |                              |       |   |   |   |   |   |   |   | 4,683 |   |
| Balance at end of period                                                             |   |         | 57,359,113 |   |                       | $      | 57,359 |                |   | $      | 506,436                              |   |   | $                                 | (860,646   | ) |   | $ | (105,335 | ) |   | $ | (402,186 | ) |

|                                                            |   | 12 Weeks Ended |     |   | 40 Weeks Ended |   |
|-----------------------------------------------------------------|--------|----------------|----------|--------|----------------|--------|
|                                                            |   | Dec. 4, 2010   |     |   | Dec. 5, 2009   |   |   | Dec. 4, 2010 |   |   | Dec. 5, 2009 |   |
| Net loss                                                        |   | $              | (199,370 | )      |           | $      | (559,586 | ) |   | $ | (475,687 | ) |   | $ | (705,055 | ) |
| Net unrealized (loss) gain on marketable securities, net of tax |   |           | -        |   |           |   | (95 | ) |   |   | - |   |   |   | 543 |   |
| Pension and other post-retirement benefits, net of tax          |   |           | 163      |   |           |   | (1,643 | ) |   |   | 543 |   |   |   | (731 | ) |
| Other comprehensive income (loss), net of tax                   |   |           | 163      |   |           |   | (1,738 | ) |   |   | 543 |   |   |   | (188 | ) |
| Total comprehensive loss                                        |   | $              | (199,207 | )      |           | $      | (561,324 | ) |   | $ | (475,144 | ) |   | $ | (705,243 | ) |

----

|                                                                                                                                                                               |   | Dec. 4, 2010 |       |   | Feb. 27, 2010 |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|------------|--------|---------------|--------|
| ASSETS                                                                                                                                                                             |   |         |       |   |          |   |
| Current assets:                                                                                                                                                                    |   |         |       |   |          |   |
| Cash and cash equivalents                                                                                                                                                          |   | $            | 92,411     |   |          | $      | 252,426 |   |
| Restricted cash                                                                                                                                                                    |   |         | 1,730      |   |          |   | 1,993 |   |
| Accounts receivable, net of allowance for doubtful accounts of $5,759 and $8,812 at 12/4/2010 and 2/27/2010, respectively                                                          |   |         | 148,340    |   |          |   | 166,143 |   |
| Inventories, net                                                                                                                                                                   |   |         | 454,621    |   |          |   | 467,227 |   |
| Prepaid expenses and other current assets                                                                                                                                          |   |         | 46,061     |   |          |   | 43,374 |   |
| Total current assets                                                                                                                                                               |   |         | 743,163    |   |          |   | 931,163 |   |
| Non-current assets:                                                                                                                                                                |   |         |       |   |          |   |   |   |
| Property:                                                                                                                                                                          |   |         |       |   |          |   |   |   |
| Property owned, net                                                                                                                                                                |   |         | 1,238,831  |   |          |   | 1,397,971 |   |
| Property leased under capital leases, net                                                                                                                                          |   |         | 65,948     |   |          |   | 89,599 |   |
| Property, net                                                                                                                                                                      |   |         | 1,304,779  |   |          |   | 1,487,570 |   |
| Goodwill                                                                                                                                                                           |   |         | 110,412    |   |          |   | 115,197 |   |
| Intangible assets, net                                                                                                                                                             |   |         | 126,763    |   |          |   | 147,713 |   |
| Other assets                                                                                                                                                                       |   |         | 138,470    |   |          |   | 145,574 |   |
| Total assets                                                                                                                                                                       |   | $            | 2,423,587  |   |          | $      | 2,827,217 |   |
|                                                                                                                                                                               |   |         |       |   |          |   |   |   |
| LIABILITIES & STOCKHOLDERS' EQUITY                                                                                                                                             |   |         |       |   |          |   |   |   |
| Current liabilities:                                                                                                                                                               |   |         |       |   |          |   |   |   |
| Current portion of long-term debt                                                                                                                                                  |   | $            | 171,467    |   |          | $      | 191 |   |
| Current portion of obligations under capital leases                                                                                                                                |   |         | 13,653     |   |          |   | 13,702 |   |
| Current portion of real estate liabilities                                                                                                                                         |   |         | 1,238      |   |          |   | 4,220 |   |
| Accounts payable                                                                                                                                                                   |   |         | 196,322    |   |          |   | 227,779 |   |
| Book overdrafts                                                                                                                                                                    |   |         | 50,922     |   |          |   | 60,465 |   |
| Accrued salaries, wages and benefits                                                                                                                                               |   |         | 126,104    |   |          |   | 145,170 |   |
| Accrued taxes                                                                                                                                                                      |   |         | 35,619     |   |          |   | 31,802 |   |
| Other accruals                                                                                                                                                                     |   |         | 305,192    |   |          |   | 246,516 |   |
| Total current liabilities                                                                                                                                                          |   |         | 900,517    |   |          |   | 729,845 |   |
| Non-current liabilities:                                                                                                                                                           |   |         |       |   |          |   |   |   |
| Long-term debt                                                                                                                                                                     |   |         | 816,830    |   |          |   | 990,359 |   |
| Long-term obligations under capital leases                                                                                                                                         |   |         | 124,714    |   |          |   | 136,880 |   |
| Long-term real estate liabilities                                                                                                                                                  |   |         | 418,372    |   |          |   | 329,363 |   |
| Deferred real estate income                                                                                                                                                        |   |         | 86,518     |   |          |   | 87,061 |   |
| Other financial liabilities                                                                                                                                                        |   |         | 3,705      |   |          |   | 13,946 |   |
| Other non-current liabilities                                                                                                                                                      |   |         | 954,182    |   |          |   | 936,209 |   |
| Total liabilities                                                                                                                                                                  |   |         | 3,304,838  |   |          |   | 3,223,663 |   |
|                                                                                                                                                                               |   |         |       |   |          |   |   |   |
| Series A redeemable preferred stock – no par value, $1,000 redemption value; authorized – 700,000 shares;                                                              |   |         |       |   |          |   |   |   |
|          issued – 175,000 shares                                                                                                |   |         | 137,792    |   |          |   | 132,757 |   |
|                                                                                                                                                                               |   |         |       |   |          |   |   |   |
| Commitments and contingencies (Refer to Note 19)                                                                                                                                   |   |         |       |   |          |   |   |   |
|                                                                                                                                                                               |   |         |       |   |          |   |   |   |
| Stockholders' deficit:                                                                                                                                                             |   |         |       |   |          |   |   |   |
| Common stock – $1 par value; authorized – 260,000,000 shares; issued and outstanding – 56,280,414 and 55,868,129 shares at 12/4/2010 and 2/27/2010, respectively |   |         | 56,280     |   |          |   | 55,868 |   |
| Additional paid-in capital                                                                                                                                                         |   |         | 511,313    |   |          |   | 526,421 |   |
| Accumulated other comprehensive loss                                                                                                                                               |   |         | (78,860    | )      |          |   | (79,403 | ) |
| Accumulated deficit                                                                                                                                                                |   |         | (1,507,776 | )      |          |   | (1,032,089 | ) |
| Total stockholders’ deficit                                                                                                                                                  |   |         | (1,019,043 | )      |          |   | (529,203 | ) |
| Total liabilities and stockholders’ deficit                                                                                                                                  |   | $            | 2,423,587  |   |          | $      | 2,827,217 |   |

----

|                                                                                       |   | 40 Weeks Ended |     |
|--------------------------------------------------------------------------------------------|--------|----------------|----------|
|                                                                                       |   | Dec. 4, 2010   |     |   | Dec. 5, 2009 |   |
| CASH FLOWS FROM OPERATING ACTIVITIES:                                                      |   |           |     |   |   |   |
| Net loss                                                                                   |   | $              | (475,687 | ) |   | $ | (705,055 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities (see next page) |   |           | 304,094  |   |   |   | 762,501 |   |
| Other changes in assets and liabilities:                                                   |   |           |     |   |   |   |   |   |
| Decrease in receivables                                                                    |   |           | 17,803   |   |   |   | 17,946 |   |
| Decrease (increase) in inventories                                                         |   |           | 10,467   |   |   |   | (19,857 | ) |
| Increase in prepaid expenses and other current assets                                      |   |           | (12,968  | ) |   |   | (32,943 | ) |
| Increase in other assets                                                                   |   |           | (10,203  | ) |   |   | (7,546 | ) |
| (Decrease) increase in accounts payable                                                    |   |           | (29,201  | ) |   |   | 23,771 |   |
| Decrease in accrued salaries, wages and benefits, and taxes                                |   |           | (28,977  | ) |   |   | (43,887 | ) |
| Increase in other accruals                                                                 |   |           | 44,128   |   |   |   | 16,145 |   |
| Increase (decrease) in other non-current liabilities                                       |   |           | 1,300    |   |   |   | (62,777 | ) |
| Other operating activities, net                                                            |   |           | (1,020   | ) |   |   | 693 |   |
| Net cash used in operating activities                                                      |   |           | (180,264 | ) |   |   | (51,009 | ) |
|                                                                                       |   |           |     |   |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                                      |   |           |     |   |   |   |   |   |
| Expenditures for property                                                                  |   |           | (62,854  | ) |   |   | (71,919 | ) |
| Proceeds from disposal of property                                                         |   |           | 38,186   |   |   |   | 3,275 |   |
| Proceeds from flood insurance                                                              |   |           | 6,410    |   |   |   | - |   |
| Proceeds from sale of joint venture                                                        |   |           | -        |   |   |   | 5,914 |   |
| Decrease in restricted cash                                                                |   |           | 303      |   |   |   | 222 |   |
| Proceeds from maturities of marketable securities                                          |   |           | -        |   |   |   | 4,212 |   |
| Net cash used in investing activities                                                      |   |           | (17,955  | ) |   |   | (58,296 | ) |
|                                                                                       |   |           |     |   |   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES:                                                      |   |           |     |   |   |   |   |   |
| Proceeds from issuance of long-term debt                                                   |   |           | 800      |   |   |   | 253,201 |   |
| Principal payments on long-term borrowings                                                 |   |           | (201     | ) |   |   | (234 | ) |
| Proceeds under revolving lines of credit                                                   |   |           | 619,500  |   |   |   | 39,450 |   |
| Principal payments on revolving lines of credit                                            |   |           | (636,384 | ) |   |   | (238,333 | ) |
| Proceeds under line of credit                                                              |   |           | -        |   |   |   | 378 |   |
| Principal payments on line of credit                                                       |   |           | -        |   |   |   | (4,211 | ) |
| Proceeds from issuance of preferred stock                                                  |   |           | -        |   |   |   | 175,000 |   |
| Proceeds from long-term real estate liabilities                                            |   |           | -        |   |   |   | 270 |   |
| Principal payments on long-term real estate liabilities                                    |   |           | (980     | ) |   |   | (918) |   |
| Proceeds from sale-leaseback transaction                                                   |   |           | 89,830   |   |   |   | 3,000 |   |
| Principal payments on capital leases                                                       |   |           | (9,140   | ) |   |   | (8,457 | ) |
| (Decrease) increase in book overdrafts                                                     |   |           | (9,543   | ) |   |   | 24,692 |   |
| Deferred financing fees                                                                    |   |           | (5,206   | ) |   |   | (26,515 | ) |
| Dividends paid on preferred stock                                                          |   |           | (10,500  | ) |   |   | (1,594 | ) |
| Proceeds from stock options exercised                                                      |   |           | 28       |   |   |   | 43 |   |
| Net cash provided by financing activities                                                  |   |           | 38,204   |   |   |   | 215,772 |   |
|                                                                                       |   |           |     |   |   |   |   |   |
| Net (decrease) increase in cash and cash equivalents                                       |   |           | (160,015 | ) |   |   | 106,467 |   |
| Cash and cash equivalents at beginning of period                                           |   |           | 252,426  |   |   |   | 175,375 |   |
| Cash and cash equivalents at end of period                                                 |   | $              | 92,411   |   |   | $ | 281,842 |   |
|                                                                                       |   |           |     |   |   |   |   |   |
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                                         |   |           |     |   |   |   |   |   |
| Cash paid during the year for interest                                                     |   | $              | 103,640  |   |   | $ | 92,736 |   |
| Cash paid during the year for income taxes                                                 |   | $              | 214      |   |   | $ | 3,342 |   |

----

|                                                                          |   | 40 Weeks Ended |    |
|-------------------------------------------------------------------------------|--------|----------------|---------|
|                                                                          |   | Dec. 4, 2010   |    |   | Dec. 5, 2009 |   |
| Depreciation and amortization                                                 |   | $              | 171,841 |   |   | $ | 191,385 |   |
| Goodwill, trademark and long-lived asset impairment                           |   |           | 78,828  |   |   |   | 417,726 |   |
| Self insurance reserve                                                        |   |           | 22,590  |   |   |   | 1,613 |   |
| Nonoperating (income) loss                                                    |   |           | (10,241 | ) |   |   | 24,898 |   |
| Non-cash interest expense                                                     |   |           | 27,658  |   |   |   | 35,101 |   |
| Stock compensation expense                                                    |   |           | 1,246   |   |   |   | 4,683 |   |
| Benefit from deferred income taxes                                            |   |           | (3,058  | ) |   |   | (12,013 | ) |
| Pension withdrawal costs                                                      |   |           | -       |   |   |   | 2,445 |   |
| Employee benefit related costs                                                |   |           | 13,728  |   |   |   | 4,290 |   |
| LIFO adjustment                                                               |   |           | 2,139   |   |   |   | 1,185 |   |
| Asset disposition initiatives in the normal course of business                |   |           | -       |   |   |   | (2,167 | ) |
| Asset disposition initiatives relating to discontinued operations             |   |           | (117    | ) |   |   | 59,932 |   |
| Non-cash occupancy charges for stores closed in the normal course of business |   |           | 7,024   |   |   |   | 38,589 |   |
| Gain on disposal of owned property, net                                       |   |           | (4,031  | ) |   |   | (1,228 | ) |
| Gain on disposal of discontinued operations                                   |   |           | (79     | ) |   |   | - |   |
| Amortization of deferred real estate income                                   |   |           | (3,434  | ) |   |   | (3,938 | ) |
| Total non-cash adjustments to net loss                                        |   | $              | 304,094 |   |   | $ | 762,501 |   |

----

| 1. | Basis of Presentation |
|----|-----------------------|

| 2. | Impact of New Accounting Pronouncements |
|----|-----------------------------------------|

| 3. | Goodwill and Other Intangible Assets |
|----|--------------------------------------|

----

|                                      |   | Fresh  |    |   | Pathmark |   |     | Gourmet |   |   | Other  |   |   | Total  |   |
|-------------------------------------------|--------|--------|---------|--------|----------|--------|----------|---------|--------|--------|--------|--------|--------|--------|--------|
| Goodwill                                  |   | $      | 120,817 |   |     | $      | 321,840  |    |   | $      | 12,110 |   |   | $      | 5,974  |   |   | $ | 460,741 |   |
| Accumulated impairment losses             |   |   | (23,704 | )      |     |   | (321,840 | )       |   |   | -      |   |   |   | -      |   |   |   | (345,544 | ) |
|   Goodwill at February 27, 2010 |   | $      | 97,113  |   |     | $      | -        |    |   | $      | 12,110 |   |   | $      | 5,974  |   |   | $ | 115,197 |   |
| Disposition of Assets*                    |   |   | (4,785  | )      |     |   | -        |    |   |   | -      |   |   |   | -      |   |   |   | (4,785 | ) |
|   Goodwill at December 4, 2010  |   | $      | 92,328  |   |     | $      | -        |    |   | $      | 12,110 |   |   | $      | 5,974  |   |   | $ | 110,412 |   |

|                                |   | Weighted Average Amortization Period (years) |   |   | Gross Carrying Amount |   |    | Accumulated Amortization at Dec. 4, 2010 |   |   | Accumulated Amortization at Feb. 27, 2010 |   |
|-------------------------------------|--------|----------------------------------------------|--------|--------|-----------------------|--------|---------|------------------------------------------|--------|--------|-------------------------------------------|--------|
| Pathmark trademark                  |   | Indefinite                                   |   |   | $                     | 48,200 |    |                                     | $      | -      |                                      |   | $ | - |   |
| Loyalty card customer relationships |   |                                         | 5      |   |                  |   | 19,200  |                                     |   |   | 10,842                                    |   |   |   | 7,595 |   |
| In-store advertiser relationships   |   |                                         | 20     |   |                  |   | 14,720  |                                     |   |   | 2,208                                     |   |   |   | 1,642 |   |
| Pharmacy payor relationships        |   |                                         | 13     |   |                  |   | 75,000  |                                     |   |   | 17,307                                    |   |   |   | 12,870 |   |
| Total                               |   |                                         |   |   |                  | $      | 157,120 |                                     |   | $      | 30,357                                    |   |   | $ | 22,107 |   |

| 2010       |   | $      | 2,475  |   |
|------------|--------|--------|--------|--------|
| 2011       |   |   | 10,725 |   |
| 2012       |   |   | 9,670  |   |
| 2013       |   |   | 6,505  |   |
| 2014       |   |   | 6,505  |   |
| Thereafter |   |   | 42,683 |   |

| 4. | Fair Value Measurements |
|----|-------------------------|

----

|             |   |                                 |   |   | Fair Value Measurements at December 4, 2010 Using |   |
|------------------|--------|--------------------------------------|--------|--------|---------------------------------------------------|--------|
|             |   | Total Carrying Value at Dec. 4, 2010 |   |   | Quoted Prices in Active Markets(Level 1)     |   |   | Significant Other Observable Inputs(Level 2) |   |   | Significant Unobservable Inputs(Level 3) |   |
| Assets:          |   |                                 |   |   |                                              |   |   |   |   |   |   |   |
| Cash equivalents |   | $                                    | 1,592  |   |                                              | $      | - |   |   | $ | 1,592 |   |   | $ | - |   |
|             |   |                                 |   |   |                                              |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities:     |   |                                 |   |   |                                              |   |   |   |   |   |   |   |   |   |   |   |
| Series B Warrant |   | $                                    | 3,705  |   |                                              | $      | - |   |   | $ | 3,705 |   |   | $ | - |   |

|             |   |                                      |    |   | Fair Value Measurements at February 27, 2010 Using |   |
|------------------|--------|-------------------------------------------|---------|--------|----------------------------------------------------|--------|
|             |   | Total Carrying Value atFeb. 27, 2010 |    |   | Quoted Prices in Active Markets(Level 1) |   |   | Significant Other Observable Inputs(Level 2) |   |   | Significant Unobservable Inputs(Level 3) |   |
| Assets:          |   |                                      |    |   |                                               |   |   |   |   |   |   |   |
| Cash equivalents |   | $                                         | 158,695 |   |                                               | $      | - |   |   | $ | 158,695 |   |   | $ | - |   |
|             |   |                                      |    |   |                                               |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities:     |   |                                      |    |   |                                               |   |   |   |   |   |   |   |   |   |   |   |
| Series B Warrant |   | $                                         | 13,946  |   |                                               | $      | - |   |   | $ | 13,946 |   |   | $ | - |   |

|                                    |   | At December 4, 2010 |    |   | At February 27, 2010 |   |
|-----------------------------------------|--------|---------------------|---------|--------|----------------------|--------|
|                                    |   | Carrying Amount     |    |   | Fair Value           |   |   | Carrying Amount |   |   | Fair Value |   |
| Current portion of long-term debt       |   | $                   | 171,467 |   |                 | $      | 146,194 |   |   | $ | 191 |   |   | $ | 191 |   |
| Long-term debt, net of related discount |   |                | 816,830 |   |                 |   | 619,152 |   |   |   | 990,359 |   |   |   | 962,040 |   |

| 5. | Valuation of Long-Lived Assets |
|----|--------------------------------|

----

| 6. | Other Accruals |
|----|----------------|

|                                             |   | AtDec. 4, 2010 |    |   | AtFeb. 27, 2010 |   |
|--------------------------------------------------|--------|----------------|---------|--------|-----------------|--------|
| Self-insurance reserves                          |   | $              | 73,902  |   |            | $      | 74,221 |   |
| Deferred taxes                                   |   |           | 11,078  |   |            |   | 3,295 |   |
| Closed store and warehouse reserves              |   |           | 96,663  |   |            |   | 62,189 |   |
| Pension withdrawal liabilities                   |   |           | 10,461  |   |            |   | 10,461 |   |
| GHI Contractual Liability                        |   |           | 8,104   |   |            |   | 8,066 |   |
| Accrued occupancy related costs for open stores  |   |           | 26,713  |   |            |   | 26,952 |   |
| Deferred income                                  |   |           | 28,066  |   |            |   | 26,534 |   |
| Deferred real estate income                      |   |           | 2,539   |   |            |   | 2,775 |   |
| Accrued audit, legal and other                   |   |           | 10,118  |   |            |   | 8,758 |   |
| Accrued interest                                 |   |           | 26,727  |   |            |   | 12,509 |   |
| Other postretirement and postemployment benefits |   |           | 2,674   |   |            |   | 2,674 |   |
| Accrued advertising                              |   |           | 861     |   |            |   | 1,911 |   |
| Dividends payable on preferred stock             |   |           | 3,113   |   |            |   | 2,982 |   |
| Other share-based awards                         |   |           | 298     |   |            |   | - |   |
| Other                                            |   |           | 3,875   |   |            |   | 3,189 |   |
| Total                                            |   | $              | 305,192 |   |            | $      | 246,516 |   |

| 7. | Other Non-Current Liabilities |
|----|-------------------------------|

|                                             |   | AtDec. 4, 2010 |    |   | AtFeb. 27, 2010 |   |
|--------------------------------------------------|--------|----------------|---------|--------|-----------------|--------|
| Deferred taxes                                   |   | $              | 526     |   |            | $      | 11,367 |   |
| Self-insurance Reserves                          |   |           | 227,051 |   |            |   | 208,419 |   |
| Closed Store and Warehouse Reserves              |   |           | 213,525 |   |            |   | 187,911 |   |
| Pension Withdrawal Liabilities                   |   |           | 85,153  |   |            |   | 89,495 |   |
| GHI Contractual Liability for Employee Benefits  |   |           | 85,923  |   |            |   | 87,703 |   |
| Pension Plan Benefits                            |   |           | 113,620 |   |            |   | 109,549 |   |
| Other Postretirement and Postemployment Benefits |   |           | 36,577  |   |            |   | 36,091 |   |
| Corporate Owned Life Insurance Liability         |   |           | 63,078  |   |            |   | 60,436 |   |
| Deferred Rent Liabilities                        |   |           | 56,719  |   |            |   | 57,963 |   |
| Deferred Income                                  |   |           | 56,051  |   |            |   | 68,250 |   |
| Unfavorable Lease Liabilities                    |   |           | 4,411   |   |            |   | 5,391 |   |
| Other                                            |   |           | 11,548  |   |            |   | 13,634 |   |
| Total                                            |   | $              | 954,182 |   |            | $      | 936,209 |   |

----

| 8. | Indebtedness and Other Financial Liabilities |
|----|----------------------------------------------|

|                                                   |   | AtDec. 4, 2010 |     |   | AtFeb. 27, 2010 |   |
|--------------------------------------------------------|--------|----------------|----------|--------|-----------------|--------|
| 5.125% Convertible Senior Notes, due June 15, 2011     |   | $              | 161,192  |   |            | $      | 155,333 |   |
| Related Party Promissory Note, due August 18, 2011     |   |           | 10,000   |   |            |   | 10,000 |   |
| 9.125% Senior Notes, due December 15, 2011             |   |           | 12,840   |   |            |   | 12,840 |   |
| 6.750% Convertible Senior Notes, due December 15, 2012 |   |           | 231,342  |   |            |   | 223,838 |   |
| 11.375% Senior Secured Notes, due August 4, 2015       |   |           | 254,337  |   |            |   | 253,668 |   |
| 9.375% Notes, due August 1, 2039                       |   |           | 200,000  |   |            |   | 200,000 |   |
| Borrowings under Credit Agreement                      |   |           | 116,017  |   |            |   | 132,900 |   |
| Other                                                  |   |           | 2,569    |   |            |   | 1,971 |   |
|                                                   |   |           | 988,297  |   |            |   | 990,550 |   |
| Less current portion of long-term debt                 |   |           | (171,467 | )*     |            |   | (191 | ) |
| Long-term debt                                         |   | $              | 816,830  |   |            | $      | 990,359 |   |

----

|                    |   | AtDec. 4, 2010 |   |   | AtFeb. 27, 2010 |   |
|-------------------------|--------|----------------|--------|--------|-----------------|--------|
| Expected life           |   | 4.51 years     |   |   | 5.28 years      |   |
| Volatility              |   | 78.3           | %      |   |            | 68.6   | % |
| Dividend yield range    |   |           | 0      | %      |            |   | 0 | % |
| Risk-free interest rate |   |           | 1.64   | %      |            |   | 2.30 | % |

| 9. | Redeemable Preferred Stock |
|----|----------------------------|

----

| 10. | Stock Based Compensation |
|-----|--------------------------|

|                                   |   | For the 12 Weeks Ended |   |   | For the 40 Weeks Ended |   |
|----------------------------------------|--------|------------------------|--------|--------|------------------------|--------|
|                                   |   | Dec. 4,                |   |   | Dec. 5,                |   |   | Dec. 4, |   |   | Dec. 5, |   |
|                                   |   | 2010                   |   |   | 2009                   |   |   | 2010 |   |   | 2009 |   |
| Stock options                          |   | $                      | 911    |   |                   | $      | 441 |   |   | $ | 665 |   |   | $ | 1,256 |   |
| Restricted stock units                 |   |                   | 26     |   |                   |   |  340 |   |   |   | 681 |   |   |   |  791 |   |
| Performance restricted stock units     |   |                   | 223    |   |                   |   |  (328 | ) |   |   | (723 | ) |   |   |  2,082 |   |
| Common stock granted to Directors      |   |                   | 187    |   |                   |   |  187 |   |   |   | 623 |   |   |   |  554 |   |
| Total stock-based compensation expense |   | $                      | 1,347  |   |                   | $      |  640 |   |   | $ | 1,246 |   |   | $ |  4,683 |   |

|                   |   | Underlying Shares |      |   | Weighted-Avg. Grant Date Fair Value |   |
|------------------------|--------|-------------------|-----------|--------|-------------------------------------|--------|
| Stock options          |   |              | 6,423,047 |   |                                | $      | 1.98 |   |
| Restricted stock units |   |              | 390,000   |   |                                |   | 3.35 |   |

----

|                    |   | 40 Weeks EndedDec. 4, 2010 |          |   |   |   | 40 Weeks Ended Dec. 5, 2009 |
|-------------------------|--------|----------------------------|---------------|--------|--------|--------|-----------------------------|
| Expected life           |   |                       | 6 years       |   |   |   |                        | 7 years |
| Volatility              |   |                       | 70.1% - 70.6% |   |   |   |                        |   | 126 | % |
| Risk-free interest rate |   |                       | 1.67% - 2.05% |   |   |   |                        |   | 0.05 | % |

----

| 11. | Retirement Plans and Benefits |
|-----|-------------------------------|

|                           |   | For the 12 Weeks Ended |   |   | For the 40 Weeks Ended |   |
|--------------------------------|--------|------------------------|--------|--------|------------------------|--------|
|                           |   | Dec. 4,                |   |   | Dec. 5,                |   |   | Dec. 4, |   |   | Dec. 5, |   |
|                           |   | 2010                   |   |   | 2009                   |   |   | 2010 |   |   | 2009 |   |
| Service cost                   |   | $                      | 1,528  |   |                   | $      | 1,572 |   |   | $ | 5,093 |   |   | $ | 5,140 |   |
| Interest cost                  |   |                   | 6,682  |   |                   |   | 6,837 |   |   |   | 22,273 |   |   |   | 22,475 |   |
| Expected return on plan assets |   |                   | (6,640 | )      |                   |   | (5,708 | ) |   |   | (22,133 | ) |   |   | (19,027 | ) |
| Curtailment loss               |   |                   | -      |   |                   |   | 72 |   |   |   | - |   |   |   | 72 |   |
| Amortization of:               |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Net prior service cost         |   |                   | 34     |   |                   |   | 68 |   |   |   | 115 |   |   |   | 227 |   |
| Actuarial loss                 |   |                   | 439    |   |                   |   | 1,092 |   |   |   | 1,463 |   |   |   | 3,617 |   |
| Pension asset loss             |   |                   | -      |   |                   |   | 2,034 |   |   |   | - |   |   |   | 2,034 |   |
| Special termination benefits   |   |                   | 200    |   |                   |   | 300 |   |   |   | 600 |   |   |   | 950 |   |
| Net pension cost               |   | $                      | 2,243  |   |                   | $      | 6,267 |   |   | $ | 7,411 |   |   | $ | 15,488 |   |

|                                   |   | For the 12 Weeks Ended |   |   | For the 40 Weeks Ended |   |
|----------------------------------------|--------|------------------------|--------|--------|------------------------|--------|
|                                   |   | Dec. 4,                |   |   | Dec. 5,                |   |   | Dec. 4, |   |   | Dec. 5, |   |
|                                   |   | 2010                   |   |   | 2009                   |   |   | 2010 |   |   | 2009 |   |
| Service cost                           |   | $                      | 151    |   |                   | $      | 117 |   |   | $ | 503 |   |   | $ | 390 |   |
| Interest cost                          |   |                   | 428    |   |                   |   | 449 |   |   |   | 1,427 |   |   |   | 1,497 |   |
| Amortization of:                       |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
|    Prior service credit |   |                   | (198   | )      |                   |   | (311 | ) |   |   | (660 | ) |   |   | (1,036 | ) |
|    Actuarial gain       |   |                   | (112   | )      |                   |   | (189 | ) |   |   | (374 | ) |   |   | (630 | ) |
| Net postretirement benefits cost       |   | $                      | 269    |   |                   | $      | 66 |   |   | $ | 896 |   |   | $ | 221 |   |

| 12. | Interest Expense, net |
|-----|-----------------------|

|                                                         |   | For the 12 weeks ended |   |   | For the 40 weeks ended |   |
|--------------------------------------------------------------|--------|------------------------|--------|--------|------------------------|--------|
|                                                         |   | Dec. 4, 2010           |   |   | Dec. 5, 2009           |   |   | Dec. 4, 2010 |   |   | Dec. 5, 2009 |   |
| $655 million Credit Agreement                                |   | $                      | 3,161  |   |                   | $      | 3,028 |   |   | $ | 10,270 |   |   | $ | 12,406 |   |
| Related Party Promissory Note, due Aug. 18, 2011             |   |                   | 142    |   |                   |   | 147 |   |   |   | 467 |   |   |   | 467 |   |
| 11.375% Senior Secured Notes, due Aug. 1, 2015               |   |                   | 6,751  |   |                   |   | 6,835 |   |   |   | 22,709 |   |   |   | 10,400 |   |
| 9.125% Senior Notes, due December 15, 2011                   |   |                   | 269    |   |                   |   | 270 |   |   |   | 898 |   |   |   | 900 |   |
| 5.125% Convertible Senior Notes, due June 15, 2011           |   |                   | 1,941  |   |                   |   | 1,952 |   |   |   | 6,483 |   |   |   | 6,505 |   |
| 6.750% Convertible Senior Notes, due December 15, 2012       |   |                   | 3,951  |   |                   |   | 3,972 |   |   |   | 13,196 |   |   |   | 13,240 |   |
| 9.375% Notes, due August 1, 2039                             |   |                   | 4,280  |   |                   |   | 4,280 |   |   |   | 14,375 |   |   |   | 14,404 |   |
| Capital Lease Obligations and Real Estate Liabilities        |   |                   | 11,286 |   |                   |   | 12,019 |   |   |   | 38,021 |   |   |   | 40,066 |   |
| Dividends on Preferred Stock Liability                       |   |                   | -      |   |                   |   | 2,165 |   |   |   | - |   |   |   | 3,247 |   |
| Self Insurance and GHI Interest                              |   |                   | 4,130  |   |                   |   | 3,292 |   |   |   | 13,001 |   |   |   | 11,420 |   |
| GHI Discount Rate Adjustment and COLI Non-cash Interest      |   |                   | (2,090 | )      |                   |   | 943 |   |   |   | 5,558 |   |   |   | 15,030 |   |
| Amortization of Deferred Financing Fees, Discounts and Other |   |                   | 6,218  |   |                   |   | 6,866 |   |   |   | 22,368 |   |   |   | 20,491 |   |
| Total interest expense                                       |   |                   | 40,039 |   |                   |   | 45,769 |   |   |   | 147,346 |   |   |   | 148,576 |   |
| Interest income                                              |   |                   | (1     | )      |                   |   | (51 | ) |   |   | (40 | ) |   |   | (143 | ) |
| Total                                                        |   | $                      | 40,038 |   |                   | $      | 45,718 |   |   | $ | 147,306 |   |   | $ | 148,433 |   |

| 13. | Income Taxes |
|-----|--------------|

----

| 14. | Discontinued Operations |
|-----|-------------------------|

|               |   | For the 40 Weeks Ended December 4, 2010 |    |
|--------------------|--------|-----------------------------------------|---------|
|               |   | Balance at 2/27/2010                    |    |   | Interest Accretion (1) |   |   | Adjustments(2) |   |   | Utilization(3) |   |   | Balance at 12/4/2010 |   |
| 2007 Events        |   |                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Occupancy          |   | $                                       | 96,909  |   |   | $ | 5,942 |   |   | $ | 8,462 |   |   | $ | (11,478 | ) |   | $ | 99,835 |   |
| Pension withdrawal |   |                                    | 58,015  |   |   |   | 2,754 |   |   |   | - |   |   |   | (4,447 | ) |   |   | 56,322 |   |
| 2007 events total  |   |                                    | 154,924 |   |   |   | 8,696 |   |   |   | 8,462 |   |   |   | (15,925 | ) |   |   | 156,157 |   |
|               |   |                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 2005 Event         |   |                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Occupancy          |   |                                    | 58,974  |   |   |   | 2,484 |   |   |   | 1,393 |   |   |   | (3,359 | ) |   |   | 59,492 |   |
|               |   |                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 2003 Events        |   |                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Occupancy          |   |                                    | 22,494  |   |   |   | 1,012 |   |   |   | 3,183 |   |   |   | (1,186 | ) |   |   | 25,503 |   |
| Total              |   | $                                       | 236,392 |   |   | $ | 12,192 |   |   | $ | 13,038 |   |   | $ | (20,470 | ) |   | $ | 241,152 |   |

|   | (1) | The additions to occupancy and severance represent the interest accretion on future occupancy costs and future obligations for early withdrawal from multi-employer union pension plans which were recorded at present value at the time of the original charge.   Interest accretion is recorded as a component of “Loss from operations of discontinued businesses” on our Consolidated Statements of Operations. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | At each balance sheet date, we assess the adequacy of the balance of the remaining liability to determine if any adjustments are required as a result of changes in circumstances and/or estimates.   These adjustments are recorded as a component of “Loss from operations of discontinued business” on our Consolidated Statements of Operations.  During the 40 weeks ended December 4, 2010, we recorded adjustments for the 2007, 2005, and 2003 events for additional occupancy related costs of $8.5 million, $1.4 million and $3.2 million, respectively, due to changes in our estimation of such future costs due to the continuing deteriorating economic conditions in the Midwest real estate market. We now expect our occupancy costs to be higher as the current economic conditions affecting the Midwest real estate market are expected to persist for some time and subleased properties in the area have been occurring at heavily discounted rates as compared to the related contractual agreements. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | Occupancy utilization represents payments made during those periods for rent, common area maintenance and real estate taxes.  Pension withdrawal utilization represents payments made to the union pension fund during the period. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                             |   | 2007 Events |    |   | 2005 Event |   |    | 2003 Events |   |   | Total  |   |
|------------------------------------------------------------------------------------------------------------------|--------|-------------|---------|--------|------------|--------|---------|-------------|--------|--------|--------|--------|
| Total severance payments made to date                                                                            |   | $           | 37,534  |   |       | $      | 2,650   |        |   | $      | 22,528 |   |   | $ | 62,712 |   |
| Expected future pension withdrawal payments                                                                      |   |        | 56,322  |   |       |   | -       |        |   |   | -      |   |   |   | 56,322 |   |
| Total severance and pension withdrawal payments expected to be incurred                                          |   |        | 93,856  |   |       |   | 2,650   |        |   |   | 22,528 |   |   | $ | 119,034 |   |
|                                                                                                             |   |        |    |   |       |   |    |        |   |   |   |   |   |   |   |   |
| Total occupancy payments made to date                                                                            |   |        | 92,058  |   |       |   | 60,570  |        |   |   | 33,933 |   |   |   | 186,561 |   |
| Expected future occupancy payments, excluding interest accretion                                                 |   |        | 99,835  |   |       |   | 59,492  |        |   |   | 25,503 |   |   |   | 184,830 |   |
| Total occupancy payments expected to be incurred, excluding interest accretion                                   |   |        | 191,893 |   |       |   | 120,062 |        |   |   | 59,436 |   |   |   | 371,391 |   |
|                                                                                                             |   |        |    |   |       |   |    |        |   |   |   |   |   |   |   |   |
| Total severance and occupancy payments made to date                                                              |   |        | 129,592 |   |       |   | 63,220  |        |   |   | 56,461 |   |   |   | 249,273 |   |
| Expected future pension withdrawal and occupancy payments, excluding interest accretion                          |   |        | 156,157 |   |       |   | 59,492  |        |   |   | 25,503 |   |   |   | 241,152 |   |
| Total severance, pension withdrawal and occupancy payments expected to be incurred, excluding interest accretion |   | $           | 285,749 |   |       | $      | 122,712 |        |   | $      | 81,964 |   |   | $ | 490,425 |   |

----

|                          |   | At December 4, 2010 |    |
|-------------------------------|--------|---------------------|---------|
|                          |   | 2007 Events         |    |   | 2005 Event |   |   | 2003 Events |   |   | Total |   |
| Other accruals                |   | $                   | 31,508  |   |   | $ | 15,222 |   |   | $ | 5,048 |   |   | $ | 51,778 |   |
| Other non-current liabilities |   | $                   | 124,649 |   |   | $ | 44,270 |   |   | $ | 20,455 |   |   | $ | 189,374 |   |

|                          |   | At February 27, 2010 |    |
|-------------------------------|--------|----------------------|---------|
|                          |   | 2007 Events          |    |   | 2005 Event |   |   | 2003 Events |   |   | Total |   |
| Other accruals                |   | $                    | 28,528  |   |   | $ | 10,773 |   |   | $ | 3,490 |   |   | $ | 42,791 |   |
| Other non-current liabilities |   | $                    | 126,396 |   |   | $ | 48,201 |   |   | $ | 19,004 |   |   | $ | 193,601 |   |

| 15. | Asset Disposition Initiatives |
|-----|-------------------------------|

----

|                                    |   | For the 40 Weeks Ended December 4, 2010 |         |
|-----------------------------------------|--------|-----------------------------------------|--------------|
|                                    |   | Balance at 2/27/2010                    |         |   | Interest Accretion (1) |   |   | Adjustments(2) |   |   | Utilization(3) |   |   | Balance at 12/4/2010 |   |
| 2010 Event                              |   |                                    |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Continuing Operations                   |   |                                    |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Occupancy                               |   | $                                       | -            |   |   | $ | 306 |   |   | $ | 55,011 |   |   | $ | (313 | ) |   | $ | 55,004 |   |
| Severance and health benefits           |   |                                    | -            |   |   |   | - |   |   |   | 955 |   |   |   | (354 | ) |   |   | 601 |   |
| 2010 event total                        |   |                                    | -            |   |   |   | 306 |   |   |   | 55,966 |   |   |   | (667 | ) |   |   | 55,605 |   |
|                                    |   |                                    |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 2005 Event                              |   |                                    |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Continuing Operations                   |   |                                    |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Health benefits                         |   |                                    | 687          |   |   |   | - |   |   |   | - |   |   |   | (209 | ) |   |   | 478 |   |
| 2005 event total                        |   |                                    |  687    |   |   |   | - |   |   |   | - |   |   |   | (209 | ) |   |   | 478 |   |
|                                    |   |                                    |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 2001 Event                              |   |                                    |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Continuing Operations                   |   |                                    |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Occupancy                               |   |                                    | 6,324        |   |   |   | 308 |   |   |   | - |   |   |   | (258 | ) |   |   | 6,374 |   |
|                                    |   |                                    |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Discontinued Operations                 |   |                                    |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Occupancy                               |   |                                    | 10,009       |   |   |   | 435 |   |   |   | - |   |   |   | (1,059 | ) |   |   | 9,385 |   |
| 2001 event total                        |   |                                    | 16,333       |   |   |   | 743 |   |   |   | - |   |   |   | (1,317 | ) |   |   | 15,759 |   |
|                                    |   |                                    |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 1998 Event                              |   |                                    |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Continuing Operations                   |   |                                    |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Occupancy                               |   |                                    | 4,098        |   |   |   | 57 |   |   |   | - |   |   |   | (641 | ) |   |   | 3,514 |   |
| Pension withdrawals and health benefits |   |                                    |  666    |   |   |   | - |   |   |   | - |   |   |   | (109 | ) |   |   | 557 |   |
|                                    |   |                                    |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Discontinued Operations                 |   |                                    |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Occupancy                               |   |                                    |  13     |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 13 |   |
| 1998 event total                        |   |                                    |  4,777  |   |   |   | 57 |   |   |   | - |   |   |   | (750 | ) |   |   | 4,084 |   |
| Total                                   |   | $                                       |  21,797 |   |   | $ | 1,106 |   |   | $ | 55,966 |   |   | $ | (2,943 | ) |   | $ | 75,926 |   |

|   | (1) | The additions to occupancy represent the interest accretion on future occupancy costs which were recorded at present value at the time of the original charge.   These adjustments are recorded to “Store operating, general and administrative expense” for continuing operations and “Loss from operations of discontinued businesses” for discontinued operations on our Consolidated Statements of Operations. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | At each balance sheet date, we assess the adequacy of the balance to determine if any adjustments are required as a result of changes in circumstances and/or estimates.   These adjustments are recorded to “Store operating, general and administrative expense” for continuing operations and “Loss from operations of discontinued businesses” for discontinued operations on our Consolidated Statements of Operations. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | During the 12 weeks ended December 4, 2010, we recorded a $0.4 million adjustment to reduce severance and benefits due to employees previously determined to be severed accepting other positions within our Company. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | Occupancy utilization represents payments made during those periods for rent, common area maintenance and real estate taxes.  Severance and benefits utilization represents payments made to terminated employees during the period. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                         |   | 2010 Event |         | 2005 Event |    |   | 2001 Event |   |    | 1998 Event |   |   | Total   |    |
|----------------------------------------------------------------------------------------------|--------|------------|--------------|------------|---------|--------|------------|--------|---------|------------|--------|--------|---------|---------|
| Total severance payments made to date                                                        |   | $          | 354          |       | $       | 49,204 |       |   | $       | 28,205     |   |   | $       | 30,907  |   |   | $ | 108,670 |   |
| Expected future severance payments                                                           |   |       | 601          |       |    | 478    |       |   |    | -          |   |   |    | 557     |   |   |   | 1,636 |   |
| Total severance payments expected to be incurred                                             |   | $          | 955          |       | $       | 49,682 |       |   | $       | 28,205     |   |   | $       | 31,464  |   |   | $ | 110,306 |   |
|                                                                                         |   |       |         |       |    |   |       |   |    |       |   |   |    |    |   |   |   |   |   |
| Total occupancy payments made to date                                                        |   | $          | 313          |       | $       | 13,856 |       |   | $       | 67,099     |   |   | $       | 119,833 |   |   | $ | 201,101 |   |
| Expected future occupancy payments, excluding interest accretion                             |   |       |  55,004 |       |    | -      |       |   |    | 15,759     |   |   |    | 3,527   |   |   |   | 74,290 |   |
| Total occupancy payments expected to be incurred, excluding interest accretion               |   |  $    |  55,317 |       |  $ | 13,856 |       |   |  $ | 82,858     |   |   |  $ | 123,360 |   |   | $ | 275,391 |   |
|                                                                                         |   |       |         |       |    |   |       |   |    |       |   |   |    |    |   |   |   |   |   |
| Total severance and occupancy payments made to date                                          |   |  $    |  667    |       | $       | 63,060 |       |   | $       | 95,304     |   |   | $       | 150,740 |   |   | $ | 309,771 |   |
| Expected future severance and occupancy payments, excluding interest accretion               |   |       |  55,605 |       |    | 478    |       |   |    | 15,759     |   |   |    | 4,084   |   |   |   | 75,926 |   |
| Total severance and occupancy payments expected to be incurred, excluding interest accretion |   |  $    |  56,272 |       | $       | 63,538 |       |   | $       | 111,063    |   |   | $       | 154,824 |   |   | $ | 385,697 |   |

|                                  |   |   | December 4, 2010 |   |
|---------------------------------------|--------|--------|------------------|--------|
|                                  |   |   | 2010 Event       |   |   | 2005 Event |   |   | 2001 Event |   |   | 1998 Event |   |   | Total |   |
| Accrued salaries, wages, and benefits |   | $      | 601              |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | 601 |   |
| Other accruals                        |   | $      | 20,050           |   |   | $ | 214 |   |   | $ | 3,384 |   |   | $ | 2,782 |   |   | $ | 26,430 |   |
| Other non-current liabilities         |   | $      | 34,954           |   |   | $ | 264 |   |   | $ | 12,375 |   |   | $ | 1,302 |   |   | $ | 48,895 |   |

|                          |   |   | February 27, 2010 |   |
|-------------------------------|--------|--------|-------------------|--------|
|                          |   |   | 2010 Event        |   |   | 2005 Event |   |   | 2001 Event |   |   | 1998 Event |   |   | Total |   |
| Other accruals                |   | $      | -                 |   |   | $ | 336 |   |   | $ | 2,992 |   |   | $ | 2,235 |   |   | $ | 5,563 |   |
| Other non-current liabilities |   | $      | -                 |   |   | $ | 351 |   |   | $ | 13,341 |   |   | $ | 2,542 |   |   | $ | 16,234 |   |

----

| 18. | Earnings (Loss) Per Share |
|-----|---------------------------|

|                               |   | 12 Weeks Ended |       |   | 40 Weeks Ended |       |
|------------------------------------|--------|----------------|------------|--------|----------------|------------|
|                               |   | Dec. 4, 2010   |       |   | Dec. 5, 2009   |       |   | Dec. 4, 2010 |   |   | Dec. 5, 2009 |   |
| Stock options                      |   | 7,625,333      |       |   |           | 2,416,848  |   |   | 4,202,947 |   |   |   | 2,480,445 |   |
| Warrants                           |   | 7,652,135      |       |   |           | 686,277    |   |   | 686,277 |   |   |   | 686,277 |   |
| Performance restricted stock units |   | 110,668        |       |   |           | 295,213    |   |   | 166,683 |   |   |   | 548,608 |   |
| Restricted stock units             |   | 972,587        |       |   |           | 1,315,132  |   |   | 1,002,303 |   |   |   | 1,132,044 |   |
| Financing warrant                  |   | 11,278,988     |       |   |           | 11,278,988 |   |   | 11,278,988 |   |   |   | 11,278,988 |   |
| Preferred stock                    |   |           | 35,000,000 |   |           |       | 11,590,600 |   |   |   | 35,000,000 |   |   |   | 11,590,600 |   |
| Convertible debt                   |   |           | 11,278,988 |   |           |       | 11,278,988 |   |   |   | 11,278,988 |   |   |   | 11,278,988 |   |

----

|                                           |   | 12 Weeks Ended |       |   | 40 Weeks Ended |     |
|------------------------------------------------|--------|----------------|------------|--------|----------------|----------|
|                                           |   | Dec. 4, 2010   |       |   | Dec. 5, 2009   |     |   | Dec. 4, 2010 |   |   | Dec. 5, 2009 |   |
| Loss from continuing operations                | $      | (180,683       | )          |   | $              | (502,438 | ) | $ | (439,111 | ) |   | $ | (622,901 | ) |
| Preferred stock dividends                      |   | (3,231         | )          |   |           | (1,066   | ) |   | (10,631 | ) |   |   | (1,599 | ) |
| Beneficial conversion feature amortization     |   | (1,111         | )          |   |           | (355     | ) |   | (3,703 | ) |   |   | (533 | ) |
| Loss from continuing operations – basic  |   | (185,025       | )          |   |           | (503,859 | ) |   | (453,445 | ) |   |   | (625,033 | ) |
| Adjustments on Other financial liabilities (1) |   |           | -          |   |           |     | 15,943 |   |   | (10,241 | ) |   |   | 24,898 |   |
| Loss from continuing operations–diluted  | $      |           | (185,025   | )      |           | $        | (487,916 | ) |   |   | (463,686 | ) |   | $ | (600,135 | ) |
|                                           |   |           |       |   |           |     |   |   |   |   |   |   |   |   |   |   |
| Weighted average common shares outstanding     |   |           | 56,280,414 |   |           |     | 58,193,430 |   |   |   | 56,116,484 |   |   |   | 58,021,355 |   |
| Share lending agreement (2)                    |   |           | (2,427,944 | )      |           |     | (4,773,182 | ) |   |   | (2,427,944 | ) |   |   | (4,881,515 | ) |
| Common shares outstanding–basic          |   |           | 53,852,470 |   |           |     | 53,420,248 |   |   |   | 53,688,540 |   |   |   | 53,139,840 |   |
|                                           |   |           |       |   |           |     |   |   |   |   |   |   |   |   |   |   |
| Effect of dilutive securities:                 |   |           |       |   |           |     |   |   |   |   |   |   |   |   |   |   |
| Convertible financial liabilities (1)          |   |           | -          |   |           |     | (15,427,036 | ) |   |   | (39,240,142 | ) |   |   | (26,295,645 | ) |
| Common shares outstanding–diluted        |   |           | 53,852,470 |   |           |     | 37,993,212 |   |   |   | 14,448,398 |   |   |   | 26,844,195 |   |

| (1) | Our Series B Warrants are classified as a liability because a third party has the right to determine their cash or share settlement.    (Refer to Note 8 – Indebtedness and Other Financial Liabilities).  These warrants are marked-to-market on our Consolidated Statements of Operations.  For example, in periods when the market price of our common stock decreases, our income from continuing operations is increased.   For purposes of determining if an application of the treasury stock method produces a dilutive result, we assume proceeds are used to repurchase common stock and we adjust the numerator similar to the adjustments required under the “if-converted” method.  We consider the combined impact of the numerator and denominator adjustments, including a denominator adjustment to reduce shares, even when the average market price of our common stock for the period is below the warrant’s strike price. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | As of December 4, 2010 and December 5, 2009, we had 5,634,002 and 7,134,002, respectively, of loaned shares under our share lending agreements, which were considered issued and outstanding.  The obligation of the financial institutions to return the borrowed shares has been accounted for as prepaid forward contract and, accordingly, shares underlying this contract are removed from the computation of basic and diluted earnings per share, unless the borrower defaults on returning the related shares.  On September 15, 2008, Lehman Europe, who is a party to a 3,206,058 share lending agreement with our Company filed under chapter 11 of the U.S. Bankruptcy Code with the United States Bankruptcy Court and/or commenced equivalent proceedings in jurisdictions outside of the United States (collectively, the “Lehman Bankruptcy”).  As such, we have included these loaned shares as issued and outstanding effective September 15, 2008 for purposes of computing our basic and diluted weighted average shares and (loss) income per share.  This treatment is consistent with the new accounting guidance relating to accounting for own share lending arrangements in contemplation of convertible debt issuance, which we adopted during the first quarter of fiscal 2010 (Refer to Note 2 – Impact of New Accounting Pronouncements).   For the 12 and 40 weeks ended December 4, 2010, weighted average common shares relating to share lending agreements of 2,427,944 were excluded from the computation of earnings per share.  For the 12 and 40 weeks ended December 5, 2009, weighted average common shares relating to share lending agreement of 4,773,182 and 4,881,515, respectively, were excluded from the computation of earnings per share. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 19. | Commitments and Contingencies |
|-----|-------------------------------|

----

| 20. | Reportable Segments |
|-----|---------------------|

----

|        |   | Sales by Category      |      |
|-------------|--------|------------------------|-----------|
|        |   | For the 12 weeks ended |      |   | For the 40 weeks ended |   |
|        |   | Dec. 4, 2010           |      |   | Dec. 5, 2009 |   |   | Dec. 4, 2010 |   |   | Dec. 5, 2009 |   |
| Grocery (1) |   | $                      | 1,254,386 |   |   | $ | 1,386,701 |   |   | $ | 4,323,618 |   |   | $ | 4,755,462 |   |
| Meat (2)    |   |                   | 342,308   |   |   |   | 362,779 |   |   |   | 1,209,657 |   |   |   | 1,281,427 |   |
| Produce (3) |   |                   | 197,111   |   |   |   | 213,212 |   |   |   | 743,739 |   |   |   | 781,107 |   |
| Total       |   | $                      | 1,793,805 |   |   | $ | 1,962,692 |   |   | $ | 6,277,014 |   |   | $ | 6,817,996 |   |

| (1) | The grocery category includes grocery, frozen foods, dairy, general merchandise/health and beauty aids, wine, beer & spirits, and pharmacy. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | The meat category includes meat, deli, bakery and seafood. |
|-----|------------------------------------------------------------|

| (3) | The produce category includes produce and floral. |
|-----|---------------------------------------------------|

|                                                |   | For the 12 weeks ended |      |   | For the 40 weeks ended |    |
|-----------------------------------------------------|--------|------------------------|-----------|--------|------------------------|---------|
|                                                |   | Dec. 4, 2010           |      |   | Dec. 5, 2009           |    |   | Dec. 4, 2010 |   |   | Dec. 5, 2009 |   |
| Sales                                               |   |                   |      |   |                   |    |   |   |   |   |   |   |
| Fresh                                               |   |  $                | 902,753   |   |                   | $       | 973,556 |   |   |  $ | 3,158,274 |   |   | $ | 3,403,009 |   |
| Pathmark(1)                                         |   | 759,946                |      |   |                   | 857,316 |   |   | 2,687,650 |   |   |   | 2,995,194 |   |
| Gourmet                                             |   | 63,307                 |      |   |                   | 65,484  |   |   | 201,301 |   |   |   | 206,875 |   |
| Other                                               |   | 67,799                 |      |   |                   | 66,336  |   |   | 229,789 |   |   |   | 212,918 |   |
| Total sales                                         |   | $                      | 1,793,805 |   |                   | $       | 1,962,692 |   |   | $ | 6,277,014 |   |   | $ | 6,817,996 |   |
|                                                |   |                   |      |   |                   |    |   |   |   |   |   |   |   |   |   |   |
| Segment income (loss)                               |   |                   |      |   |                   |    |   |   |   |   |   |   |   |   |   |   |
| Fresh                                               |   |                   | 4,891     |   |                   |    | 13,313 |   |   |   | 28,618 |   |   |   | 87,322 |   |
| Pathmark(1)                                         |   |                   | (20,992   | )      |                   |    | (16,501 | ) |   |   | (73,572 | ) |   |   | (33,589 | ) |
| Gourmet                                             |   |                   | 5,411     |   |                   |    | 6,804 |   |   |   | 14,294 |   |   |   | 18,234 |   |
| Other                                               |   |                   | 595       |   |                   |    | (116) |   |   |   | 1,586 |   |   |   | 1,541 |   |
| Total segment (loss) income                         |   |                   | (10,095   | )      |                   |    | 3,500 |   |   |   | (29,074 | ) |   |   | 73,508 |   |
| Corporate (2)                                       |   |                   | (29,468   | )      |                   |    | (22,606 | ) |   |   | (105,664 | ) |   |   | (82,236 | ) |
| Reconciling items (3)                               |   |                   | (103,822  | )      |                   |    | (434,045 | ) |   |   | (170,016 | ) |   |   | (454,825 | ) |
| Loss from continuing operations                     |   |                   | (143,385  | )      |                   |    | (453,151 | ) |   |   | (304,754 | ) |   |   | (463,553 | ) |
| Nonoperating (loss) income                          |   |                   | (213      | )      |                   |    | (15,944 | ) |   |   | 10,241 |   |   |   | (24,898 | ) |
| Interest expense                                    |   |                   | (40,039   | )      |                   |    | (45,769 | ) |   |   | (147,346 | ) |   |   | (148,576 | ) |
| Interest and dividend income                        |   |                   | 1         |   |                   |    | 51 |   |   |   | 40 |   |   |   | 143 |   |
| Loss from continuing operations before income taxes |   | $                      | (183,636  | )      |                   | $       | (514,813 | ) |   | $ | (441,819 | ) |   | $ | (636,884 | ) |

| (1) | Includes results from Fresh stores that have been subsequently converted to Pathmark stores. |
|-----|----------------------------------------------------------------------------------------------|

| (2) | Represents a $4.8 million decline in corporate and administrative costs, which was more than offset by a $28.2 million increase in corporate costs attributable to store-related activities, primarily benefits and occupancy costs which are not allocated to segments during the 40 weeks ended December 4, 2010. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Reconciling items, which are not included in segment income, consist of the following: |
|-----|----------------------------------------------------------------------------------------|

----

|                         |   | For the 12 weeks ended |     |   | For the 40 weeks ended |   |
|------------------------------|--------|------------------------|----------|--------|------------------------|--------|
|                         |   | Dec. 4, 2010           |     |   | Dec. 5, 2009           |   |   | Dec. 4, 2010 |   |   | Dec. 5, 2009 |   |
| Long-lived asset impairment  |   | $                      | (29,336  | )      |                   | $      | (40,820 | ) |   | $ | (64,984 | ) |   | $ | (40,820 | ) |
| Intangible asset impairment  |   |                   | (12,700  | )      |                   |   | (49,900 | ) |   |   | (12,700 | ) |   |   | (49,900 | ) |
| Net restructuring and other  |   |                   | (11,684  | )      |                   |   | (1,291 | ) |   |   | (24,914 | ) |   |   | (4,187 | ) |
| Real estate related activity |   |                   | (48,114  | )      |                   |   | (20,583 | ) |   |   | (47,881 | ) |   |   | (29,812 | ) |
| Stock-based compensation     |   |                   | (1,346   | )      |                   |   | (592 | ) |   |   | (1,246 | ) |   |   | (4,636 | ) |
| Pension withdrawal costs     |   |                   | -        |   |                   |   | - |   |   |   | - |   |   |   | (2,445 | ) |
| LIFO adjustment              |   |                   | (642     | )      |                   |   | 981 |   |   |   | (2,139 | ) |   |   | (1,185 | ) |
| Goodwill impairment          |   |                   | -        |   |                   |   | (321,840 | ) |   |   | (16,152 | ) |   |   | (321,840 | ) |
| Total reconciling items      |   | $                      | (103,822 | )      |                   | $      | (434,045 | ) |   | $ | (170,016 | ) |   | $ | (454,825 | ) |

|                                        |   | For the 12 weeks ended |   |   | For the 40 weeks ended |   |
|---------------------------------------------|--------|------------------------|--------|--------|------------------------|--------|
|                                        |   | Dec. 4, 2010           |   |   | Dec. 5, 2009           |   |   | Dec. 4, 2010 |   |   | Dec. 5, 2009 |   |
| Segment depreciation and amortization       |   |                   |   |   |                   |   |   |   |   |   |   |   |
| Fresh                                       |   | $                      | 16,486 |   |                   | $      | 18,997 |   |   | $ | 57,206 |   |   | $ | 64,443 |   |
| Pathmark (1)                                |   |                   | 19,077 |   |                   |   | 21,279 |   |   |   | 65,610 |   |   |   | 74,762 |   |
| Gourmet                                     |   |                   | 1,883  |   |                   |   | 2,160 |   |   |   | 6,585 |   |   |   | 7,209 |   |
| Other                                       |   |                   | 1,271  |   |                   |   | 1,126 |   |   |   | 4,175 |   |   |   | 3,361 |   |
| Total segment depreciation and amortization |   |                   | 38,717 |   |                   |   | 43,562 |   |   |   | 133,576 |   |   |   | 149,775 |   |
| Corporate                                   |   |                   | 11,228 |   |                   |   | 12,251 |   |   |   | 38,265 |   |   |   | 41,610 |   |
| Total company depreciation and amortization |   | $                      | 49,945 |   |                   | $      | 55,813 |   |   | $ | 171,841 |   |   | $ | 191,385 |   |

| (1) | Includes results from Fresh stores that have been subsequently converted to Pathmark stores. |
|-----|----------------------------------------------------------------------------------------------|

| 21. | Subsequent Events |
|-----|-------------------|

|   | • |   | the DIP Lenders agreed to lend up to $800.0 million in the form of a $350.0 million term loan and a $450.0 million revolving credit facility with a $250.0 million sublimit for letters of credit, in each case subject to the terms and conditions therein; |
|--------|---------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • |   | our Company’s and the subsidiary borrower’s obligations under the DIP Credit Agreement and the other specified loan documents are guaranteed by our Company’s certain other subsidiaries that are Debtors (“Subsidiary Guarantors” and, together with our Company and the Subsidiary Borrowers, the “Loan Parties”); and |
|--------|---------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • |   | the Loan Parties’ obligations under the DIP Credit Agreement and such other specified loan documents are secured by a security interest in, and lien upon, substantially all of the Loan Parties’ existing and after-acquired personal and real property, having the priority and subject to the terms therein and in the order(s) entered into by the Bankruptcy Court, as applicable. |
|--------|---------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| ·   | Overview – a general description of our business and segment structure. |
|--------------------|-------------------------------------------------------------------------------|

| ·   | Operating Results – a discussion of the value drivers of our business; measurements; opportunities; challenges and risks; and initiatives. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Outlook – a discussion of certain trends or business initiatives for the remainder of fiscal 2010 to assist in understanding the business. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Results of Operations and Liquidity and Capital Resources – a discussion of results for the 12 weeks ended December 4, 2010 compared to the 12 weeks ended December 5, 2009; results for the 40 weeks ended December 4, 2010 compared to the 40 weeks ended December 5, 2009; and current and expected future liquidity. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Critical Accounting Estimates – a discussion of significant estimates made by our management. |
|--------------------|-----------------------------------------------------------------------------------------------------|

|                               |   | 12 Weeks Ended December 4, 2010 |    |   | 12 Weeks Ended December 5, 2009 |   |    | Favorable (Unfavorable)Dollar Change |   |   | % Change |   |
|------------------------------------|--------|--------------------------------------|---------|--------|--------------------------------------|--------|---------|--------------------------------------|--------|--------|----------|--------|
|                               |   | (in millions, except percentages)    |    |
| Sales                              |   | $                                    | 1,793.8 |   |                                 | $      | 1,962.7 |                                 |   | $      | (168.9   | )      |   |   | (8.6 | )% |
| Decrease in comparable store sales |   |                                 | (4.9    | )%     |                                 |   | (5.8    | )%                                   |   | NA     |     |   | NA |   |
| Loss from continuing operations    |   | $                                    | (180.7  | )      |                                 | $      | (502.4  | )                                    |   | $      | 321.7    |   |   |   | 64.0 |  % |
| Loss from discontinued operations  |   | $                                    | (18.7   | )      |                                 | $      | (57.2   | )                                    |   | $      | 38.5     |   |   |   | 67.3 |  % |
| Net loss                           |   | $                                    | (199.4  | )      |                                 | $      | (559.6  | )                                    |   | $      | 360.2    |   |   |   | 64.4 |  % |
| Net loss per share – basic   |   | $                                    | (3.78   | )      |                                 | $      | (10.50  | )                                    |   | $      | 6.72     |   |   |   | 64.0 |  % |
| Net loss per share – diluted |   | $                                    | (3.78   | )      |                                 | $      | (14.35  | )                                    |   | $      | 10.57    |   |   |   | 73.7 |  % |
|                               |   |                                 |    |   |                                 |   |    |                                 |   |   |     |   |   |   |   |   |
| Non-GAAP Financial Data:           |   |                                 |    |   |                                 |   |    |                                 |   |   |     |   |   |   |   |   |
| Adjusted EBITDA (1)                |   | $                                    | 10.4    |   |                                 | $      | 36.7    |                                 |   | $      | (26.3    | )      |   |   | (71.7 | ) % |

----

|        |   | For the 12 weeks ended |      |
|-------------|--------|------------------------|-----------|
|        |   | Dec. 4, 2010           |      |   | Dec. 5, 2009 |   |
|        |   | (in thousands)         |      |
| Fresh       |   | $                      | 902,753   |   |   | $ | 973,556 |   |
| Pathmark    |   |                   | 759,946   |   |   |   | 857,316 |   |
| Gourmet     |   |                   | 63,307    |   |   |   | 65,484 |   |
| Other       |   |                   | 67,799    |   |   |   | 66,336 |   |
| Total sales |   | $                      | 1,793,805 |   |   | $ | 1,962,692 |   |

|          |   | Sales Volume |   |   | Gross Margin Rate |   |   | Total |   |
|---------------|--------|--------------|--------|--------|-------------------|--------|--------|-------|--------|
| Total Company |   | $            | (50.8  | )      |              | $      | (5.5   | )     |   | $ | (56.3 | ) |

|                        |   | For the 12 weeks ended |    |
|-----------------------------|--------|------------------------|---------|
|                        |   | Dec. 4, 2010           |    |   | Dec. 5, 2009 |   |
|                        |   | (in thousands)         |    |
| Fresh                       |   | $                      | 4,891   |   |   | $ | 13,313 |   |
| Pathmark                    |   |                   | (20,992 | ) |   |   | (16,501 | ) |
| Gourmet                     |   |                   | 5,411   |   |   |   | 6,804 |   |
| Other                       |   |                   | 595     |   |   |   | (116 | ) |
| Total segment (loss) income |   | $                      | (10,095 | ) |   | $ | 3,500 |   |

|                               |   | 40 Weeks Ended December 4, 2010   |    |   | 40 Weeks Ended December 5, 2009 |   |    | Favorable (Unfavorable) Dollar Change |   |   | % Change |   |
|------------------------------------|--------|-----------------------------------|---------|--------|---------------------------------|--------|---------|---------------------------------------|--------|--------|----------|--------|
|                               |   | (in millions, except percentages) |    |
|                               |   |                              |    |   |                            |   |    |                                  |   |   |     |   |
| Sales                              |   | $                                 | 6,277.0 |   |                            | $      | 6,818.0 |                                  |   | $      | (541.0   | )      |   |   | (7.9 | )% |
| Decrease in comparable store sales |   |                              | (6.4    | )%     |                            |   | (4.2    | )%                                    |   | NA     |     |   | NA |   |
| Loss from continuing operations    |   | $                                 | (439.1  | )      |                            | $      | (622.9  | )                                     |   | $      | 183.8    |   |   |   | 29.5 |  % |
| Loss from discontinued operations  |   | $                                 | (36.6   | )      |                            | $      | (82.2   | )                                     |   | $      | 45.5     |   |   |   | 55.4 |  % |
| Net loss                           |   | $                                 | (475.7  | )      |                            | $      | (705.1  | )                                     |   | $      | 229.4    |   |   |   | 32.5 |  % |
| Net loss per share – basic   |   | $                                 | (9.13   | )      |                            | $      | (13.31  | )                                     |   | $      | 4.18     |   |   |   | 31.4 |  % |
| Net loss per share – diluted |   | $                                 | (34.62  | )      |                            | $      | (25.42  | )                                     |   | $      | (9.20    | )      |   |   | (36.2 | )% |
|                               |   |                              |    |   |                            |   |    |                                  |   |   |     |   |   |   |   |   |
| Non-GAAP Financial Data:           |   |                              |    |   |                            |   |    |                                  |   |   |     |   |   |   |   |   |
| Adjusted EBITDA (1)                |   | $                                 | 37.1    |   |                            | $      | 182.7   |                                  |   | $      | (145.6   | )      |   |   | (79.7 | )% |

|        |   | For the 40 weeks ended |      |
|-------------|--------|------------------------|-----------|
|        |   | Dec. 4, 2010           |      |   | Dec. 5, 2009 |   |
|        |   | (in thousands)         |      |
| Fresh       |   | $                      | 3,158,274 |   |   | $ | 3,403,009 |   |
| Pathmark    |   |                   | 2,687,650 |   |   |   | 2,995,194 |   |
| Gourmet     |   |                   | 201,301   |   |   |   | 206,875 |   |
| Other       |   |                   | 229,789   |   |   |   | 212,918 |   |
| Total sales |   | $                      | 6,277,014 |   |   | $ | 6,817,996 |   |

|          |   | Sales Volume |   |   | Gross Margin Rate |   |   | Total |   |
|---------------|--------|--------------|--------|--------|-------------------|--------|--------|-------|--------|
| Total Company |   | $            | (163.3 | )      |              | $      | (34.7  | )     |   | $ | (198.0 | ) |

|                        |   | For the 40 weeks ended |    |
|-----------------------------|--------|------------------------|---------|
|                        |   | Dec. 4, 2010           |    |   | Dec. 5, 2009 |   |
|                        |   | (in thousands)         |    |
| Fresh                       |   | $                      | 28,618  |   |   | $ | 87,322 |   |
| Pathmark                    |   |                   | (73,572 | ) |   |   | (33,589 | ) |
| Gourmet                     |   |                   | 14,294  |   |   |   | 18,234 |   |
| Other                       |   |                   | 1,586   |   |   |   | 1,541 |   |
| Total segment (loss) income |   | $                      | (29,074 | ) |   | $ | 73,508 |   |

----

|                                                 |   | 12 Weeks Ended |     |   | 40 Weeks Ended |   |
|------------------------------------------------------|--------|----------------|----------|--------|----------------|--------|
|                                                 |   | Dec. 4, 2010   |     |   | Dec. 5, 2009   |   |   | Dec. 4, 2010 |   |   | Dec. 5, 2009 |   |
| Net loss                                             |   | $              | (199,370 | )      |           | $      | (559,586 | ) |   | $ | (475,687 | ) |   | $ | (705,055 | ) |
| Loss from discontinued operations                    |   |           | 18,687   |   |           |   | 57,148 |   |   |   | 36,576 |   |   |   | 82,154 |   |
| Benefit from income taxes                            |   |           | (2,953   | )      |           |   | (12,375 | ) |   |   | (2,708 | ) |   |   | (13,983 | ) |
| Interest expense, net                                |   |           | 40,038   |   |           |   | 45,718 |   |   |   | 147,306 |   |   |   | 148,433 |   |
| Depreciation and amortization                        |   |           | 49,945   |   |           |   | 55,813 |   |   |   | 171,841 |   |   |   | 191,385 |   |
| EBITDA                                               |   |           | (93,653  | )      |           |   | (413,282 | ) |   |   | (122,672 | ) |   |   | (297,066 | ) |
| Adjustments:                                         |   |           |     |   |           |   |   |   |   |   |   |   |   |   |   |   |
| Goodwill, trademark, and long-lived asset impairment |   |           | 42,036   |   |           |   | 412,560 |   |   |   | 77,684 |   |   |   | 412,560 |   |
| Net restructuring and other                          |   |           | 11,682   |   |           |   | 1,243 |   |   |   | 24,914 |   |   |   | 4,140 |   |
| Real estate related activity                         |   |           | 48,115   |   |           |   | 20,584 |   |   |   | 47,881 |   |   |   | 29,812 |   |
| Stock-based compensation                             |   |           | 1,347    |   |           |   | 640 |   |   |   | 1,246 |   |   |   | 4,683 |   |
| Pension withdrawal costs                             |   |           | -        |   |           |   | - |   |   |   | - |   |   |   | 2,445 |   |
| LIFO adjustment                                      |   |           | 642      |   |           |   | (981 | ) |   |   | 2,139 |   |   |   | 1,185 |   |
| Self insurance reserve                               |   |           | -        |   |           |   | - |   |   |   | 16,152 |   |   |   | - |   |
| Nonoperating loss (income)                           |   |           | 213      |   |           |   | 15,944 |   |   |   | (10,241 | ) |   |   | 24,898 |   |
| Total adjustments to EBITDA                          |   |           | 104,035  |   |           |   | 449,990 |   |   |   | 159,775 |   |   |   | 479,723 |   |
| Adjusted EBITDA                                      |   | $              | 10,382   |   |           | $      | 36,708 |   |   | $ | 37,103 |   |   | $ | 182,657 |   |

----

|                                                 |   | 12 Weeks Ended |    |   | 40 Weeks Ended |   |
|------------------------------------------------------|--------|----------------|---------|--------|----------------|--------|
|                                                 |   | Dec. 4, 2010   |    |   | Dec. 5, 2009   |   |   | Dec. 4, 2010 |   |   | Dec. 5, 2009 |   |
| Net cash used in operating activities                |   | $              | (85,841 | )      |           | $      | (72,235 | ) |   | $ | (180,264 | ) |   | $ | (51,009 | ) |
| Goodwill, trademark, and long-lived asset impairment |   |           | (42,036 | )      |           |   | (413,987 | ) |   |   | (78,828 | ) |   |   | (417,726 | ) |
| Nonoperating (loss) income                           |   |           | (213    | )      |           |   | (15,944 | ) |   |   | 10,241 |   |   |   | (24,898 | ) |
| Interest expense, net                                |   |           | 40,038  |   |           |   | 45,718 |   |   |   | 147,306 |   |   |   | 148,433 |   |
| Non-cash interest expense                            |   |           | (4,400  | )      |           |   | (7,708 | ) |   |   | (27,658 | ) |   |   | (35,101 | ) |
| Asset disposition initiatives                        |   |           | 121     |   |           |   | (48,767 | ) |   |   | 117 |   |   |   | (57,765 | ) |
| Occupancy charges for normal store closures          |   |           | (6,558  | )      |           |   | (20,215 | ) |   |   | (7,024 | ) |   |   | (38,589 | ) |
| Gain (loss) on disposal of owned property            |   |           | 2,224   |   |           |   | (2,352 | ) |   |   | 4,031 |   |   |   | 1,228 |   |
| Amortization of deferred real estate income          |   |           | 1,022   |   |           |   | 1,103 |   |   |   | 3,434 |   |   |   | 3,938 |   |
| Loss from operations of discontinued operations      |   |           | 18,687  |   |           |   | 57,148 |   |   |   | 36,655 |   |   |   | 82,154 |   |
| Benefit from income taxes                            |   |           | (2,953  | )      |           |   | (12,375 | ) |   |   | (2,708 | ) |   |   | (13,983 | ) |
| Deferred income tax benefit                          |   |           | 3,058   |   |           |   | 12,013 |   |   |   | 3,058 |   |   |   | 12,013 |   |
| Pension withdrawal costs                             |   |           | -       |   |           |   | - |   |   |   | - |   |   |   | (2,445 | ) |
| Self insurance reserve                               |   |           | (929    | )      |           |   | - |   |   |   | (22,590 | ) |   |   | (1,613 | ) |
| Employee benefit related costs                       |   |           | (7,015  | )      |           |   | (4,290 | ) |   |   | (13,728 | ) |   |   | (4,290 | ) |
| LIFO adjustment                                      |   |           | (642    | )      |           |   | 981 |   |   |   | (2,139 | ) |   |   | (1,185 | ) |
| Stock compensation expense                           |   |           | (1,347  | )      |           |   | (640 | ) |   |   | (1,246 | ) |   |   | (4,683 | ) |
| Changes in working capital                           |   |           | 25,033  |   |           |   | 55,142 |   |   |   | (1,252 | ) |   |   | 38,825 |   |
| Other assets                                         |   |           | 7,404   |   |           |   | (2,382 | ) |   |   | 10,203 |   |   |   | 7,546 |   |
| Other non-current liabilities                        |   |           | (40,228 | )      |           |   | 14,861 |   |   |   | (1,300 | ) |   |   | 62,777 |   |
| Other, net                                           |   |           | 922     |   |           |   | 647 |   |   |   | 1,020 |   |   |   | (693 | )  |
| EBITDA                                               |   |           | (93,653 | )      |           |   | (413,282 | ) |   |   | (122,672 | ) |   |   | (297,066 | ) |
| Adjustments:                                         |   |           |    |   |           |   |   |   |   |   |   |   |   |   |   |   |
| Goodwill, trademark, and long-lived asset impairment |   |           | 42,036  |   |           |   | 412,560 |   |   |   | 77,684 |   |   |   | 412,560 |   |
| Net restructuring and other                          |   |           | 11,682  |   |           |   | 1,243 |   |   |   | 24,914 |   |   |   | 4,140 |   |
| Real estate related activity                         |   |           | 48,115  |   |           |   | 20,584 |   |   |   | 47,881 |   |   |   | 29,812 |   |
| Stock-based compensation                             |   |           | 1,347   |   |           |   | 640 |   |   |   | 1,246 |   |   |   | 4,683 |   |
| Pension withdrawal costs                             |   |           | -       |   |           |   | - |   |   |   | - |   |   |   | 2,445 |   |
| LIFO adjustment                                      |   |           | 642     |   |           |   | (981 | ) |   |   | 2,139 |   |   |   | 1,185 |   |
| Self insurance reserve                               |   |           | -       |   |           |   | - |   |   |   | 16,152 |   |   |   | - |   |
| Nonoperating (income) loss                           |   |           | 213     |   |           |   | 15,944 |   |   |   | (10,241 | ) |   |   | 24,898 |   |
| Total adjustments to EBITDA                          |   |           | 104,035 |   |           |   | 449,990 |   |   |   | 159,775 |   |   |   | 479,723 |   |
| Adjusted EBITDA                                      |   | $              | 10,382  |   |           | $      | 36,708 |   |   | $ | 37,103 |   |   | $ | 182,657 |   |

----

|                                      |   | For the 40 Weeks Ended |     |
|-------------------------------------------|--------|------------------------|----------|
|                                      |   | December 4, 2010       |     |   | December 5, 2009 |   |
| Net cash used in operating activities     |   | $                      | (180,264 | ) |   | $ | (51,009 | ) |
| Net cash used in investing activities     |   | $                      | (17,955  | ) |   | $ | (58,296 | ) |
| Net cash provided by financing activities |   | $                      | 38,204   |   |   | $ | 215,772 |   |

----

|                                         |   | Amount ($ in thousands) |     |   | Expiration Date |          |
|----------------------------------------------|--------|-------------------------|----------|--------|-----------------|---------------|
| Amended $655.0 million Credit Agreement      |   | $                       | 655,000  |   |            | December 2012 |   |
| Borrowing base collateral adjustment         |   |                    | (227,417 | )      |            |          |   |
| Available for borrowing                      |   |                    | 427,583  | (1)    |            |          |   |   |
| Loans outstanding                            |   |                    | (116,017 | )      |            |          |   |   |
| Letters of credit outstanding                |   |                    | (196,153 | )      |            |          |   |   |
| Net available borrowings at December 4, 2010 |   | $                       | 115,413  |   |            |          |   |   |
|                                         |   |                    |     |   |            |          |   |   |
| Invested cash                                |   | $                       | 634      | (2)    |            |          |   |   |

| (1) | The availability under the Credit Agreement is limited to the value assigned to the collateral supporting the Credit Agreement. |
|-----|---------------------------------------------------------------------------------------------------------------------------------|

----

|   | • |   | the DIP Lenders agreed to lend up to $800.0 million in the form of a $350.0 million term loan and a $450.0 million revolving credit facility with a $250.0 million sublimit for letters of credit, in each case subject to the terms and conditions therein; |
|--------|---------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • |   | our Company’s and the Subsidiary Borrower’s obligations under the DIP Credit Agreement and the other specified loan documents are guaranteed by our Company’s certain other subsidiaries that are Debtors (“Subsidiary Guarantors” and, together with our Company and the Subsidiary Borrowers, the “Loan Parties”); and |
|--------|---------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • |   | the Loan Parties’ obligations under the DIP Credit Agreement and such other specified loan documents are secured by a security interest in, and lien upon, substantially all of the Loan Parties’ existing and after-acquired personal and real property, having the priority and subject to the terms therein and in the order(s) entered into by the Bankruptcy Court, as applicable. |
|--------|---------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|   | · | Failure to execute on our turnaround plan could adversely affect our Company’s liquidity, financial condition and results of operations. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ·  | Our substantial indebtedness could impair our financial condition and our ability tofulfill our debt obligations. |
|--------|--------------|-------------------------------------------------------------------------------------------------------------------|

----

|   | · | We are affected by increasing labor, benefit and other operating costs and acompetitive labor market and are subject to the risk of unionized labor disruptions. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | As a result of the Bankruptcy Filing, our historical financial information may not be indicative of our future financial performance. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------|

| ·  | Operating during the Bankruptcy Filing may restrict our ability to pursue our strategic and operational initiatives. |
|--------------|----------------------------------------------------------------------------------------------------------------------|

|         | ·  |   | incur indebtedness;                                                      |
|--------------|--------------|--------|--------------------------------------------------------------------------|
|    | ·  |   | incur or create liens;                                                   |
|    | ·  |   | dispose of assets;                                                       |
|         | ·  |   | prepay certain indebtedness and make other restricted payments;          |
|         | ·       |   | enter into sale and leaseback transactions; and                          |
|         | ·       |   | modify the terms of certain indebtedness and certain material contracts. |

----

| ·  | The pursuit of the Bankruptcy Filing has consumed and will continue to consume a substantial portion of the time and attention of our corporate management and will impact how our business is conducted, which may have an adverse effect on our business and results of operations. |
|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | We may not be able to remain in compliance with the requirements of the DIP Credit Agreement or that the lending commitments under the DIP Credit Agreement will not be terminated by the DIP Lender. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | If we are unable to implement a plan of reorganization or if sufficient debtor-in-possession financing is not available we could be required to seek a sale of our Company or certain of its material assets pursuant to Section 363 of the Bankruptcy Code, or liquidate under Chapter 7 of the Bankruptcy Code. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | As a result of approval and implementation of the Proposed Plan, should such occur, certain changes in ownership of our Company could occur, which could adversely affect our ability to utilize our significant net operating loss carry-forwards upon our emergence from the Bankruptcy Filing. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | We may experience increased levels of employee attrition. |
|--------------------|-----------------------------------------------------------|

|   | Trading in our securities during the pendency of the Bankruptcy Filing is highly speculative and poses substantial risks. Our common stock may be cancelled and holders of such common stock may not receive any distribution with respect to, or be able to recover any portion of, their investments. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·  | Our common stock and 9 3/8% senior quarterly interest bonds are no longer listed on a national securities exchange and are quoted only on the Pink Sheets, which could negatively affect our stock price, bond price and liquidity. |
|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (a) | Exhibits required by Item 601 of Regulation S-K |
|-----|-------------------------------------------------|

|   | EXHIBIT NO. | DESCRIPTION |
|--------|-------------|-------------|

|   | 1.1 | Agreement of Sale and Leaseback (the "Sale Agreement"), dated November 4, 2010, by and among Winstanley Enterprises, LLC, certain of its affiliated entities, the Comapny and certain of its subsidiaries (incorporated byreference to Exhibit 1.1 of Form 8-K filed on November 9, 2010). |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 31.1* | Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|--------|-------|--------------------------------------------------------------------------------------------------------|

|   | 31.2* | Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|--------|-------|--------------------------------------------------------------------------------------------------------|

|   | 32* | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|--------|-----|------------------------------------------------------------------------------------------------------------------------|

|   | * | Filed herewith |
|--------|---|----------------|

----

| Date:  January 13, 2011 | By:    | /s/ Melissa E. Sungela                                 |   |
|-----------------------------------|--------|--------------------------------------------------------|--------|
|                              |   | Melissa E. Sungela, Vice President,                    |   |
|                              |   | Corporate Controller                                   |   |
|                              |   | (Chief Accounting Officer and Duly Authorized Officer) |   |