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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-QQuarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

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For the Fiscal Quarter Ended
August 2, 2003

Commission File Number
1-5287


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Pathmark Stores, Inc.(Exact name of registrant as specified in its charter)

Delaware(State or other jurisdiction of
incorporation or organization)

22-2879612(I.R.S. Employer
Identification No.)200 Milik Street
Carteret, New Jersey(Address of principal executive office)

07008(Zip Code)(732) 499-3000(Registrant's telephone number, including area code)


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Securities registered pursuant to Section 12(b) of the Act:None

Securities registered pursuant to Section 12(g) of the Act:Common Stock, par value $0.01 per share
Warrants to purchase Common Stock

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Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes ý                        No o

Indicate
by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes ý                        No o

Indicate
by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.

Yes ý                        No o

As
of September 2, 2003, 30,071,192 shares of the Common Stock were outstanding.

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Part I. Financial Information

Item 1. Consolidated Financial Statements

Pathmark Stores, Inc.  Consolidated Statements of Operations (Unaudited)  (in millions, except per share data)

|                                                                           |                                                           | 13 Weeks Ended |        | 26 Weeks Ended |  
|-------------------------------------------------------------------------- | --------------------------------------------------------- | -------------- | ------ | -------------- | -
|
|Sales                                                                      |                                                           | $              | 995.6  |                | $
|Cost of goods sold                                                         |                                                           |                | (713.9 | )              |  
|                                                                           |                                                           |                |        |                |  
|Gross profit                                                               |                                                           |                | 281.7  |                |  
|Selling, general and administrative expenses                               |                                                           |                | (232.5 | )              |  
|Depreciation and amortization                                              |                                                           |                | (21.3  | )              |  
|                                                                           |                                                           |                |        |                |  
|Operating earnings                                                         |                                                           |                | 27.9   |                |  
|Interest expense, net                                                      |                                                           |                | (17.5  | )              |  
|                                                                           |                                                           |                |        |                |  
|Earnings before income taxes and cumulative effect of an accounting change |                                                           |                | 10.4   |                |  
|Income tax provision                                                       |                                                           |                | (4.2   | )              |  
|                                                                           |                                                           |                |        |                |  
|Earnings before cumulative effect of an accounting change                  |                                                           |                | 6.2    |                |  
|Cumulative effect of an accounting change, net of tax                      |                                                           |                |       |                |  
|                                                                           |                                                           |                |        |                |  
|Net earnings                                                               |                                                           | $              | 6.2    |                | $
|                                                                           |                                                           |                |        |                |  
|Weighted average number of shares outstandingbasic                        |                                                           |                | 30.1   |                |  
|                                                                           |                                                           |                |        |                |  
|Weighted average number of shares outstandingdiluted                      |                                                           |                | 30.4   |                |  
|                                                                           |                                                           |                |        |                |  
|Net earnings per sharebasic and diluted                                   |                                                           |                |        |                |  
|                                                                           | Earnings before cumulative effect of an accounting change |                | $      | 0.21           |  
|                                                                           | Cumulative effect of an accounting change, net of tax     |                |        |               |  
|                                                                           |                                                           |                |        |                |  
|                                                                           | Net earnings                                              |                | $      | 0.21           |  
|                                                                           |                                                           |                |        |                |  

See
notes to consolidated financial statements (unaudited).

2

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Pathmark Stores, Inc.  Consolidated Balance Sheets (Unaudited)  (in millions, except share and per share amounts)

|                                           |                                                                                                                                                     | August 2,
2003             |         | February 1,
2003 |      
|------------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------- | ---------------- | -----
|ASSETS                                     |                                                                                                                                                     |                            |         |                  |      
|Current assets                             |                                                                                                                                                     |                            |         |                  |      
|                                           | Cash                                                                                                                                                |                            | $       | 13.7             |      
|                                           | Accounts receivable, net                                                                                                                            |                            |         | 21.3             |      
|                                           | Merchandise inventories                                                                                                                             |                            |         | 183.7            |      
|                                           | Due from suppliers                                                                                                                                  |                            |         | 72.1             |      
|                                           | Other current assets                                                                                                                                |                            |         | 31.7             |      
|                                           |                                                                                                                                                     |                            |         |                  |      
|                                           |                                                                                                                                                     | Total current assets       |         |                  | 322.5
|Property and equipment, net                |                                                                                                                                                     |                            | 585.8   |                  |      
|Goodwill                                   |                                                                                                                                                     |                            | 434.0   |                  |      
|Other noncurrent assets                    |                                                                                                                                                     |                            | 164.3   |                  |      
|                                           |                                                                                                                                                     |                            |         |                  |      
|Total assets                               |                                                                                                                                                     | $                          | 1,506.6 |                  | $    
|                                           |                                                                                                                                                     |                            |         |                  |      
|LIABILITIES AND STOCKHOLDERS' EQUITY       |                                                                                                                                                     |                            |         |                  |      
|Current liabilities                        |                                                                                                                                                     |                            |         |                  |      
|                                           | Accounts payable                                                                                                                                    |                            | $       | 100.1            |      
|                                           | Current maturities of long-term debt                                                                                                                |                            |         | 11.0             |      
|                                           | Current portion of lease obligations                                                                                                                |                            |         | 17.6             |      
|                                           | Other accrued expenses and other current liabilities                                                                                                |                            |         | 132.3            |      
|                                           |                                                                                                                                                     |                            |         |                  |      
|                                           |                                                                                                                                                     | Total current liabilities  |         |                  | 261.0
|Long-term debt                             |                                                                                                                                                     |                            | 420.8   |                  |      
|Long-term lease obligations                |                                                                                                                                                     |                            | 182.0   |                  |      
|Deferred income taxes                      |                                                                                                                                                     |                            | 92.7    |                  |      
|Other noncurrent liabilities               |                                                                                                                                                     |                            | 185.2   |                  |      
|Stockholders' equity                       |                                                                                                                                                     |                            |         |                  |      
|                                           | Preferred stock
    Authorized: 5,000,000 shares; no shares issued                                                                                  |                            |         |                 |      
|                                           | Common stock, par value $0.01 per share
    Authorized: 100,000,000 shares; issued: 30,099,510 shares at August 2, 2003
    and at February 1, 2003 |                            |         | 0.3              |      
|                                           | Common stock warrants                                                                                                                               |                            |         | 60.0             |      
|                                           | Paid-in capital                                                                                                                                     |                            |         | 607.9            |      
|                                           | Accumulated deficit                                                                                                                                 |                            |         | (299.1           | )    
|                                           | Accumulated other comprehensive loss                                                                                                                |                            |         | (3.5             | )    
|                                           | Treasury stock, at cost: 28,318 shares at August 2, 2003 and at February 1, 2003                                                                    |                            |         | (0.7             | )    
|                                           |                                                                                                                                                     |                            |         |                  |      
|                                           |                                                                                                                                                     | Total stockholders' equity |         |                  | 364.9
|                                           |                                                                                                                                                     |                            |         |                  |      
|Total liabilities and stockholders' equity |                                                                                                                                                     | $                          | 1,506.6 |                  | $    
|                                           |                                                                                                                                                     |                            |         |                  |      

See
notes to consolidated financial statements (unaudited).

3

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Pathmark Stores, Inc.  Consolidated Statements of Cash Flows (Unaudited)  (in millions)

|                                                                                    |                                                               | 26 Weeks Ended                                       |                                                 
|----------------------------------------------------------------------------------- | ------------------------------------------------------------- | ---------------------------------------------------- | ------------------------------------------------
|
|Operating Activities                                                                |                                                               |                                                      |                                                 
|Net earnings                                                                        |                                                               | $                                                    | 7.1                                             
|Adjustments to reconcile net earnings to net cash provided by operating activities: |                                                               |                                                      |                                                 
|                                                                                    | Depreciation and amortization                                 |                                                      |                                                 
|                                                                                    | Amortization of deferred financing costs                      |                                                      |                                                 
|                                                                                    | Gain on sale of real estate                                   |                                                      |                                                 
|                                                                                    | Deferred income tax provision                                 |                                                      |                                                 
|                                                                                    | Cumulative effect of an accounting change                     |                                                      |                                                 
|                                                                                    | Cash provided by (used for) operating assets and liabilities: |                                                      |                                                 
|                                                                                    |                                                               | Accounts receivable                                  |                                                 
|                                                                                    |                                                               | Merchandise inventories                              |                                                 
|                                                                                    |                                                               | Due from suppliers                                   |                                                 
|                                                                                    |                                                               | Other current assets                                 |                                                 
|                                                                                    |                                                               | Other noncurrent assets                              |                                                 
|                                                                                    |                                                               | Accounts payable                                     |                                                 
|                                                                                    |                                                               | Accrued interest                                     |                                                 
|                                                                                    |                                                               | Other accrued expenses and other current liabilities |                                                 
|                                                                                    |                                                               | Other noncurrent liabilities                         |                                                 
|                                                                                    |                                                               |                                                      |                                                 
|                                                                                    |                                                               |                                                      | Cash provided by operating activities           
|                                                                                    |                                                               |                                                      |                                                 
|Investing Activities                                                                |                                                               |                                                      |                                                 
|                                                                                    | Property and equipment expenditures                           |                                                      |                                                 
|                                                                                    | Proceeds from sale of real estate                             |                                                      |                                                 
|                                                                                    | Lease financings                                              |                                                      |                                                 
|                                                                                    |                                                               |                                                      |                                                 
|                                                                                    |                                                               |                                                      | Cash used for investing activities              
|                                                                                    |                                                               |                                                      |                                                 
|Financing Activities                                                                |                                                               |                                                      |                                                 
|                                                                                    | Repayment of the term loan                                    |                                                      |                                                 
|                                                                                    | Decrease in capital lease obligations                         |                                                      |                                                 
|                                                                                    | Borrowing under lease financings                              |                                                      |                                                 
|                                                                                    | Borrowing (repayment) under the working capital facility      |                                                      |                                                 
|                                                                                    | Borrowing (repayment) of other debt                           |                                                      |                                                 
|                                                                                    | Repayment of industrial revenue bonds                         |                                                      |                                                 
|                                                                                    | Proceeds from exercise of stock options                       |                                                      |                                                 
|                                                                                    |                                                               |                                                      |                                                 
|                                                                                    |                                                               |                                                      | Cash provided by (used for) financing activities
|                                                                                    |                                                               |                                                      |                                                 
|Increase (decrease) in cash                                                         |                                                               |                                                      | 2.4                                             
|Cash at beginning of period                                                         |                                                               |                                                      | 11.3                                            
|                                                                                    |                                                               |                                                      |                                                 
|Cash at end of period                                                               |                                                               | $                                                    | 13.7                                            
|                                                                                    |                                                               |                                                      |                                                 
|Supplemental Disclosures of Cash Flow Information                                   |                                                               |                                                      |                                                 
|                                                                                    | Interest paid                                                 |                                                      | $                                               
|                                                                                    |                                                               |                                                      |                                                 
|                                                                                    | Income taxes paid                                             |                                                      | $                                               
|                                                                                    |                                                               |                                                      |                                                 
|Noncash Investing and Financing Activities                                          |                                                               |                                                      |                                                 
|                                                                                    | Capital lease obligations                                     |                                                      | $                                               
|                                                                                    |                                                               |                                                      |                                                 

See
notes to consolidated financial statements (unaudited).

4

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Pathmark Stores, Inc.        Notes to Consolidated Financial Statements (Unaudited)

Note 1. Basis of Presentation and Significant Accounting Policies

Business.The Company operated 143 supermarkets as of August 2, 2003, primarily in the New York-New Jersey
and Philadelphia metropolitan areas.

Basis of Presentation.The unaudited consolidated financial statements included herein have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). In the opinion of management, the consolidated financial statements included herein reflect all adjustments
which are of a normal and recurring nature and are necessary to present fairly the results of operations and financial position of the Company. This report should be read in conjunction with the
audited financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended February 1, 2003.

Principles of Consolidation.The consolidated financial statements include the accounts of the Company and its subsidiaries,
all of which are 100% owned. All intercompany transactions have been eliminated in consolidation.

Stock-Based Compensation.The Company adopted the Financial Accounting Standards Board (the "FASB") Statement of Financial
Accounting Standards ("SFAS") No. 148, "Accounting for Stock-Based CompensationTransition and Disclosure", which amends SFAS No. 123, "Accounting for Stock-Based
Compensation". SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation plans; however,
it also allows an entity to continue to measure compensation expense for those plans using the intrinsic value based method of accounting prescribed by Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees." Under the fair value method, compensation cost is measured at the grant date based on the value of the award and is recognized over
the service period, which is usually the vesting period. Under the intrinsic value based method, compensation expense is the excess, if any, of the quoted market price of the stock at the grant date,
or other measurement date, over the amount an employee must pay to acquire the stock. The Company has elected to account for its stock-based employee compensation plans under APB Opinion No. 25
with pro forma disclosures of net earnings and net earnings per share, as if the fair value based method of accounting defined in SFAS No. 123 had been applied.

The
pro forma disclosure of net earnings and net earnings per share as if the fair value based method of accounting, as defined in SFAS No. 123, had been applied is as follows (in
millions, except per share amounts):

|                                                                  |  | 13 Weeks Ended |       | 26 Weeks Ended |  
|----------------------------------------------------------------- |  | -------------- | ----- | -------------- | -
|
|Net earnings, as reported                                         |  | $              | 6.2   |                | $
|Less: stock-based compensation expense, net of related tax effect |  |                | (1.0  | )              |  
|                                                                  |  |                |       |                |  
|Net earnings, pro forma                                           |  | $              | 5.2   |                | $
|                                                                  |  |                |       |                |  
|Weighted average number of shares outstandingbasic               |  |                | 30.1  |                |  
|                                                                  |  |                |       |                |  
|Weighted average number of shares outstandingdiluted             |  |                | 30.4  |                |  
|                                                                  |  |                |       |                |  
|Net earnings per sharebasic and diluted, as reported             |  | $              | 0.21  |                | $
|Less: stock-based compensation expense, net of related tax effect |  |                | (0.04 | )              |  
|                                                                  |  |                |       |                |  
|Net earnings per sharebasic and diluted, pro forma               |  | $              | 0.17  |                | $
|                                                                  |  |                |       |                |  

5

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Note 2. Selling, General and Administrative Expenses ("SG&A")

SG&A is net of a gain from the disposition of real estate, related to the assignment of two real estate leases, of $12.1 million and $13.7 million
in the 13 weeks and 26 weeks ended August 2, 2003, respectively. During the 26 weeks ended August 2, 2003 the Company initiated and completed its store labor buyout initiative and
corporate headcount reduction program in order to reduce the Company's labor costs. The Company recorded a charge of $3.0 million related to its store labor buyout initiative in the 13 weeks
ended August 2, 2003 and recorded a charge of $8.1 million related to its store labor buyout initiative and corporate headcount reduction program in the 26 weeks ended August 2,
2003. The aforementioned $8.1 million charge included a $2.0 million charge funded by the Company's qualified pension plan. Of the $8.1 million charge in the 26 weeks ended
August 2, 2003, $7.3 million is attributable to the cost of a voluntary early retirement program and $0.8 million is attributable to severance and termination benefits. As of
August 2, 2003, $1.2 million of benefits related to the store labor buyout initiative and corporate headcount reduction program remain to be paid out over time.

Note 3. Long-Term Debt

Long-term debt is comprised of the following (in millions):

|                                                          |  | August 2,
2003 |       | February 1,
2003 |  
|--------------------------------------------------------- |  | -------------- | ----- | ---------------- | -
|Term loan                                                 |  | $              | 198.9 |                  | $
|Working capital facility                                  |  |                | 9.0   |                  |  
|Senior subordinated notes                                 |  |                | 200.0 |                  |  
|Mortgages                                                 |  |                | 21.6  |                  |  
|Other debt                                                |  |                | 2.3   |                  |  
|                                                          |  |                |       |                  |  
|Total debt                                                |  |                | 431.8 |                  |  
|Less: current maturities and the working capital facility |  |                | (11.0 | )                |  
|                                                          |  |                |       |                  |  
|Long-term debt                                            |  | $              | 420.8 |                  | $
|                                                          |  |                |       |                  |  

Proceeds
from the disposition of real estate during fiscal 2003 were used to prepay the term loan by $18.0 million. The Company was in compliance with all debt covenants as of
August 2, 2003.

Note 4. Interest Expense, Net

Interest expense, net is comprised of the following (in millions):

|                                         |  | 13 Weeks Ended |      | 26 Weeks Ended
|---------------------------------------- |  | -------------- | ---- | --------------
|
|Term loan                                |  | $              | 4.2  |               
|Working capital facility                 |  |                | 0.4  |               
|Senior subordinated notes                |  |                | 4.4  |               
|Lease obligations                        |  |                | 5.1  |               
|Amortization of deferred financing costs |  |                | 1.0  |               
|Mortgages                                |  |                | 0.4  |               
|Other                                    |  |                | 2.0  |               
|                                         |  |                |      |               
|Interest expense, net                    |  | $              | 17.5 |               
|                                         |  |                |      |               

The
amortization of deferred financing costs includes $0.5 million in the 13 weeks and 26 weeks ended August 2, 2003 related to the write-off of deferred
financing costs resulting from the prepayment of the term loan by $18.0 million.

6

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Note 5. Comprehensive Earnings

Comprehensive earnings is comprised of the following (in millions):

|                              |                                                       | 13 Weeks Ended |     | 26 Weeks Ended |  
|----------------------------- | ----------------------------------------------------- | -------------- | --- | -------------- | -
|
|Net earnings                  |                                                       | $              | 6.2 |                | $
|Other comprehensive earnings: |                                                       |                |     |                |  
|                              | Unrealized gain (loss) on cash flow hedge, net of tax |                |     | 0.7            |  
|                              |                                                       |                |     |                |  
|Comprehensive earnings        |                                                       | $              | 6.9 |                | $
|                              |                                                       |                |     |                |  

Note 6. Derivative Instruments and Hedging Activities

As part of its overall strategy to manage the level of exposure to interest rate risk, in July 2001, the Company entered into a three-year
interest rate zero-cost collar. After giving effect to the January 28, 2003 amendment to the credit agreement, the collar had an effective cap with a strike of 10.5% and a floor
with a strike of 8.89%, on a notional amount of $150 million on its term loan. At inception, the derivative was designated, and continues to qualify, as a perfectly-effective
cash-flow hedge of the Company's forecasted variable interest rate payments due on the term loan. The Company does not hold or issue derivative financial instruments for speculative or
trading purposes but rather to hedge against the risk of rising interest rates. This derivative is recorded on the balance sheet at fair value, included in other noncurrent liabilities, with the
related unrealized gain (loss), net of tax, recorded in stockholders' equity and classified as accumulated other comprehensive loss. The fair value of the derivative is based on its market value as
determined by an independent party. However, considerable judgment is required in developing estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the
amounts that the Company could settle for in a current market exchange. The use of different market assumptions or methodologies could affect the estimated fair value. The counterparty to this
derivative transaction is a major financial institution. The Company does not expect any accumulated other comprehensive loss related to the derivative currently recorded in stockholders' equity to be
recognized in its statement of operations in fiscal 2003.

Note 7. Guarantees

In November 2002, the FASB issued FASB Interpretation ("FIN") No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others." FIN No. 45 elaborates on the existing disclosure requirements for most guarantees, including loan guarantees such as standby letters of credit.
It also clarifies that at the time a company issues a guarantee, the company must recognize an initial liability for the fair value, or market value, of the obligation it assumes under the guarantee
and must disclose that information in its interim and annual financial statements. The provisions related to recognizing a liability at inception of the guarantee for the fair value of the guarantor's
obligations do not apply to guarantees accounted for as derivatives. The initial recognition and measurement provisions apply on a prospective basis to guarantees issued or modified after
December 31, 2002.

In
the normal course of business, the Company has assigned to third parties various leases related to former businesses that the Company sold as well as former operating Pathmark
supermarkets (the "Assigned Leases"). When the Assigned Leases were assigned, the Company generally remained

7

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secondarily
liable with respect to these lease obligations. As such, if any of the assignees were to become unable to continue making payments under the Assigned Leases, the Company could be required
to assume the lease obligation. As of August 2, 2003, 68 Assigned Leases remain in place. Assuming that each respective assignee became unable to continue to make payments under an Assigned
Lease, an event the Company believes to be remote, management estimates its maximum potential obligation with respect to the Assigned Leases to be approximately $112 million, which could be
partially or totally offset by reassigning or subletting such leases. The Company has recognized a liability on its consolidated balance sheet as of August 2, 2003 of approximately
$3 million, which represents the fair value of certain guarantees attributable to the Company's secondary liability in connection with Assigned Leases assigned after December 31, 2002.

8

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Note 8. Condensed Consolidating Financial Information

The following represents the condensed consolidating financial statements of Pathmark and its 100% owned guarantor and nonguarantor subsidiaries. The guarantor
subsidiaries are comprised of six 100% owned entities, including Pathmark's distribution subsidiary, and guarantee on a full and unconditional and joint and several basis, the Senior Subordinated
Notes. The nonguarantor subsidiaries are comprised of four 100% owned single-purpose entities. Each of those entities owns the real estate on which a supermarket leased to Pathmark is located.

|                                                  |  | Pathmark |        | Guarantor
Subsidiaries |   | Non-
Guarantor
Subsidiaries |   | Intercompany
Elimination |      | Consolidated
Total |  
|------------------------------------------------- |  | -------- | ------ | ---------------------- | - | --------------------------- | - | ------------------------ | ---- | ------------------ | -
|
|Condensed Consolidating Statements of Operations: |  |          |        |                        |   |                             |   |                          |      |                    |  
|For the 13 Weeks Ended August 2, 2003             |  |          |        |                        |   |                             |   |                          |      |                    |  
|Sales                                             |  | $        | 995.6  |                        | $ | 573.9                       |   | $                        |     |                    | $
|Cost of goods sold                                |  |          | (711.6 | )                      |   | (576.2                      | ) |                          |     |                    |  
|                                                  |  |          |        |                        |   |                             |   |                          |      |                    |  
|Gross profit (loss)                               |  |          | 284.0  |                        |   | (2.3                        | ) |                          |     |                    |  
|Selling, general and administrative expenses      |  |          | (234.7 | )                      |   | 1.4                         |   |                          | 0.8  |                    |  
|Depreciation and amortization                     |  |          | (19.0  | )                      |   | (1.9                        | ) |                          | (0.4 | )                  |  
|                                                  |  |          |        |                        |   |                             |   |                          |      |                    |  
|Operating earnings (loss)                         |  |          | 30.3   |                        |   | (2.8                        | ) |                          | 0.4  |                    |  
|Interest expense, net                             |  |          | (16.9  | )                      |   | (0.2                        | ) |                          | (0.4 | )                  |  
|Equity in loss of subsidiaries                    |  |          | (3.0   | )                      |   |                            |   |                          |     |                    |  
|                                                  |  |          |        |                        |   |                             |   |                          |      |                    |  
|Earnings (loss) before income taxes               |  |          | 10.4   |                        |   | (3.0                        | ) |                          |     |                    |  
|Income tax provision                              |  |          | (4.2   | )                      |   |                            |   |                          |     |                    |  
|                                                  |  |          |        |                        |   |                             |   |                          |      |                    |  
|Net earnings (loss)                               |  | $        | 6.2    |                        | $ | (3.0                        | ) | $                        |     |                    | $
|                                                  |  |          |        |                        |   |                             |   |                          |      |                    |  
|For the 13 Weeks Ended August 3, 2002             |  |          |        |                        |   |                             |   |                          |      |                    |  
|Sales                                             |  | $        | 987.3  |                        | $ | 583.9                       |   | $                        |     |                    | $
|Cost of goods sold                                |  |          | (706.8 | )                      |   | (585.1                      | ) |                          |     |                    |  
|                                                  |  |          |        |                        |   |                             |   |                          |      |                    |  
|Gross profit (loss)                               |  |          | 280.5  |                        |   | (1.2                        | ) |                          |     |                    |  
|Selling, general and administrative expenses      |  |          | (237.3 | )                      |   | 1.3                         |   |                          | 0.8  |                    |  
|Depreciation and amortization                     |  |          | (19.3  | )                      |   | (1.7                        | ) |                          | (0.4 | )                  |  
|                                                  |  |          |        |                        |   |                             |   |                          |      |                    |  
|Operating earnings (loss)                         |  |          | 23.9   |                        |   | (1.6                        | ) |                          | 0.4  |                    |  
|Interest expense, net                             |  |          | (16.2  | )                      |   | (0.2                        | ) |                          | (0.4 | )                  |  
|Equity in loss of subsidiaries                    |  |          | (1.8   | )                      |   |                            |   |                          |     |                    |  
|                                                  |  |          |        |                        |   |                             |   |                          |      |                    |  
|Earnings (loss) before income taxes               |  |          | 5.9    |                        |   | (1.8                        | ) |                          |     |                    |  
|Income tax provision                              |  |          | (2.4   | )                      |   |                            |   |                          |     |                    |  
|                                                  |  |          |        |                        |   |                             |   |                          |      |                    |  
|Net earnings (loss)                               |  | $        | 3.5    |                        | $ | (1.8                        | ) | $                        |     |                    | $
|                                                  |  |          |        |                        |   |                             |   |                          |      |                    |  

8

---

|                                                                                  |  |   |          |   |   |          |   |   |      |   |  
|--------------------------------------------------------------------------------- |  | - | -------- | - | - | -------- | - | - | ---- | - | -
|Condensed Consolidating Statements of Operations:                                 |  |   |          |   |   |          |   |   |      |   |  
|For the 26 Weeks Ended August 2, 2003                                             |  |   |          |   |   |          |   |   |      |   |  
|Sales                                                                             |  | $ | 2,000.3  |   | $ | 1,182.8  |   | $ |     |   | $
|Cost of goods sold                                                                |  |   | (1,428.0 | ) |   | (1,187.6 | ) |   |     |   |  
|                                                                                  |  |   |          |   |   |          |   |   |      |   |  
|Gross profit (loss)                                                               |  |   | 572.3    |   |   | (4.8     | ) |   |     |   |  
|Selling, general and administrative expenses                                      |  |   | (483.1   | ) |   | 2.7      |   |   | 1.7  |   |  
|Depreciation and amortization                                                     |  |   | (38.0    | ) |   | (3.7     | ) |   | (0.8 | ) |  
|                                                                                  |  |   |          |   |   |          |   |   |      |   |  
|Operating earnings (loss)                                                         |  |   | 51.2     |   |   | (5.8     | ) |   | 0.9  |   |  
|Interest expense, net                                                             |  |   | (33.2    | ) |   | (0.4     | ) |   | (0.8 | ) |  
|Equity in loss of subsidiaries                                                    |  |   | (6.1     | ) |   |         |   |   |     |   |  
|                                                                                  |  |   |          |   |   |          |   |   |      |   |  
|Earnings (loss) before income taxes                                               |  |   | 11.9     |   |   | (6.2     | ) |   | 0.1  |   |  
|Income tax provision                                                              |  |   | (4.8     | ) |   |         |   |   |     |   |  
|                                                                                  |  |   |          |   |   |          |   |   |      |   |  
|Net earnings (loss)                                                               |  | $ | 7.1      |   | $ | (6.2     | ) | $ | 0.1  |   | $
|                                                                                  |  |   |          |   |   |          |   |   |      |   |  
|For the 26 Weeks Ended August 3, 2002                                             |  |   |          |   |   |          |   |   |      |   |  
|Sales                                                                             |  | $ | 1,964.1  |   | $ | 1,190.9  |   | $ |     |   | $
|Cost of goods sold                                                                |  |   | (1,404.8 | ) |   | (1,191.9 | ) |   |     |   |  
|                                                                                  |  |   |          |   |   |          |   |   |      |   |  
|Gross profit (loss)                                                               |  |   | 559.3    |   |   | (1.0     | ) |   |     |   |  
|Selling, general and administrative expenses                                      |  |   | (477.2   | ) |   | 2.6      |   |   | 1.7  |   |  
|Depreciation and amortization                                                     |  |   | (37.8    | ) |   | (3.4     | ) |   | (0.9 | ) |  
|                                                                                  |  |   |          |   |   |          |   |   |      |   |  
|Operating earnings (loss)                                                         |  |   | 44.3     |   |   | (1.8     | ) |   | 0.8  |   |  
|Interest expense, net                                                             |  |   | (31.8    | ) |   | (0.5     | ) |   | (0.8 | ) |  
|Equity in loss of subsidiaries                                                    |  |   | (2.3     | ) |   |         |   |   |     |   |  
|                                                                                  |  |   |          |   |   |          |   |   |      |   |  
|Earnings (loss) before income taxes and cumulative effect of an accounting change |  |   | 10.2     |   |   | (2.3     | ) |   |     |   |  
|Income tax provision                                                              |  |   | (4.0     | ) |   |         |   |   |     |   |  
|                                                                                  |  |   |          |   |   |          |   |   |      |   |  
|Net earnings (loss) before cumulative effect of an accounting change              |  |   | 6.2      |   |   | (2.3     | ) |   |     |   |  
|Cumulative effect of an accounting change                                         |  |   | (0.6     | ) |   |         |   |   |     |   |  
|                                                                                  |  |   |          |   |   |          |   |   |      |   |  
|Net earnings (loss)                                                               |  | $ | 5.6      |   | $ | (2.3     | ) | $ |     |   | $
|                                                                                  |  |   |          |   |   |          |   |   |      |   |  

9

---



|                                           |  |   |         |  |   |      |  |   |      | 
|------------------------------------------ |  | - | ------- |  | - | ---- |  | - | ---- | 
|Condensed Consolidating Balance Sheets:    |  |   |         |  |   |      |  |   |      | 
|As of August 2, 2003                       |  |   |         |  |   |      |  |   |      | 
|Merchandise inventories                    |  | $ | 157.7   |  | $ | 25.6 |  | $ | 0.4  | 
|Other current assets                       |  |   | 136.1   |  |   | 2.7  |  |   |     | 
|                                           |  |   |         |  |   |      |  |   |      | 
|Total current assets                       |  |   | 293.8   |  |   | 28.3 |  |   | 0.4  | 
|Property and equipment, net                |  |   | 496.0   |  |   | 60.0 |  |   | 29.8 | 
|Goodwill                                   |  |   | 434.0   |  |   |     |  |   |     | 
|Investment in subsidiaries                 |  |   | 47.0    |  |   |     |  |   |     | 
|Other noncurrent assets                    |  |   | 163.6   |  |   |     |  |   | 0.7  | 
|                                           |  |   |         |  |   |      |  |   |      | 
|Total assets                               |  | $ | 1,434.4 |  | $ | 88.3 |  | $ | 30.9 | 
|                                           |  |   |         |  |   |      |  |   |      | 
|Accounts payable                           |  | $ | 95.1    |  | $ | 5.0  |  | $ |     | 
|Other current liabilities                  |  |   | 156.2   |  |   | 3.9  |  |   | 0.8  | 
|                                           |  |   |         |  |   |      |  |   |      | 
|Total current liabilities                  |  |   | 251.3   |  |   | 8.9  |  |   | 0.8  | 
|Long-term debt                             |  |   | 399.7   |  |   |     |  |   | 21.1 | 
|Long-term lease obligations                |  |   | 177.6   |  |   | 4.4  |  |   |     | 
|Other noncurrent liabilities               |  |   | 240.5   |  |   | 37.4 |  |   |     | 
|Stockholders' equity                       |  |   | 365.3   |  |   | 37.6 |  |   | 9.0  | 
|                                           |  |   |         |  |   |      |  |   |      | 
|Total liabilities and stockholders' equity |  | $ | 1,434.4 |  | $ | 88.3 |  | $ | 30.9 | 
|                                           |  |   |         |  |   |      |  |   |      | 
|As of February 1, 2003                     |  |   |         |  |   |      |  |   |      | 
|Merchandise inventories                    |  | $ | 160.4   |  | $ | 23.7 |  | $ |     | 
|Other current assets                       |  |   | 137.7   |  |   | 5.0  |  |   | 0.4  | 
|                                           |  |   |         |  |   |      |  |   |      | 
|Total current assets                       |  |   | 298.1   |  |   | 28.7 |  |   | 0.4  | 
|Property and equipment, net                |  |   | 517.2   |  |   | 56.7 |  |   | 30.6 | 
|Goodwill                                   |  |   | 434.0   |  |   |     |  |   |     | 
|Investment in subsidiaries                 |  |   | 53.1    |  |   |     |  |   |     | 
|Other noncurrent assets                    |  |   | 150.8   |  |   | 5.4  |  |   | 0.7  | 
|                                           |  |   |         |  |   |      |  |   |      | 
|Total assets                               |  | $ | 1,453.2 |  | $ | 90.8 |  | $ | 31.7 | 
|                                           |  |   |         |  |   |      |  |   |      | 
|Accounts payable                           |  | $ | 85.1    |  | $ | 7.1  |  | $ |     | 
|Other current liabilities                  |  |   | 170.5   |  |   | 3.8  |  |   | 0.8  | 
|                                           |  |   |         |  |   |      |  |   |      | 
|Total current liabilities                  |  |   | 255.6   |  |   | 10.9 |  |   | 0.8  | 
|Long-term debt                             |  |   | 418.0   |  |   |     |  |   | 21.4 | 
|Long-term lease obligations                |  |   | 177.1   |  |   | 5.8  |  |   |     | 
|Other noncurrent liabilities               |  |   | 245.9   |  |   | 30.3 |  |   |     | 
|Stockholders' equity                       |  |   | 356.6   |  |   | 43.8 |  |   | 9.5  | 
|                                           |  |   |         |  |   |      |  |   |      | 
|Total liabilities and stockholders' equity |  | $ | 1,453.2 |  | $ | 90.8 |  | $ | 31.7 | 
|                                           |  |   |         |  |   |      |  |   |      | 

10

---

|Condensed Consolidating Cash Flow Statements:    |                                              |   |       |       |   |      |     
|------------------------------------------------ | -------------------------------------------- | - | ----- | ----- | - | ---- | ----
|For the 26 Weeks Ended August 2, 2003            |                                              |   |       |       |   |      |     
|Operating Activities                             |                                              |   |       |       |   |      |     
|Cash provided by operating activities            |                                              | $ | 36.7  |       | $ | 1.4  |     
|                                                 |                                              |   |       |       |   |      |     
|Investing Activities                             |                                              |   |       |       |   |      |     
|                                                 | Property and equipment expenditures          |   |       | (25.4 | ) |      | (0.1
|                                                 | Proceeds from sale of real estate            |   |       | 17.3  |   |      |    
|                                                 |                                              |   |       |       |   |      |     
|Cash used for investing activities               |                                              |   | (8.1  | )     |   | (0.1 | )   
|                                                 |                                              |   |       |       |   |      |     
|Financing Activities                             |                                              |   |       |       |   |      |     
|                                                 | Repayment of the term loan                   |   |       | (18.4 | ) |      |    
|                                                 | Decrease in capital lease obligations        |   |       | (8.9  | ) |      | (1.3
|                                                 | Borrowing under lease financings             |   |       | 1.8   |   |      |    
|                                                 | Repayment under the working capital facility |   |       | (1.0  | ) |      |    
|                                                 | Repayment of other debt                      |   |       | (0.3  | ) |      |    
|                                                 | Intercompany equity transactions             |   |       | 0.6   |   |      |    
|                                                 |                                              |   |       |       |   |      |     
|Cash used for financing activities               |                                              |   | (26.2 | )     |   | (1.3 | )   
|                                                 |                                              |   |       |       |   |      |     
|Increase in cash                                 |                                              |   | 2.4   |       |   |     |     
|Cash at beginning of period                      |                                              |   | 11.0  |       |   |     |     
|                                                 |                                              |   |       |       |   |      |     
|Cash at end of period                            |                                              | $ | 13.4  |       | $ |     |     
|                                                 |                                              |   |       |       |   |      |     
|For the 26 Weeks Ended August 3, 2002            |                                              |   |       |       |   |      |     
|Operating Activities                             |                                              |   |       |       |   |      |     
|Cash provided by operating activities            |                                              | $ | 36.8  |       | $ | 2.7  |     
|                                                 |                                              |   |       |       |   |      |     
|Investing Activities                             |                                              |   |       |       |   |      |     
|                                                 | Property and equipment expenditures          |   |       | (53.9 | ) |      | (1.5
|                                                 | Lease financings                             |   |       | (7.3  | ) |      |    
|                                                 |                                              |   |       |       |   |      |     
|Cash used for investing activities               |                                              |   | (61.2 | )     |   | (1.5 | )   
|                                                 |                                              |   |       |       |   |      |     
|Financing Activities                             |                                              |   |       |       |   |      |     
|                                                 | Borrowing under the working capital facility |   |       | 18.4  |   |      |    
|                                                 | Decrease in capital lease obligations        |   |       | (6.9  | ) |      | (1.2
|                                                 | Borrowing under lease financings             |   |       | 7.3   |   |      |    
|                                                 | Repayment of industrial revenue bonds        |   |       | (6.4  | ) |      |    
|                                                 | Repayment of the term loan                   |   |       | (0.4  | ) |      |    
|                                                 | Borrowing (repayment) of other debt          |   |       | 0.4   |   |      |    
|                                                 | Proceeds from exercise of stock options      |   |       | 0.2   |   |      |    
|                                                 |                                              |   |       |       |   |      |     
|Cash provided by (used for) financing activities |                                              |   | 12.6  |       |   | (1.2 | )   
|                                                 |                                              |   |       |       |   |      |     
|Increase (decrease) in cash                      |                                              |   | (11.8 | )     |   |     |     
|Cash at beginning of period                      |                                              |   | 24.3  |       |   |     |     
|                                                 |                                              |   |       |       |   |      |     
|Cash at end of period                            |                                              | $ | 12.5  |       | $ |     |     
|                                                 |                                              |   |       |       |   |      |     

11

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Note 9.    Cumulative Effect of An Accounting ChangeFiscal 2002

The
Company adopted, as of the beginning of fiscal 2002, Emerging Issues Task Force ("EITF") Issue No. 02-16, "Accounting by a Customer (Including a Reseller) for
Certain Consideration Received from a Vendor". In adopting EITF Issue No. 02-16, vendor payments related to advertising reimbursements are recorded as a reduction of cost of goods
sold when both the required advertising is performed and the inventory is sold; prior to this change, these reimbursements were recorded as a reduction of advertising expense when the required
advertising was performed. As a result, the Company recorded a charge, as of the first quarter of fiscal 2002, of $0.6 million, net of an income tax benefit of $0.4 million, for the
cumulative effect of an accounting change.

Note 10.    Subsequent Event

On August 14 and 15, 2003, 76 of the Company's 143 stores were affected by a power outage throughout the Northeast. The Company has insurance coverage,
which the Company expects will fully reimburse it for all product loss, incremental expenses and business interruption incurred during the power outage, less the policy's $250,000 deductible. As such,
the Company does not expect the losses resulting from the power outage to have a material impact on third quarter earnings.

12

---



Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

The following table sets forth selected consolidated statements of operations data (dollars in millions):

|                                                                           |  | 13 Weeks Ended |        | 26 Weeks Ended |      
|-------------------------------------------------------------------------- |  | -------------- | ------ | -------------- | -----
|
|
|Sales                                                                      |  | $              | 995.6  |                | 100.0
|                                                                           |  |                |        |                |      
|Gross profit                                                               |  | $              | 281.7  |                | 28.3 
|Selling, general and administrative expenses                               |  |                | (232.5 | )              | (23.3
|Depreciation and amortization                                              |  |                | (21.3  | )              | (2.2 
|                                                                           |  |                |        |                |      
|Operating earnings                                                         |  |                | 27.9   |                | 2.8  
|Interest expense, net                                                      |  |                | (17.5  | )              | (1.8 
|                                                                           |  |                |        |                |      
|Earnings before income taxes and cumulative effect of an accounting change |  |                | 10.4   |                | 1.0  
|Income tax provision                                                       |  |                | (4.2   | )              | (0.4 
|                                                                           |  |                |        |                |      
|Earnings before cumulative effect of an accounting change                  |  |                | 6.2    |                | 0.6  
|Cumulative effect of an accounting change                                  |  |                |       |                |     
|                                                                           |  |                |        |                |      
|Net earnings                                                               |  | $              | 6.2    |                | 0.6  
|                                                                           |  |                |        |                |      

Sales.Sales in the second quarter of fiscal 2003 were $995.6 million, up 0.8% from $987.3 million in fiscal
2002. Sales in the six-month period of fiscal 2003 were $2,000.3 million, up 1.8% from $1,964.1 million in fiscal 2002. The sales increase in the second quarter of fiscal
2003 was primarily due to a 0.6% increase in same-store sales, which includes replacement stores and enlargements, and new stores, partially offset by closed stores. The sales increase in
the six-month period of fiscal 2003 was primarily due to a 1.3% increase in same-store sales and new stores, partially offset by closed stores. We believe sales benefited from
our successful marketing and operations initiatives, including the change in the start of our ad week. Sales in the six-month period of fiscal 2003 were favorably impacted by the increased
customer shopping preceding several major snowstorms in the first quarter of fiscal 2003. The Company operated 143 supermarkets at the end of the second quarters of fiscal 2003 and fiscal 2002,
respectively.

Gross Profit.Gross profit represents the difference between sales and cost of goods sold, which includes the costs of
inventory sold and the related purchase and distribution costs, net of vendor allowances
and rebates. Gross profit in the second quarter of fiscal 2003 was $281.7 million or 28.3% of sales compared to $279.3 million or 28.3% of sales in fiscal 2002. For the
six-month period of fiscal 2003, gross profit was $567.5 million or 28.4% of sales compared to $558.3 million or 28.4% in fiscal 2002. The increase in gross profit in the
second quarter and the six-month period of fiscal 2003 was primarily due to higher sales.

SG&A.SG&A in the second quarter of fiscal 2003 was $232.5 million or 23.3% of sales compared to $235.2 million
or 23.8% of sales in fiscal 2002. The decrease in SG&A in the second quarter of fiscal 2003 was primarily due to a $12.1 million gain from the disposition of real estate, partially offset by a
$3.0 million charge from a labor buyout program in some of our stores, as well as higher costs associated with medical, pension and general liability expenses. For the six-month
period of fiscal 2003, SG&A was $478.7 million or 23.9% of sales compared to $472.9 million or 24.1% of sales in fiscal 2002. The increase in SG&A in the

13

---

six-month
period of fiscal 2003 was primarily due to a $8.1 million charge from a labor buyout program in some of our stores and a headcount reduction program in our corporate
office, higher than usual snow removal costs in our first quarter and higher occupancy expenses, partially offset by a $13.7 million gain from the disposition of real estate. The
six-month period of fiscal 2002 included a $2.0 million charge related to a labor buyout program.

Depreciation and Amortization.Depreciation and amortization in the second quarter of fiscal 2003 was $21.3 million
compared to $21.4 million in fiscal 2002. For the six-month period of fiscal 2003, depreciation and amortization was $42.5 million compared to $42.1 million in fiscal
2002. The increase in depreciation and amortization expense in the six-month period of fiscal 2003 was primarily due to the impact of fiscal 2002 capital expenditures, including property
acquired under capital leases and technology investments, partially offset by a decrease in fiscal 2003 capital expenditures.

Operating Earnings.Operating earnings in the second quarter of fiscal 2003 were $27.9 million compared to
$22.7 million in fiscal 2002. For the six-month period of fiscal 2003, operating earnings were $46.3 million compared to $43.3 million in fiscal 2002. The increase in
operating earnings in the second quarter of fiscal 2003 was primarily due to higher gross profit and lower SG&A expenses. The increase in operating earnings in the six-month period of
fiscal 2003 was primarily due to higher gross profit, partially offset by higher SG&A expenses.

Interest Expense.Interest expense was $17.5 million in the second quarter of fiscal 2003 compared to
$16.8 million in fiscal 2002 and $34.4 million for the six-month period of fiscal 2003 compared to $33.1 million in fiscal 2002. The increase in interest expense in
the second quarter and the
six-month period of fiscal 2003 was primarily due to increased amortization of deferred financing costs due to our $18 million prepayment on the term loan and an interest rate
increase as a result of the January 28, 2003 amendment to the credit agreement.

Income Tax Provision.The income tax provisions of $4.2 million and $4.8 million, respectively, in the second
quarter and the six-month period of fiscal 2003 is based on an effective tax rate of 40.3% for the full fiscal year. The income tax provision of $2.4 million in the second quarter
of fiscal 2002 was based on an effective income tax rate of 41.6% and the income tax provision of $4.0 million in the six-month period was based on an effective income tax rate of
39.6% for the full fiscal year. The increase in the effective income tax rate in fiscal 2003 compared to fiscal 2002 is largely due to the impact of the State of New Jersey's 2002 income tax
legislation.

Cumulative Effect of An Accounting Change.The Company adopted, as of the beginning of fiscal 2002, EITF Issue
No. 02-16, "Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor". In adopting EITF Issue No. 02-16, vendor payments
related to advertising reimbursements are recorded as a reduction of cost of goods sold when both the required advertising is performed and the inventory is sold; prior to this change, these
reimbursements were recorded as a reduction of advertising expense when the required advertising was performed. As a result, the Company recorded a charge, as of the first quarter of fiscal 2002, of
$0.6 million, net of an income tax benefit of $0.4 million, for the cumulative effect of an accounting change.

Summary of Operations.Net earnings in the second quarter of fiscal 2003 were $6.2 million compared to
$3.5 million in fiscal 2002. For the six-month period of fiscal 2003, net earnings were $7.1 million compared to net earnings of $5.6 million in fiscal 2002. The
increase in net earnings in the second quarter and the six-month period of fiscal 2003 was primarily due to increased operating earnings, partially offset by higher interest expenses and
higher income tax provisions.

14

---

Liquidity and Capital Resources

Cash Flows.The following table sets forth certain consolidated statements of cash flow data (in millions):

26 Weeks EndedAugust 2,
2003

August 3,
2002Cash provided by (used for):Operating activities

$
38.9

$
40.5Investing activities


(8.2
)

(63.5
)Financing activities


(28.3
)

11.3


The
decrease in cash provided by operating activities was primarily due to an increase in cash interest paid as a result of the timing of cash interest payments related to the Senior
Subordinated Notes, partially offset by cash provided by operating assets and liabilities. The decrease in cash used for investing activities was primarily due to lower property and equipment
expenditures, higher proceeds from the disposition of real estate and lower lease financings. The increase in cash used for financing activities was primarily due to the $18.0 million
prepayment on the term loan and reduced borrowings on the working capital facility.

Debt Service and Liquidity.We have outstanding $200 million aggregate principal amount of 8.75% Senior Subordinated
Notes due 2012 (the "Senior Subordinated Notes"), which pay cash interest semi-annually on February 1 and August 1. The proceeds from the issuance of the Senior Subordinated
Notes were used to repay a portion of our outstanding loans under the bank credit facility and to repay in the first quarter of fiscal 2002 $6.4 million of our outstanding industrial revenue
bonds. The Senior Subordinated Notes restrict our ability to declare cash dividends on our common stock. We are in compliance with all Senior Subordinated Notes' covenants as of August 2, 2003.

On
September 19, 2000, we entered into a credit agreement with a group of lenders led by JPMorgan Chase Bank (the "Credit Agreement"). On January 28, 2003, the Company
amended its Credit Agreement (the "January Amendment"). Pursuant to this amendment, among other things, the maximum permitted leverage ratio was increased through fiscal 2004, the minimum consolidated
interest and rental expense coverage ratio was decreased through 2004, the minimum permitted consolidated EBITDA was decreased through fiscal 2004, and a minimum fixed-charge coverage ratio covenant
was added. Additionally, the Company agreed to (i) an increase in the commitment fee on the revolver portion of the Credit Agreement of 25.0 basis points; and (ii) an increase in the
applicable interest rates payable on outstanding balances under the Credit Agreement of 50.0 basis points.

In
addition, the Credit Agreement contains certain covenants which, among other things, place limits on the incurrence of additional indebtedness, issuance of cash-pay
preferred stock, repurchase of Company stock, incurrence of liens, sale-leaseback transactions, hedging activities, sale or discount of receivables, investments, loans, advances,
guarantees with affiliates, asset sales, acquisitions, capital expenditures, mergers and consolidations, changing lines of business, prepayments of other indebtedness, amendments to the organizational
documents and other matters customarily restricted in such agreements. The Credit Agreement contains customary events of default, including without limitation, payment defaults, material breaches of
representations and warranties, material covenant defaults, certain events of bankruptcy and insolvency, and a change of control. In addition, the Credit Agreement prohibits the payment of cash
dividends. We are in compliance with all covenants in the Credit Agreement as of August 2, 2003.

Borrowings
under the Credit Agreement bear interest at floating rates equal to LIBOR plus an applicable margin, subject to decrease, depending on the total debt to consolidated EBITDA
ratio. Borrowings under the working capital facility and the term loan bear interest at rates of LIBOR + 3.50% and LIBOR + 4.50%, respectively. We are required to repay a
portion of the borrowing under the term loan each year, so as to

15

---

retire
such indebtedness in its entirety by July 15, 2007. The working capital facility expires on July 15, 2005. The weighted average interest rate in effect on all borrowings under the
term loan was 8.0% during the first six months of fiscal 2003. As of August 2, 2003 and September 2, 2003, borrowings under the working capital facility were $9.0 million and
$7.9 million, respectively. Letters of credit of $56.2 million and $55.2 million were outstanding as of August 2, 2003 and September 2, 2003, respectively.

On
June 24, 2003, we utilized the proceeds from the disposition of real estate and made an $18 million prepayment on the term loan. Effective as of August 2, 2003,
our remaining term loan balance was $198.9 million payable as follows (in millions):

Fiscal Years

Principal
Payments2003

$
0.32004


0.72005


49.72006


98.82007


49.4Total

$
198.9


All
of the obligations under the Credit Agreement are guaranteed by the Company's 100% owned subsidiaries, except the Company's nonguarantor subsidiaries, which are comprised of four
100% owned and consolidated single-purpose entities. Each of these single-purpose entities owns the real estate on which a supermarket leased to Pathmark is located. The obligations under the Credit
Agreement and those of the subsidiaries guaranteeing the Credit Agreement are secured by substantially all of the Company's tangible and intangible assets including, without limitation, intellectual
property, real property, including leasehold interests, and the capital stock in each of these subsidiaries.

We
believe that cash flows generated from operations, supplemented by the unused borrowing capacity under the working capital facility and the availability of capital lease financing
will be sufficient to provide for our debt service requirements, working capital needs and capital expenditure program for the foreseeable future. There can be no assurance, however, that our business
will continue to generate cash flow at or above current levels or that we will maintain our ability to borrow under the Credit Agreement. There are no credit agency ratings-related triggers in either
our Credit Agreement or in the indenture relating to the Senior Subordinated Notes that would adversely impact the cost of borrowings, annual amortization of principal or related debt maturities.

Market Risk.Our financial results are subject to risk from interest rate fluctuations on debt, which carries variable
interest rates. As part of our overall strategy to manage the level of exposure to interest rate risk, in July 2001, we entered into a three-year interest rate zero-cost
collar. After giving effect to the January Amendment, the collar had an effective cap with a strike of 10.5% and a floor with a strike of 8.89%, on a notional amount of $150 million of our term
loan. Variable rate debt outstanding under our term loan was $198.9 million on August 2, 2003. As of August 2, 2003, the weighted average interest rate in effect on all borrowings
under our term loan, including the impact of the zero-cost collar on $150 million of our term loan, was 8.0%. A 1% change in interest rates applied to the $48.9 million
balance of floating-rate term loan debt would affect pre-tax annual results of operations by approximately $0.5 million. Our Senior Subordinated Notes bear interest at a
fixed rate of 8.75%, and are, therefore, not subject to risk from interest rate fluctuations.

The
principal objective of our investment management activities is to maintain acceptable levels of interest rate and liquidity risk to facilitate our funding needs. As part of our risk
management, we may use additional derivative financial products such as interest rate hedges and interest rate swaps in the future.

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Capital Expenditures.Capital expenditures in the second quarter and six-month period of fiscal 2003, including
property acquired under capital leases and technology investments, were $17.8 million and $30.8 million, respectively compared to $49.5 million and $76.4 million,
respectively, in the second quarter and six-month period of fiscal 2002. During the first six months of fiscal 2003, we opened one new store, closed two stores and renovated three stores.
During the remaining six months of fiscal 2003, we plan to open two additional stores (one a replacement), close one store and renovate 13 stores. Capital expenditures for fiscal 2003, including
property to be acquired under capital leases and technology investments, are anticipated to be approximately $95 million.

Critical Accounting Policies

Our discussion of results of operations and financial condition relies on our consolidated financial statements that are prepared based on certain critical
accounting policies that require management to make judgments and estimates that are subject to varying degrees of uncertainty. We believe that investors need to be aware of these policies and how
they impact our financial statements as a whole, as well as our related discussion and analysis presented herein. While we believe that these accounting policies are based on sound measurement
criteria, actual future events can and often do result in outcomes that can be materially different from these estimates or forecasts. The accounting policies and related risk described in our Annual
Report on Form 10-K for the year ended February 1, 2003 are those that depend most heavily on these judgments and estimates. As of August 2, 2003, there have been no
material changes to any of the critical accounting policies contained therein.

New Accounting Pronouncements

In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations," which addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS No. 143 requires that asset retirement costs be capitalized
as part of the carrying amount of the long-lived asset and depreciated over the useful life of the related asset. The provisions of SFAS No. 143 were effective with the beginning of
fiscal 2003. The adoption of SFAS No. 143 did not have an impact on the Company's financial position or results of operations.

In
April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities," to amend and clarify financial accounting and
reporting for derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS
No. 149 requires that contracts with comparable characteristics be accounted for similarly and clarifies under what circumstances a contract with an initial net investment meets the
characteristics of a derivative as discussed in SFAS No. 133. In addition, it clarifies when a derivative contains a financing component that warrants special reporting in the statement of cash
flows. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. The adoption of SFAS
No. 149 did not have an impact on the Company's financial position or results of operations.

In
May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity." SFAS No. 150
establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial
instrument that is within its scope as a liability (or an asset in some circumstances). The provisions of SFAS No. 150 are effective for financial instruments entered into or modified after
May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The Company believes that the adoption of SFAS No. 150 will
not have an impact on its financial position or results of operations.

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Forward-Looking Information

This report and the documents incorporated by reference into this report contain both historical and "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. These statements appear in a number of places in this report and include statements regarding our intent, belief
and current expectations with respect to, among other things, capital expenditures and technology initiates, the ability to borrow funds under our credit facilities, the ability to successfully
implement our operating strategies, including trends affecting our business,
financial condition and results of operations. The words "may", "will", "believe", "expect", "anticipate", "intend", "project", and other similar expressions generally identify forward-looking
statements. While these forward-looking statements and the related assumptions are made in good faith and reflect our current judgment regarding the direction of our business, actual results will
almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. These statements are based upon a number of
assumptions and estimates which are inherently subject to significant uncertainties and contingencies, many of which are beyond our control and reflect future business decisions which are subject to
change. Some of these assumptions inevitably will not materialize, and unanticipated events will occur which will affect our results.

Some
important factors (but not necessarily all factors) that could affect our revenues, growth strategies, future profitability and operating results, or that otherwise could cause
actual results to differ materially from those expressed in or implied by any forward-looking statement, include the following:



For
a discussion of these factors, see Item IBusinessFactors Affecting Our Business and Prospects in our Annual Report on Form 10-K for the
year ended February 1, 2003.

Item 4. Controls and Procedures

As of the end of the period covered by this report, under the supervision and with the participation of the Company's management, including our Chief Executive
Officer and Chief Financial Officer, we carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to
Rule 13a-15 of the Securities Exchange Act of 1934. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure
controls and procedures are effective in timely alerting them to material information required to be included in the Company's periodic SEC filings.

The
Company's Chief Executive Officer and Chief Financial Officer have also concluded that there have not been any changes in the Company's internal control over financial reporting that
have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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Part II. Other Information

Item 4.    Submission of Matters to a Vote of Security Holders.

| |  | a) |  | The Company held its Annual Meeting of Shareholders on June 13, 2003.
| |  | -- |  | ---------------------------------------------------------------------
| |  | b) |  | Results of votes of security holders.                                
| |  |    |  | (1)                                                                  
| |  |    |  |                                                                      
| |  |    |  |                                                                      
| |  |    |  |                                                                      
| |  |    |  |                                                                      
| |  |    |  |                                                                      
| |  |    |  |                                                                      
| |  |    |  |                                                                      
| |  |    |  | (2)                                                                  
| |  |    |  |                                                                      
| |  |    |  |                                                                      
| |  |    |  |                                                                      
| |  |    |  | (3)                                                                  
| |  |    |  |                                                                      
| |  |    |  |                                                                      
| |  |    |  |                                                                      
| |  |    |  | (4)                                                                  
| |  |    |  |                                                                      
| |  |    |  |                                                                      

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Item 6.    Exhibits and Report on Form 8-K



3:

Amended and Restated By-Laws of the Company, effective June 13, 2003, filed herewith.31.1:

Certification of Eileen R. Scott, under Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.31.2:

Certification of Frank G. Vitrano, under Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.32.1:

Certification of Eileen R. Scott, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.32.2:

Certification of Frank G. Vitrano, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.






Signatures

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

| |  | PATHMARK STORES, INC.
| |  | ---------------------
| |  | By:                  
| |  |                      
| |  | By:                  
| |  |                      

Date:September 11, 2003

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