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

FORM 10-Q

|(Mark One)                                                    |                                                                                         
|------------------------------------------------------------- | ----------------------------------------------------------------------------------------
|ý                                                             | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|For the fiscal quarter ended October 30, 2004                
|-OR-                                                         
|o                                                             | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|For the transition period
from                             to

Commission file number 1-5287

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)


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 December 1, 2004, 30,071,192 shares of the Common Stock were outstanding.





### Part I. Financial Information

#### Item 1. Financial Statements

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

|                                                        | 13 Weeks Ended |  | 39 Weeks Ended
|------------------------------------------------------- | -------------- |  | --------------
|
|Sales                                                   |                |  | $             
|Cost of goods sold                                      |                |  |               
|                                                        |                |  |               
|Gross profit                                            |                |  |               
|Selling, general and administrative expenses            |                |  |               
|Depreciation and amortization                           |                |  |               
|                                                        |                |  |               
|Operating earnings                                      |                |  |               
|Interest expense                                        |                |  |               
|                                                        |                |  |               
|Earnings (loss) before income taxes                     |                |  |               
|Income tax benefit (provision)                          |                |  |               
|                                                        |                |  |               
|Net earnings (loss)                                     |                |  | $             
|                                                        |                |  |               
|Weighted average number of shares outstanding - basic   |                |  |               
|                                                        |                |  |               
|Weighted average number of shares outstanding - diluted |                |  |               
|                                                        |                |  |               
|Net earnings (loss) per share - basic and diluted       |                |  | $             
|                                                        |                |  |               

See notes to financial statements (unaudited).

2

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

|                                                               | (Unaudited)October 30, 2004 |  | January 31,2004
|-------------------------------------------------------------- | --------------------------- |  | ---------------
|ASSETS                                                         |                             |  |                
|Current assets                                                 |                             | 
|Cash                                                           |                             |  | $              
|Accounts receivable, net                                       |                             |  |                
|Merchandise inventories                                        |                             |  |                
|Due from suppliers                                             |                             |  |                
|Other current  assets                                          |                             |  |                
|                                                               |                             |  |                
|Total current assets                                           |                             |  |                
|Property and equipment, net                                    |                             |  |                
|Goodwill                                                       |                             |  |                
|Other noncurrent assets                                        |                             |  |                
|                                                               |                             |  |                
|Total assets                                                   |                             |  | $              
|                                                               |                             |  |                
|LIABILITIES AND STOCKHOLDERS' EQUITY                           |                             | 
|Current liabilities                                            |                             | 
|Accounts payable                                               |                             |  | $              
|Current maturities of long-term debt                           |                             |  |                
|Current portion of lease obligations                           |                             |  |                
|Accrued expenses and other current liabilities                 |                             |  |                
|                                                               |                             |  |                
|Total current liabilities                                      |                             |  |                
|Long-term debt                                                 |                             |  |                
|Long-term lease obligations                                    |                             |  |                
|Deferred income taxes                                          |                             |  |                
|Other noncurrent liabilities                                   |                             |  |                
|                                                               |                             |  |                
|Total liabilities                                              |                             |  |                
|                                                               |                             |  |                
|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 October 30, 2004 and at January 31, 2004                    |                             | 
|Common stock warrants                                          |                             |  |                
|Paid-in capital                                                |                             |  |                
|Accumulated deficit                                            |                             |  |                
|Accumulated other comprehensive loss                           |                             |  |                
|Treasury stock, at cost: 28,318 shares at October 30, 2004 and |                             | 
|at January 31, 2004                                            |                             |  |                
|                                                               |                             |  |                
|Total stockholders' equity                                     |                             |  |                
|                                                               |                             |  |                
|Total liabilities and stockholders' equity                     |                             |  | $              
|                                                               |                             |  |                

See notes to financial statements (unaudited).

3

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

|                                                                 | 39 Weeks Ended
|---------------------------------------------------------------- | --------------
|
|Operating Activities                                             |               
|Net earnings (loss)                                              |               
|Adjustments to reconcile net earnings (loss) to cash provided by |               
|operating activities:                                            |               
|Depreciation and amortization                                    |               
|Amortization and write off of deferred financing costs           |               
|Gain on sale of real estate                                      |               
|Deferred income tax provision (benefit)                          |               
|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                                             |               
|Capital expenditures, including technology investments           |               
|Acquisition of Community Supermarket Corporation                 |               
|Proceeds from the sale of real estate                            |               
|                                                                 |               
|Cash used for investing activities                               |               
|                                                                 |               
|Financing Activities                                             |               
|Borrowings under the term loan                                   |               
|Repayments of the term loan                                      |               
|Borrowings under the working capital facilities, net             |               
|Repayments of capital lease obligations                          |               
|Deferred financing costs                                         |               
|Borrowings (repayments) of other debt, net                       |               
|Borrowings under the senior subordinated notes                   |               
|Proceeds from lease financings                                   |               
|                                                                 |               
|Cash provided by (used for) financing activities                 |               
|                                                                 |               
|Increase in cash                                                 |               
|Cash at beginning of period                                      |               
|                                                                 |               
|Cash at end of period                                            |               
|                                                                 |               
|Supplemental Disclosures of Cash Flow Information                |               
|Interest paid                                                    |               
|                                                                 |               
|Income taxes paid                                                |               
|                                                                 |               
|Noncash Investing and Financing Activities                       |               
|Capital lease obligations incurred                               |               
|                                                                 |               

See notes to financial statements (unaudited).

4

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

##### Note 1. Significant Accounting Policies

Business.
Pathmark  Stores,  Inc. (the Company or Pathmark) operated 142 supermarkets as of October 30,
2004, 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 January 31, 2004.

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.

##### Note 2. Stock-Based Compensation

The Company accounts for stock-based compensation plans
using the intrinsic value recognition and measurement principles of Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees. Since the
exercise price of all stock options granted under the Companys stock-based
compensation plans was equal to the market price of the underlying common stock on the
grant date, no stock-based compensation expense is recognized in the Companys
operating results.

The following pro forma disclosure illustrates the effect
on net earnings (loss) and net earnings (loss) per share as if the Company had applied the
fair value recognition provisions of the Financial Accounting Standards Board (the
FASB) Statement of Financial Accounting Standards (SFAS) No. 123,
as amended by SFAS No. 148 (in millions, except per share amounts):

|                                                               | 13 Weeks Ended |  | 39 Weeks Ended
|-------------------------------------------------------------- | -------------- |  | --------------
|
|Net earnings (loss), as reported                               |                |  | $             
|Less: stock-based compensation expense, net of                 |                | 
|related tax effect                                             |                |  |               
|                                                               |                |  |               
|Net earnings (loss), pro forma                                 |                |  | $             
|                                                               |                |  |               
|Weighted average number of shares outstanding - basic          |                |  |               
|                                                               |                |  |               
|Weighted average number of shares outstanding - diluted        |                |  |               
|                                                               |                |  |               
|Net earnings (loss) per share - basic and diluted, as reported |                |  | $             
|Less: stock-based compensation expense, net of                 |                | 
|related tax effect                                             |                |  |               
|                                                               |                |  |               
|Net earnings (loss) per share - basic and diluted, pro forma   |                |  | $             
|                                                               |                |  |               

5

### Pathmark Stores, Inc.
Notes to Financial Statements (Unaudited)  (Continued)

##### Note 3. Long-Term Debt

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

|                                                          | October 30, 2004 |  | January 31,2004
|--------------------------------------------------------- | ---------------- |  | ---------------
|Senior subordinated notes                                 |                  |  | $              
|Term loans                                                |                  |  |                
|Working capital facilities                                |                  |  |                
|Mortgages                                                 |                  |  |                
|Other debt                                                |                  |  |                
|                                                          |                  |  |                
|Total debt                                                |                  |  |                
|Less: current maturities and the working capital facility |                  |  |                
|                                                          |                  |  |                
|Long-term debt                                            |                  |  | $              
|                                                          |                  |  |                

On October 1, 2004, the Company entered into the amended
and restated $250 million senior secured credit facility (the Credit
Agreement) with a group of lenders led by Fleet Retail Group, a Bank of America
Company. The term of the Credit Agreement is five years and consists of a $180 million
revolving working capital facility (the Working Capital Facility) (including a
maximum of $125 million in letters of credit) and a $70 million term loan (the Term
Loan). The proceeds from the Credit Agreement were used to completely repay the
outstanding balance under the Companys credit agreement dated September 19, 2000
(the 2000 Credit Agreement). Interest on borrowings under the Credit Agreement
bear interest at floating rates, currently at LIBOR plus 2.0%. Pursuant to the Credit Agreement,
among other things, the maximum permitted leverage ratio, the minimum
consolidated interest and rental expense coverage ratio, the minimum fixed-charge ratio
and the maximum consolidated capital expenditures covenants were all eliminated and
replaced with three financial covenants: minimum annual consolidated EBITDA of $135 million, minimum
inventory of $150 million and maximum annual cash capital expenditures of $110 million.
The Company was in compliance with all Credit Agreement covenants as of October 30, 2004.

The Company has outstanding $350 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 Indenture relating to the Senior Subordinated Notes (the Indenture)
contains a number of restrictive covenants, including a restriction on our ability to
declare cash dividends on our common stock. The Company was in compliance with all related
covenants as of October 30, 2004.

There are no credit agency ratings-related triggers in
either the Credit Agreement or in the Indenture that would adversely impact the cost of
borrowings, annual amortization of principal or related debt maturities.

6

### Pathmark Stores, Inc.
Notes to Financial Statements (Unaudited)  (Continued)

##### Note 4. Interest Expense

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

|                                         | 13 Weeks Ended |  | 39 Weeks Ended
|---------------------------------------- | -------------- |  | --------------
|
|Senior subordinated notes                |                |  | $             
|Term loans                               |                |  |               
|Working capital facilities               |                |  |               
|Mortgages                                |                |  |               
|Lease obligations                        |                |  |               
|Amortization of deferred financing costs |                |  |               
|Write off of deferred financing costs    |                |  |               
|Derivative settlement charge             |                |  |               
|Other                                    |                |  |               
|                                         |                |  |               
|Interest expense                         |                |  | $             
|                                         |                |  |               

Interest expense in the third quarter and the first nine
months of fiscal 2004 includes the write off of deferred financing costs of $1.5 million
related to the early extinguishment of the Companys 2000 Credit Agreement.
Interest expense in the third quarter and the first nine months of fiscal 2003 included a
derivative settlement charge of $2.8 million related to the termination and settlement of
$100 million of the Companys interest rate zero-cost collar and the write off of
deferred financing costs of $1.4 million related to the repayment of $102 million of the
Term Loan from the proceeds of additional borrowings under the Senior Subordinated Notes.
Interest expense in the first nine months of fiscal 2003 also included the write off of
deferred financing costs of $0.5 million related to the repayment of $18 million of the
Term Loan in the second quarter of fiscal 2003.

##### Note 5. Comprehensive Earnings (Loss)

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

|                                               | 13 Weeks Ended |  | 39 Weeks Ended
|---------------------------------------------- | -------------- |  | --------------
|
|Net earnings (loss)                            |                |  | $             
|Other comprehensive earnings:                  |                | 
|Derivative settlement, net of tax              |                |  |               
|Unrealized gain on cash flow hedge, net of tax |                |  |               
|                                               |                |  |               
|Comprehensive earnings (loss)                  |                |  | $             
|                                               |                |  |               

##### Note 6. Guarantees

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 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 October 30, 2004, 66 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
$113.3 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 October 30, 2004 of $2.7 million, which represents certain guarantees attributable to
the Companys secondary liability in connection with Assigned Leases assigned after
December 31, 2002.

7

### Pathmark Stores, Inc.
Notes to Financial Statements (Unaudited)  (Continued)

##### Note 7. Benefits

The Company sponsors a tax-qualified pension plan which
covers substantially all non-union and certain union associates and several nonqualified
pension plans for certain of its associates as well as retiree health and life insurance
benefits, primarily for union groups and retired non-union associates. The components of
net periodic benefit cost (cost reduction) are as follows (in millions):

Pension Benefits:

|                                    | 13 Weeks Ended |  | 39 Weeks Ended
|----------------------------------- | -------------- |  | --------------
|
|Service cost                        |                |  | $             
|Interest cost                       |                |  |               
|Expected return on plan assets      |                |  |               
|Amortization of prior service costs |                |  |               
|Amortization of losses              |                |  |               
|Retirement incentive program        |                |  |               
|                                    |                |  |               
|Net periodic benefit cost reduction |                |  | $             
|                                    |                |  |               

Other Postretirement Benefits:

|                             | 13 Weeks Ended |  | 39 Weeks Ended
|---------------------------- | -------------- |  | --------------
|
|Service cost                 |                |  | $             
|Interest cost                |                |  |               
|Amortization of losses       |                |  |               
|Retirement incentive program |                |  |               
|                             |                |  |               
|Net periodic benefit cost    |                |  | $             
|                             |                |  |               

In May 2004, the staff of the FASB issued FASB Staff
Position (FSP) No. FAS 106-2, Accounting and Disclosure Requirements
Related to the Medicare Prescription Drug, Improvement and Modernization Act of
2003, which superseded FSP No. FAS 106-1. This FSP provides guidance on the
accounting for the effects of the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (the Act). FSP No. FAS 106-1 allowed companies to
either assess the effect of the Act on their retirement-related benefit costs and
obligations or to defer accounting for the effects of the Act until authoritative guidance
was issued. The Company elected to defer any accounting for the effects of the Act
pursuant to FSP No. FAS 106-1 and made that election in its fiscal quarter ended May 1,
2004, the first period in which the plans accounting for the effects of the Act
normally would have been reflected in the Companys financial statements. The Company
and its actuarial advisors determined that benefits provided by one of the prescription
drug plans the Company sponsors for a collective bargaining group as of the date of
enactment were at least actuarially equivalent to Medicare Part D, and, accordingly, the
Company will be entitled to the federal subsidy for that plan. The Company and its
actuarial advisors based this determination on a comparison of the value of the
prescription drug benefit for the bargaining group (net of retiree contributions) to the
value of Medicare Part D (net of retiree premiums), using an actuarial model of
prescription drug expenses for employer-sponsored medical plans. The Company elected to
early adopt the provisions of this FSP for the second fiscal quarter ended July 31, 2004,
and incorporated the required disclosure provisions into its financial statements. The
Company performed a measurement of the effects of the Act on its expense for the year
beginning January 1, 2004 and on its

8

### Pathmark Stores, Inc.
Notes to Financial Statements (Unaudited)  (Continued)

##### Note 7.  Benefits - (Continued)

accumulated postretirement benefit obligation (APBO) as of January 1, 2004, the date that
followed the enactment of the Act. The expense for 2004 decreased by
approximately $0.7 million as a result of the Act. The Companys APBO as of
the beginning of this fiscal year decreased by approximately $4.5 million as a
result of the Act. This change in the APBO due to the Act is considered an
actuarial gain. In measuring the $4.5 million APBO impact of the Act, the
Company projected that its prescription drug per capita plan costs would,
effective on January 1, 2006, decrease by 20% on average for members of one of
its collective-bargaining units as a result of the federal subsidy and that the
Company would use the federal subsidy to offset plan costs in order to establish
retiree contributions, and there would be no change in participation rates. The
effect of applying this FSP had no cumulative effect on the Companys
retained earnings as of January 31, 2004. Accordingly, in applying the guidance
in SFAS No. 3, the Company reported a reduction in net periodic benefit costs of
$0.5 million for the first nine months of fiscal 2004 representing three
quarters of the $0.7 million annual reduction under the Act.

##### Note 8. Goodwill

On February 20, 2004, the Company purchased the remaining
67% of the common stock of Community Supermarket Corporation (CSC) that it did
not already own from the other shareholder for $4.5 million in cash (the
Acquisition). As a result of the Acquisition, the Company owns 100% of CSC
(now known as Bergen Street Pathmark, Inc.). CSC has been a tenant under a lease for a
supermarket in Newark, New Jersey (the Newark Store) and prior to the
acquisition, had retained the Company to manage the supermarket for it. The Acquisition
was accounted for utilizing the purchase method, in which the purchase price was allocated
to the fair value of assets acquired and liabilities assumed, and resulted in additional
goodwill of $4.5 million. The results of operations of CSC are included in the
Companys financial statements subsequent to the acquisition date.

##### Note 9. Insurance Claim

From August 1, 2004 through September 2, 2004, the
Company was forced to close its store in Upper Darby, Pennsylvania because of extensive
damage when a nearby creek overflowed and flooded the
store during torrential rains. The Company has insurance coverage, which the Company
expects will fully reimburse it for all property damage, product loss, business
interruption and incremental expenses incurred during the store closure, less the
policys $0.1 million deductible. The total insurance claim is estimated to be $7.3
million. During the third quarter of fiscal 2004, the Company was advanced $2.5 million
related to the insurance claim. As of October 30, 2004, an insurance claim receivable of
$3.0 million was included in Other Current Assets on the Companys Consolidated
Balance Sheet which the Company expects to collect in the fourth quarter of fiscal 2004.
In addition, the Company expects to settle its insurance claim in the fourth quarter of
fiscal 2004 and record a gain equal to the difference between the replacement value and
net book value of the damaged property and collect the insurance proceeds related to
business interruption.

9

### Pathmark Stores, Inc.
Notes to Financial Statements (Unaudited)  (Continued)

##### Note 10. Consolidating Financial Information

The following represents the 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 | GuarantorSubsidiaries | Non-GuarantorSubsidiaries | Intercompany Elimination | ConsolidatedTotal
|-------------------------------------------- | -------- | --------------------- | ------------------------- | ------------------------ | -----------------
|
|Consolidating Statements of Operations:      |          |                       |                           |                          |                  
|For the 13 Weeks Ended October 30, 2004      |          |                      
|Sales                                        |          |                       | $                         | 979.9                    |                  
|Cost of goods sold                           |          |                       |                           | (704.5                   | )                
|                                             |          |                       |                           |                          |                  
|Gross profit                                 |          |                       |                           | 275.4                    |                  
|Selling, general and administrative expenses |          |                       |                           | (248.7                   | )                
|Depreciation and amortization                |          |                       |                           | (19.9                    | )                
|                                             |          |                       |                           |                          |                  
|Operating earnings                           |          |                       |                           | 6.8                      |                  
|Interest expense                             |          |                       |                           | (17.5                    | )                
|Equity in earnings of subsidiaries           |          |                       |                           | 2.5                      |                  
|                                             |          |                       |                           |                          |                  
|Earnings (loss) before income taxes          |          |                       |                           | (8.2                     | )                
|Income tax benefit                           |          |                       |                           | 4.6                      |                  
|                                             |          |                       |                           |                          |                  
|Net earnings (loss)                          |          |                       | $                         | (3.6                     | )                
|                                             |          |                       |                           |                          |                  
|                                            
|For the 13 Weeks Ended November 1, 2003      |          |                      
|Sales                                        |          |                       | $                         | 978.5                    |                  
|Cost of goods sold                           |          |                       |                           | (698.2                   | )                
|                                             |          |                       |                           |                          |                  
|Gross profit (loss)                          |          |                       |                           | 280.3                    |                  
|Selling, general and administrative expenses |          |                       |                           | (238.7                   | )                
|Depreciation and amortization                |          |                       |                           | (18.5                    | )                
|                                             |          |                       |                           |                          |                  
|Operating earnings (loss)                    |          |                       |                           | 23.1                     |                  
|Interest expense                             |          |                       |                           | (20.2                    | )                
|Equity in loss of subsidiaries               |          |                       |                           | (3.2                     | )                
|                                             |          |                       |                           |                          |                  
|Loss before income taxes                     |          |                       |                           | (0.3                     | )                
|Income tax benefit                           |          |                       |                           | 0.1                      |                  
|                                             |          |                       |                           |                          |                  
|Net loss                                     |          |                       | $                         | (0.2                     | )                
|                                             |          |                       |                           |                          |                  

10

### Pathmark Stores, Inc.
Notes to Financial Statements (Unaudited)  (Continued)

##### Note 10.  Consolidating Financial Information - (Continued)

|                                                    | Pathmark | GuarantorSubsidiaries | Non-GuarantorSubsidiaries | Intercompany Elimination | ConsolidatedTotal
|--------------------------------------------------- | -------- | --------------------- | ------------------------- | ------------------------ | -----------------
|
|Consolidating Statements of Operations (Continued): |          |                       |                           |                          |                  
|For the 39 Weeks Ended October 30, 2004             |          |                      
|Sales                                               |          |                       | $                         | 2,981.7                  |                  
|Cost of goods sold                                  |          |                       |                           | (2,141.4                 | )                
|                                                    |          |                       |                           |                          |                  
|Gross profit                                        |          |                       |                           | 840.3                    |                  
|Selling, general and administrative expenses        |          |                       |                           | (746.7                   | )                
|Depreciation and amortization                       |          |                       |                           | (58.9                    | )                
|                                                    |          |                       |                           |                          |                  
|Operating earnings                                  |          |                       |                           | 34.7                     |                  
|Interest expense                                    |          |                       |                           | (49.0                    | )                
|Equity in earnings of subsidiaries                  |          |                       |                           | 0.6                      |                  
|                                                    |          |                       |                           |                          |                  
|Earnings (loss) before income taxes                 |          |                       |                           | (13.7                    | )                
|Income tax benefit                                  |          |                       |                           | 6.7                      |                  
|                                                    |          |                       |                           |                          |                  
|Net earnings (loss)                                 |          |                       | $                         | (7.0                     | )                
|                                                    |          |                       |                           |                          |                  
|                                                   
|For the 39 Weeks Ended November 1, 2003             |          |                      
|Sales                                               |          |                       | $                         | 2,978.8                  |                  
|Cost of goods sold                                  |          |                       |                           | (2,126.2                 | )                
|                                                    |          |                       |                           |                          |                  
|Gross profit (loss)                                 |          |                       |                           | 852.6                    |                  
|Selling, general and administrative expenses        |          |                       |                           | (721.9                   | )                
|Depreciation and amortization                       |          |                       |                           | (56.5                    | )                
|                                                    |          |                       |                           |                          |                  
|Operating earnings (loss)                           |          |                       |                           | 74.2                     |                  
|Interest expense                                    |          |                       |                           | (53.5                    | )                
|Equity in loss of subsidiaries                      |          |                       |                           | (9.1                     | )                
|                                                    |          |                       |                           |                          |                  
|Earnings (loss) before income taxes                 |          |                       |                           | 11.6                     |                  
|Income tax provision                                |          |                       |                           | (4.7                     | )                
|                                                    |          |                       |                           |                          |                  
|Net earnings (loss)                                 |          |                       | $                         | 6.9                      |                  
|                                                    |          |                       |                           |                          |                  

11

### Pathmark Stores, Inc.
Notes to Financial Statements (Unaudited)  (Continued)

##### Note 10.  Consolidating Financial Information - (Continued)

|                                           | Pathmark | GuarantorSubsidiaries | Non-GuarantorSubsidiaries | Intercompany Elimination | ConsolidatedTotal
|------------------------------------------ | -------- | --------------------- | ------------------------- | ------------------------ | -----------------
|
|Consolidating Balance Sheets:              |          |                       |                           |                          |                  
|As of October 30, 2004                     |          |                      
|Merchandise inventories                    |          |                       | $                         | 172.2                    |                  
|Other current assets                       |          |                       |                           | 125.0                    |                  
|                                           |          |                       |                           |                          |                  
|Total current assets                       |          |                       |                           | 297.2                    |                  
|Property and equipment, net                |          |                       |                           | 509.0                    |                  
|Goodwill                                   |          |                       |                           | 438.5                    |                  
|Investment in subsidiaries                 |          |                       |                           | 58.8                     |                  
|Other noncurrent assets                    |          |                       |                           | 190.7                    |                  
|                                           |          |                       |                           |                          |                  
|Total assets                               |          |                       | $                         | 1,494.2                  |                  
|                                           |          |                       |                           |                          |                  
|Accounts payable                           |          |                       | $                         | 83.7                     |                  
|Other current liabilities                  |          |                       |                           | 201.6                    |                  
|                                           |          |                       |                           |                          |                  
|Total current liabilities                  |          |                       |                           | 285.3                    |                  
|Long-term debt                             |          |                       |                           | 424.2                    |                  
|Long-term lease obligations                |          |                       |                           | 172.9                    |                  
|Other noncurrent liabilities               |          |                       |                           | 243.8                    |                  
|                                           |          |                       |                           |                          |                  
|Total liabilities                          |          |                       |                           | 1,126.2                  |                  
|Stockholders' equity                       |          |                       |                           | 368.0                    |                  
|                                           |          |                       |                           |                          |                  
|Total liabilities and stockholders' equity |          |                       | $                         | 1,494.2                  |                  
|                                           |          |                       |                           |                          |                  
|                                          
|As of January 31, 2004                     |          |                      
|Merchandise inventories                    |          |                       | $                         | 163.5                    |                  
|Other current assets                       |          |                       |                           | 141.5                    |                  
|                                           |          |                       |                           |                          |                  
|Total current assets                       |          |                       |                           | 305.0                    |                  
|Property and equipment, net                |          |                       |                           | 496.1                    |                  
|Goodwill                                   |          |                       |                           | 434.0                    |                  
|Investment in subsidiaries                 |          |                       |                           | 58.2                     |                  
|Other noncurrent assets                    |          |                       |                           | 171.1                    |                  
|                                           |          |                       |                           |                          |                  
|Total assets                               |          |                       | $                         | 1,464.4                  |                  
|                                           |          |                       |                           |                          |                  
|Accounts payable                           |          |                       | $                         | 80.0                     |                  
|Other current liabilities                  |          |                       |                           | 168.6                    |                  
|                                           |          |                       |                           |                          |                  
|Total current liabilities                  |          |                       |                           | 248.6                    |                  
|Long-term debt                             |          |                       |                           | 400.4                    |                  
|Long-term lease obligations                |          |                       |                           | 176.1                    |                  
|Other noncurrent liabilities               |          |                       |                           | 264.5                    |                  
|                                           |          |                       |                           |                          |                  
|Total liabilities                          |          |                       |                           | 1,089.6                  |                  
|Stockholders' equity                       |          |                       |                           | 374.8                    |                  
|                                           |          |                       |                           |                          |                  
|Total liabilities and stockholders' equity |          |                       | $                         | 1,464.4                  |                  
|                                           |          |                       |                           |                          |                  

12

### Pathmark Stores, Inc.
Notes to Financial Statements (Unaudited)  (Continued)

##### Note 10.  Consolidating Financial Information - (Continued)

|                                                     | Pathmark | GuarantorSubsidiaries | Non-GuarantorSubsidiaries | Intercompany Elimination | ConsolidatedTotal
|---------------------------------------------------- | -------- | --------------------- | ------------------------- | ------------------------ | -----------------
|
|Consolidating Cash Flow Statements:                  |          |                       |                           |                          |                  
|For the 39 Weeks Ended October 30, 2004              |          |                      
|Operating Activities                                 |          |                      
|Cash provided by operating activities                |          |                       | $                         | 22.8                     |                  
|                                                     |          |                       |                           |                          |                  
|Investing Activities                                 |          |                      
|Capital expenditures, including technology           |          |                      
|investments                                          |          |                       |                           | (78.4                    | )                
|Acquisition of Community Supermarket Corporation     |          |                       |                           | (4.5                     | )                
|Proceeds from sale of real estate                    |          |                       |                           | 6.3                      |                  
|                                                     |          |                       |                           |                          |                  
|Cash used for investing activities                   |          |                       |                           | (76.6                    | )                
|                                                     |          |                       |                           |                          |                  
|Financing Activities                                 |          |                      
|Borrowings under the term loan                       |          |                       |                           | 70.0                     |                  
|Repayments of the term loan                          |          |                       |                           | (45.8                    | )                
|Borrowings under the working capital facilities, net |          |                       |                           | 45.6                     |                  
|Repayments of capital lease obligations              |          |                       |                           | (8.6                     | )                
|Deferred financing costs                             |          |                       |                           | (5.1                     | )                
|Repayments of other debt, net                        |          |                       |                           | (0.4                     | )                
|Intercompany equity transactions                     |          |                       |                           | 0.2                      |                  
|                                                     |          |                       |                           |                          |                  
|Cash provided by (used for) financing activities     |          |                       |                           | 55.9                     |                  
|                                                     |          |                       |                           |                          |                  
|Increase in cash                                     |          |                       |                           | 2.1                      |                  
|Cash at beginning at period                          |          |                       |                           | 8.7                      |                  
|                                                     |          |                       |                           |                          |                  
|Cash at end of period                                |          |                       | $                         | 10.8                     |                  
|                                                     |          |                       |                           |                          |                  
|                                                    
|Condensed Consolidating Cash Flow Statements:        |          |                      
|For the 39 Weeks Ended November 1, 2003              |          |                      
|Operating Activities                                 |          |                      
|Cash provided by operating activities                |          |                       | $                         | 34.5                     |                  
|                                                     |          |                       |                           |                          |                  
|Investing Activities                                 |          |                      
|Property and equipment expenditures                  |          |                       |                           | (42.5                    | )                
|Proceeds from sale of real estate                    |          |                       |                           | 17.3                     |                  
|                                                     |          |                       |                           |                          |                  
|Cash used for investing activities                   |          |                       |                           | (25.2                    | )                
|                                                     |          |                       |                           |                          |                  
|Financing Activities                                 |          |                      
|Repayments of the term loan                          |          |                       |                           | (120.5                   | )                
|Borrowings under the senior subordinated notes       |          |                       |                           | 102.5                    |                  
|Repayments of the working capital facility           |          |                       |                           | 18.0                     |                  
|Decrease in capital lease obligations                |          |                       |                           | (11.7                    | )                
|Borrowings under lease financings                    |          |                       |                           | 1.8                      |                  
|Repayments of other debt                             |          |                       |                           | 1.4                      |                  
|Intercompany equity transactions                     |          |                       |                           | 0.4                      |                  
|                                                     |          |                       |                           |                          |                  
|Cash used for financing activities                   |          |                       |                           | (8.1                     | )                
|                                                     |          |                       |                           |                          |                  
|Increase in cash                                     |          |                       |                           | 1.2                      |                  
|Cash at beginning of period                          |          |                       |                           | 11.0                     |                  
|                                                     |          |                       |                           |                          |                  
|Cash at end of period                                |          |                       | $                         | 12.2                     |                  
|                                                     |          |                       |                           |                          |                  

13

### Pathmark Stores, Inc.

#### 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 | 39 Weeks Ended
|------------------------------------------------ | -------------- | --------------
|                                                 |                |               
|                                                 |                |               
|Sales                                            |                |               
|                                                 |                |               
|Gross profit                                     |                |               
|Selling, general and administrative     expenses |                |               
|Depreciation and amortization                    |                |               
|                                                 |                |               
|Operating earnings                               |                |               
|Interest expense                                 |                |               
|                                                 |                |               
|Earnings (loss) before income taxes              |                |               
|Income tax benefit (provision)                   |                |               
|                                                 |                |               
|Net earnings (loss)                              |                |               
|                                                 |                |               

Sales. Sales in the third quarter of fiscal 2004 were
$979.9 million, up 0.1% from $978.5 million in the third quarter of fiscal 2003. The sales
increase in the third quarter of fiscal 2004 was due to a 1.4% increase from new stores,
partially offset by a 0.5% decrease in same-store sales (stores open the entire third
quarter in both fiscal 2004 and fiscal 2003, including replacement stores) and by a 0.8%
decrease from closed stores. Sales in the first nine months of fiscal 2004 were $2,981.7
million, up 0.1% from $2,978.8 million in the first nine months of fiscal 2003. The sales
increase in the first nine months of fiscal 2004 was due to a 1.0% increase from new
stores, partially offset by a 0.2% decrease in same-store sales and by a 0.7% decrease
from closed stores.

We believe sales in the third quarter and the first nine
months of  fiscal 2004 were affected by continuing weakness in consumer demand, which
resulted in a  decrease in our customer traffic, partially offset by an increase in our
average order  size. Third quarter sales were also negatively impacted by the timing of
Labor Day, which  was a week later in fiscal 2004 than last year, and resulted in lower
back-to-school  sales. In addition, seasonal sales were negatively impacted by the summer
weather, which  was cooler and wetter than normal. The change to everyday low price
related to our health  and beauty care category in February 2004 has not yet achieved the
sales we expected,  resulting in lower sales in this category, although our unit volume
has increased. The  Company operated 142 stores and 143 stores at the end of the third
quarters of fiscal 2004  and fiscal 2003, respectively.

Gross Profit. Gross profit represents the difference
between sales and cost of goods sold, which includes the cost of inventory sold and the
related purchase and distribution costs, net of vendor allowances and rebates. Gross
profit in the third quarter of fiscal 2004 was $277.2 million or 28.3% of sales compared
to $277.9 million or 28.4% of sales in the third quarter of fiscal 2003. Gross profit in
the first nine months of fiscal 2004 was $840.3 million or 28.2% of sales compared to
$845.4 million or 28.4% of sales in the first nine months of fiscal 2003. The decrease in
gross profit margin in the third quarter of fiscal 2004 was primarily due to higher
markdowns on summer seasonal merchandise and lower margins due to the impact of the health
and beauty care pricing strategy. The decrease in gross profit margin in the first nine
months of fiscal 2004 was primarily due to higher promotional expenses, which did not
generate the sales expected, and the inability to pass on the full cost of wholesale price
increases.

14

### Pathmark Stores, Inc.

Selling, General and Administrative Expenses (SG&A).
SG&A in the third quarter of fiscal 2004 was $245.8 million or
25.1% of sales compared to $236.7 million or 24.2% of sales in the third quarter of fiscal
2003. SG&A in the third quarter of fiscal 2004 increased by $9.1 million or 0.9% as a
percentage of sales compared to the third quarter of fiscal 2003 primarily due to the
following factors: (1) welfare, pension and medical expenses increased by 0.35% as a
percentage of sales, (2) store labor expense increased by 0.2% as a percentage of sales
due to contractual increases and our flat sales, (3) rent and real estate taxes increased
by 0.1% as a percentage of sales due to three new stores compared to last year, and (4)
higher debit and credit card fees as well as higher supply costs resulting from resin
increases.

SG&A in the first nine months of fiscal 2004 was
$738.6 million or 24.8% of  sales compared to $715.4 million or 24.0% of sales in the
first nine months of fiscal  2003. SG&A in the first nine months of fiscal 2004
included a $1.5 million gain from  the disposition of real estate. SG&A in the first
nine months of fiscal 2003 included  a $8.1 million charge related to the Companys
store labor buyout initiative and  corporate headcount reduction program during the first
and second quarters of fiscal 2003,  net of a $13.7 million gain from the disposition of
real estate related to the assignment  of two real estate leases. Excluding the net gains
of $1.5 million and $5.6 million in the  first nine months of fiscal 2004 and 2003,
respectively, SG&A in the first nine months  of fiscal 2004 increased by $19.1
million compared to the first nine months of fiscal 2003  primarily due to higher
welfare, pension and medical expenses, as well as higher store  labor expenses, rent and
real estate taxes.

Depreciation and Amortization. Depreciation and
amortization in the third quarter of fiscal 2004 were $21.6 million compared to $20.7
million in the third quarter of fiscal 2003. Depreciation and amortization in the first
nine months of fiscal 2004 were $64.6 million compared to $63.2 million in the first nine
months of fiscal 2003. The increase in depreciation and amortization in the third quarter
and the first nine months of fiscal 2004 was primarily due to an increase in related
property and equipment.

Operating Earnings. Operating earnings in the third
quarter of fiscal 2004 were $9.8 million compared to $20.5 million in the third quarter of
fiscal 2003. Operating earnings in the first nine months of fiscal 2004 were $37.1 million
compared to $66.8 million in the first nine months of fiscal 2003. The decrease in
operating earnings in the third quarter and the first nine months of fiscal 2004 was
primarily due to higher SG&A. SG&A in the first nine months of 2003 included a
$13.7 million real estate gain, partially offset by a $8.1 million labor buyout and
headcount reduction charge.

Interest Expense. Interest expense was $18.0 million in
the third quarter of fiscal 2004 compared to $20.8 million in the third quarter of fiscal
2003. Interest expense in the third quarter of fiscal 2004 included a write off of
deferred financing costs of $1.5 million related to the early extinguishment of our
2000 Credit Agreement. Interest expense in the third quarter of fiscal 2003 included a
derivative settlement charge of $2.8 million related to the termination and settlement of
$100 million of our interest rate zero-cost collar and the write off of deferred financing
costs of $1.4 million related to the repayment of $102 million of our Term Loan from
proceeds of additional borrowings under the Senior Subordinated Notes. Excluding these
items, interest expense in the third quarter of fiscal 2004 decreased by $0.1 million
compared to the third quarter of fiscal 2003.

Interest expense in the first nine months of  fiscal
2004 was $50.8 million compared to $55.2 million in the first nine months of fiscal
2003. Interest expense in the first nine months of fiscal 2004 included the write off of
deferred financing costs of $1.5 million related to the early extinguishment of our
2000 Credit Agreement. Interest expense in the first nine months of fiscal 2003
included the derivative settlement charge of $2.8 million, the write off of deferred
financing costs of $1.9 million resulting from the repayment of our Term Loan. Excluding
these items, interest expense in the first nine months of fiscal 2004 decreased by $1.2
million compared to the first nine months of fiscal 2003. The decrease in interest
expense  in the third quarter and the first nine months of fiscal 2004 was primarily due
to lower  interest rates.

15

### Pathmark Stores, Inc.

Income Tax Benefit (Provision). The income tax benefits
of $4.6 million in the third quarter of fiscal 2004 and $6.7 million in the first nine
months of fiscal 2004 reflect a provision for certain state taxes and a change in our
estimated effective annual income tax rate recorded in the third quarter of fiscal 2004,
which includes the legislative reinstatement of the Work Opportunity Tax Credit,
retroactive to the beginning of 2004. As a result, the effective tax rates for the third
quarter and the first nine months of fiscal 2004 were approximately 57.1% and 49.2%,
respectively. The income tax benefit of $0.1 million in the third quarter and the income
tax provision of $4.7 million in the first nine months of fiscal 2003 were based on an
effective income tax rate of 40.3% for fiscal 2003.

Summary of Operations. The net loss was $3.6 million in
the third quarter of fiscal 2004 compared to $0.2 million in the third quarter of fiscal
2003. The net loss in the first nine months of fiscal 2004 was $7.0 million compared to
net earnings of $6.9 million in the first nine months of fiscal 2003. The decrease in net
earnings in the third quarter and the first nine months of fiscal 2004 was primarily due
to a decrease in operating earnings, partially offset by lower interest expenses and lower
income tax provisions.

##### Liquidity and Capital Resources

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

|                             | 39 Weeks Ended
|---------------------------- | --------------
|
|Cash provided by (used for): |               
|Operating activities         |               
|Investing activities         |               
|Financing activities         |               

The decrease in cash provided by operating activities was
primarily due to lower cash provided by operating earnings, partially offset by lower cash
used for operating assets and liabilities. The increase in cash used for investing
activities was due to higher capital expenditures and the acquisition of CSC, partially
offset by lower proceeds from the sale of real estate. The increase in cash provided by
financing activities was primarily due to net increased borrowings under the Working
Capital Facility and the Term Loan (see Debt Service and Liquidity below); fiscal 2003
included a $120.0 million repayment of the Term Loan, primarily from additional borrowings
of $102.5 million under the Senior Subordinated Notes.

Debt Service and Liquidity. On October 1, 2004, we
entered into the Credit Agreement which amends and restates the 2000 Credit Agreement. The
proceeds from the Credit Agreement were used to completely repay the outstanding balance
under the 2000 Credit Agreement. As of October 30, 2004, borrowings under the Term Loan
and the Working Capital Facility were $70.0 million and $50.1 million, respectively and
outstanding letters of credit were $58.3 million. As of October 30, 2004, borrowing
availability under the Working Capital Facility was $71.6 million. Pursuant to the Credit
Agreement, among other things, the maximum permitted leverage ratio, the
minimum consolidated interest and rental expense coverage ratio, the minimum fixed-charge
ratio and the maximum consolidated capital expenditures covenants were all eliminated and
replaced with three financial covenants: minimum annual consolidated EBITDA of $135 million, minimum
inventory of $150 million and maximum annual cash capital expenditures of $110 million. 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, repayments of other indebtedness, amendments to organizational
documents and other matters customarily restricted in such agreements. Also, the Credit
Agreement prohibits the payment of cash dividends. The Credit Agreement contains customary
events of default, including without limitation, payment defaults, material breaches of
representations, warranties and covenants, certain events of bankruptcy and insolvency,
and a change of control.

16

### Pathmark Stores, Inc.

We were in compliance with all Credit Agreement covenants
as of October 30, 2004. We believe that cash flows generated from operations, supplemented
by the unused borrowing capacity under the Credit Agreement 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 remainder of fiscal 2004.
However, in the event that cash flows from operations do not increase in fiscal 2005 and
beyond, we may need to adjust our future cash capital expenditure program.

There are no credit agency ratings-related triggers in
either the 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.

Borrowings under the Working Capital Facility and the
Term Loan bear interest at floating rates equal to LIBOR plus a premium that ranges
between 1.5% to 2.25% depending on the average remaining availability under the Credit
Agreement. Our interest rate on borrowings under the Credit Agreement is currently at LIBOR plus 2.0%.
Under the Term Loan, we are required to make a balloon payment of $70 million
on October 1, 2009. The Working Capital Facility also expires on October 1, 2009. The
weighted-average interest rate in effect on all borrowings under the Term Loan was 5.6%
during the first nine months of fiscal 2004.

All of the obligations under the Credit Agreement are
guaranteed by the Companys 100% owned subsidiaries, except our 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 have outstanding $350 million aggregate principal
amount of Senior Subordinated Notes which pay cash interest semi-annually on February 1
and August 1. The Indenture contains a number of restrictive covenants, including a
restriction on our ability to declare cash dividends on our common stock. We were in
compliance with all Senior Subordinated Notes covenants as of October 30, 2004.

Capital Expenditures. Capital expenditures in the third
quarter of fiscal 2004, including property acquired under capital leases and technology
investments, were $36.7 million compared to $17.6 million in the third quarter of fiscal
2003. Total investments in the first nine months of fiscal 2004 were $101.3 million, which
were comprised of capital expenditures of $81.5 million, the Acquisition for $4.5 million
and capital leases of $15.3 million compared to capital expenditures of $48.4 million in
the first nine months of fiscal 2003. During the first nine months of fiscal 2004, we
acquired the Newark Store, opened one new store, renovated 17 stores and closed two
stores, one of which was operated by a joint venture. During the remainder of fiscal 2004,
we expect to complete three store renovations. Capital expenditures for fiscal 2004,
including property acquired under capital leases, the Acquisition and technology
investments, are expected to be approximately $114 million, of which approximately $98
million represents cash capital expenditures.

##### 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 January 31, 2004 are those that depend most heavily
on these judgments and estimates. As of October 30, 2004, there have been no material
changes to any of the critical accounting policies contained therein.

17

### Pathmark Stores, Inc.

##### New Accounting Pronouncements

In December 2003, the FASB issued SFAS No. 132 (revised
2003), Employers Disclosure about Pensions and Other Postretirement Benefit,
an amendment of SFAS No. 87, 88 and 106. This statement revises employers
disclosures about pension plans and other postretirement benefit plans. It requires
additional disclosures to those in the original SFAS No. 132, Employers
Disclosures about Pensions and Other Postretirement Benefits, which it replaces,
about the assets, obligations, cash flows, and net periodic benefit cost of defined
benefit pension plans and other defined benefit postretirement plans. Effective with
fiscal 2003 year-end reporting, the required information was provided separately for
pension plans and for other postretirement benefit plans. Effective with fiscal 2004
quarterly reporting, the required information was provided separately for pension plans
and for other postretirement benefit plans. The adoption of SFAS No. 132 (revised 2003)
did not have an impact on our financial position or results of operations.

In May 2004, the staff of the FASB issued FSP No. FAS
106-2, Accounting and Disclosure Requirements Related to the Medicare Prescription
Drug, Improvement and Modernization Act of 2003, which superseded FSP No. FAS 106-1.
This FSP provides guidance on the accounting for the effects of the Medicare Prescription
Drug, Improvement and Modernization Act of 2003 (the Act). FSP No. FAS 106-1
allowed companies to either assess the effect of the Act on their retirement-related
benefit costs and obligations or to defer accounting for the effects of the Act until
authoritative guidance was issued. We elected to defer any accounting for the effects of
the Act pursuant to FSP No. FAS 106-1 and made that election in our fiscal quarter ended
May 1, 2004, the first period in which the plans accounting for the effects of the
Act normally would have been reflected in our financial statements. We and our actuarial
advisors determined that benefits provided by one of the prescription drug plans we
sponsor for a collective bargaining group as of the date of enactment were at least
actuarially equivalent to Medicare Part D, and, accordingly, we will be entitled to the
federal subsidy for that plan. We and our actuarial advisors based this determination on a
comparison of the value of the prescription drug benefit for the bargaining group (net of
retiree contributions) to the value of Medicare Part D (net of retiree premiums), using an
actuarial model of prescription drug expenses for employer-sponsored medical plans. We
elected to early adopt the provisions of this FSP for the second fiscal quarter ended July
31, 2004, and incorporated the required disclosure provisions into our financial
statements. We performed a measurement of the effects of the Act on our expense for the
year beginning January 1, 2004 and on our APBO as of January 1, 2004, the date that followed the enactment of the Act.
The expense for 2004 decreased by approximately $0.7 million as a result of the Act. Our
APBO as of the beginning of this fiscal year decreased by approximately $4.5 million as a
result of the Act. This change in the APBO due to the Act is considered an actuarial gain.
In measuring the $4.5 million APBO impact of the Act, we projected that our prescription
drug per capita plan costs would, effective on January 1, 2006, decrease by 20% on average
for members of one of our collective-bargaining units as a result of the federal subsidy
and that we would use the federal subsidy to offset plan costs in order to establish
retiree contributions, and there would be no change in participation rates. The effect of
applying this FSP had no cumulative effect on our retained earnings as of January 31,
2004. Accordingly, in applying the guidance in SFAS No. 3, we reported a reduction in net
periodic benefit costs of $0.5 million for the first nine months of fiscal 2004
representing three quarters of the $0.7 million annual reduction under the Act.

##### 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 initiatives, 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 anticipate, believe, expect,
forecast, guidance, intend, may,
plan, project, will 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.

18

### Pathmark Stores, Inc.

Some important factors (but not necessarily all factors)
that could negatively 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:

- changes in business and economic conditions and other adverse
conditions in our markets;
- unanticipated environmental damages;
- increased competition;
- increased labor and labor related (e.g., health and welfare
and pension) costs and/or labor disruptions;
- reliance on third-party suppliers;
- our ability to successfully implement our operating,
marketing, renovation and expansion strategies; and
- natural disasters.

For a discussion of these factors, see Item 1 
Business  Factors Affecting Our Business and Prospects in our Annual Report on Form
10-K for the year ended January 31, 2004.

#### Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

Our financial results are subject to risk from interest
rate fluctuations on debt which carries variable interest rates. Variable rate debt
outstanding under our Term Loan was $70.0 million on October 30, 2004. The interest rate
in effect on all borrowings under our Term Loan was 5.6% during the first nine months of
fiscal 2004. A 1% change in interest rates applied to the $70.0 million balance of
floating-rate Term Loan debt would affect pre-tax annual results of operations by
approximately $0.7 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 derivative financial products such as interest rate hedges and
interest rate swaps in the future.

#### Item 4.  Controls and Procedures.

The Companys management, with the participation of
the Companys Chief Executive Officer and Chief Financial Officer, has evaluated the
effectiveness of the Companys disclosure controls and procedures pursuant to Rule
13a-15(b) of the Exchange Act as of October 30, 2004. Based on that evaluation, the
Companys Chief Executive Officer and Chief Financial Officer have concluded that, as
of October 30, 2004, the Companys disclosure controls and procedures are effective
in timely alerting them to material information relating to the Company required to be
included in the Companys Exchange Act reports.

There has been no change during the Companys fiscal
quarter ended October 30, 2004 in the Companys internal controls over financial
reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange
Act) that has materially affected, or is reasonably likely to materially affect, the
Companys internal controls over financing reporting.

19

### Pathmark Stores, Inc.

### Part II. Other Information

#### Item 6. Exhibits:



|10.1 | Form
of Award Agreement pursuant to the Company's 2000 Non-Employee Directors Equity Plan.
|---- | ------------------------------------------------------------------------------------------



|10.2 | Form
of Award Agreement for executive officers pursuant to the Company's 2000 Employee Equity
Plan.
|---- | ---------------------------------------------------------------------------------------------------



|31.1 | Certification
of Eileen R. Scott, pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------



|31.2 | Certification
of Frank G. Vitrano, pursuant to Rule 13a-14(a), as adopted pursuant to 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.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

20

### Pathmark Stores, Inc.

### 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: December 7, 2004

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