UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10-K(Mark One)ý
        ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (THE EXCHANGE ACT)For the fiscal year ended February 3, 2007oro
        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACTFor the transition period from _____________ to ______________Commission file number:  1-05287 PATHMARK STORES, INC.(Exact name of registrant as specified in its charter)Delaware
        
        22-2879612(State or other jurisdiction of incorporation or organization)
        
        (I.R.S. Employer Identification No.)200 Milik Street, Carteret, New Jersey
        
        07008(Address of principal executive office)
        
        (Zip Code)(732) 499-3000(Registrants telephone number, including area code)Securities registered pursuant to Section 12(b) of the Exchange Act:NoneSecurities registered pursuant to Section 12(g) of the Exchange Act:Common Stock, par value $0.01 per share
Warrants to purchase Common Stock Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the Exchange Act.Yes  o    Noý Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Exchange Act.    Yes  o     No  ý Indicate by check
mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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
if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.   ý Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, or a non-accelerated
filer.  See definition of accelerated filer and large accelerated filer in
Rule 12b-2 of the Exchange Act.  
Large Accelerated Filer   o     Accelerated Filer   ý    Non-Accelerated Filer   o Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  o       No  ý As of July 28, 2006,
which was the last business day of the registrants most recently completed second fiscal quarter, the aggregate market value
of the Common Stock held by nonaffiliates was $271,988,326 (based upon the closing price as reported by the NASDAQ Global Market (NASDAQ)).
As of April 7, 2007, 52,306,852 shares of Common Stock were outstanding. Documents incorporated
by reference: Part III of the Annual Report on Form 10-K incorporates by reference information to the extent specific sections are
referred to herein from the Proxy Statement for its Annual Meeting to be held on June 14, 2007 (the 2007 Proxy
Statement), to be filed within 120 days after the fiscal year ended February 3, 2007.   Part I

Item 1. Business.*

General

Pathmark Stores, Inc. (the
Company or Pathmark) is a leading supermarket chain in the densely populated New York  New Jersey and
Philadelphia metro areas, operating as a single reporting segment with 141 stores. We pioneered the development of the large
supermarket/drugstore format in the Northeast, opening our first store of this kind in 1977. Over 40 years we have successfully
developed a leading supermarket business with strong brand name recognition and customer loyalty. We focus our operations on this
market area, where we believe we can maintain and build upon our strong market presence and achieve additional operating economies.
All of our stores are located within 100 miles of our corporate office in Carteret, New Jersey and of our company-operated and
outsourced distribution facilities. Proximity of these distribution facilities to our stores improves our in-stock conditions and
lowers our distribution costs. Our market area includes some of the most densely populated regions of the United States,
representing approximately 8% of the U.S. population and encompassing two of the five largest U.S. metro areas by population, namely
New York and Philadelphia. We believe that the high population density in our markets coupled with the geographic concentration of
our stores provide substantial opportunities for economies of scale. Pathmark was incorporated in Delaware in 1987 and is the
successor by merger to a business established in 1966. Our principal executive office is located at 200 Milik Street, Carteret, NJ
07008 (telephone: (732) 499-3000). Our common stock is listed on the NASDAQ under the trading symbol PTMK.

Merger Agreement

On March 4, 2007, we entered into
an agreement and plan of merger (the Merger Agreement) with The Great Atlantic & Pacific Tea
Company, Inc. and its wholly-owned subsidiary, Sand Merger Corp. (collectively "A&P"). Pursuant to the Merger
Agreement, A&P will acquire Pathmark through the merger of Sand Merger Corp. with and into Pathmark (the Merger)
with Pathmark being the surviving corporation. At the effective time of the Merger, each issued and outstanding share of our common
stock (Common Stock), will be automatically converted into the right to receive, without interest, $9.00 in cash and
0.12963 shares of A&P common stock, par value $1.00 per share (A&P Common Stock). No fractional shares of
A&P Common Stock will be issued in connection with the Merger and holders of Common Stock will be entitled to receive cash in
lieu thereof. The Merger is subject to customary closing conditions, including, among others, (i) approval of the Merger by our
shareholders; (ii) approval of both the issuance of A&P Common Stock in connection with the Merger and the amendment of certain
preemptive rights provision contained in A&Ps charter by A&P stockholders, and (iii) the expiration or termination of
the waiting period under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended. The availability of A&Ps
financing is not a condition to the closing of the Merger.

Yucaipa Investment

On June 9, 2005, the Company,
pursuant to a securities purchase agreement dated as of March 23, 2005 (the Purchase Agreement), among the Company, a
group of investors led by The Yucaipa Companies LLC (Yucaipa) and certain investment funds affiliated with Yucaipa (the
Investors), issued to the Investors: (i) 20,000,000 shares (the Shares) of our Common Stock, (ii) Series A
warrants (the Series A Warrants) to purchase 10,060,000 shares of Common Stock at an exercise price of $8.50 per share,
and (iii) Series B warrants (the Series B Warrants) to purchase 15,046,350 shares of Common Stock at an exercise price
of $15.00 per share (the Shares, the Series A Warrants and the Series B Warrants are collectively referred to as the Purchased
Securities) for an aggregate purchase price of $150 million in cash. When issued, the Shares represented 39.9% of the
outstanding Common Stock. Upon issuance, the Series A Warrants and the Series B Warrants will increase Yucaipas holdings to
48.2% and 58.3%, respectively, of the outstanding Common Stock. We received $137.5 million for the Purchased Securities,
net of $12.5 million of costs directly attributable to the offering, including a closing fee and transaction expenses of $6.2
million paid to Yucaipa. At closing, we used $40.3 million of the net proceeds to pay down its working capital facility
borrowings and subsequently used $23.3 million to defease its mortgage borrowings, including a redemption premium of $2.3 million.
The remaining net proceeds have been used for general corporate purposes, including capital expenditures.






* Unless otherwise indicated, all information in Item
1 is given as of February 3, 2007.



2








Stores

Highly Productive,
Modern-Format Store Base.Our stores are among the most productive in the supermarket industry and in fiscal
2006 generated sales per store and sales per selling square foot of $28.8 million and $725, respectively, and average approximately
52,800 square feet in size. We design our stores to provide customers with one-stop shopping with a wide assortment of
foods and general merchandise, as well as a host of additional conveniences, including 128 in-store full-service pharmacies and a
wide array of financial services offered by 71 in-store banks. We are a leading filler of prescriptions among our supermarket
competitors in the New York  New Jersey and Philadelphia metro areas and, through our agreements with Bank of America and New
York Community Bank, we believe we are one of the leading providers of in-store banking services in our market area.


Below
is a summary of the range of our store sizes as of February 3, 2007:


Total Square Feet
     Numberof StoresGreater than 60,000
     1950,001 - 60,000
     7640,000 - 50,000
     35Less than 40,000
     11Total
     141Prime Real Estate Locations.
 112 of our stores are in the greater New York  New
Jersey metro area and 29 of our stores are in the greater Philadelphia metro area.  Our
stores are generally well situated in high-traffic urban and suburban locations where we
have established a loyal customer base and where we believe we are well positioned
against new competitive entrants, as our store portfolio would be difficult to replicate.
 Given the prime locations of our stores coupled with a format that offers our customers
a convenient, one-stop shopping experience, our stores are among the most
productive in our industry.

Provide Excellent
Customer Service and Store-Level Execution.At Pathmark, customer service is a key area of emphasis. To
ensure the implementation of our high customer service standards, we rely on a store evaluation program whereby mystery
shoppers visit our stores and rate each store on a variety of customer service attributes. One of our top priorities is to
continue our strong execution in the area of food safety, which, through our surveys, we have found to be one of the top criterion
by which customers choose a supermarket. We intend to continue to develop and improve store-level execution through programs that
emphasize proactive, interpersonal communication between store associates and customers.

Merchandising and Store Initiatives

Differentiated
Merchandising.We believe that our merchandising and marketing programs allow us to differentiate our
product and service offerings to our customers. We also believe that our large stores and the experience of our category managers
and store operators allow us to respond to the varying product demands of our customers with effective merchandising, which is
important given the diverse cultural makeup of the communities in which we operate. We continue to introduce new merchandising
concepts into our stores, such as expanded meal solutions, fresh foods and natural and organic offerings. Each of these new
concepts, as well as our continuing emphasis on perishables, has been integrated into our first new prototype store, which was
introduced late in fiscal 2006. Given our leading position in our market area, our high customer count and our established marketing
skills, we are also able to offer vendors significant opportunities to market their products effectively in a desirable market area.





3







Perishables. We believe
that the quality and variety of perishable items, particularly produce, meat and deli, is an important factor for consumers when
choosing where to shop. We continue to focus on quality produce by utilizing Produce Pete, a local television
personality who appears on a television show on weekend mornings devoted to tips on shopping for fresh fruits and vegetables, as an
integral part of our advertisements.

Private Label.We have a large variety of private label products under the Pathmark name, which we continuously update.
Approximately 3,000 Pathmark private label products are currently available, which we believe provide substantial value to our
customers and increase overall customer loyalty. During fiscal 2006, we commenced an initiative to update our private label image by
redesigning many of our Pathmark labels. Additionally, in fiscal 2006 we joined the Topco Cooperative (Topco) as a full
member. By utilizing Topcos resources, we believe we can enhance our private label program by expanding product offerings,
improving quality and reducing product cost. As a member of Topco, we will also have access to their well-known Top Care private
label products. Late in fiscal 2006, we completed an agreement with Wild Oats Markets, Inc. (Wild Oats), one of the
largest natural food supermarket chains in North American, which enables us to carry certain Wild Oats branded products. We believe
that through the Wild Oats arrangement, we can offer our customers an enhanced selection of natural and organic alternatives to our
traditional offerings, which will enable us to become more competitive in this growing category.

Gross Profit.We intend to continue to focus on improving our profitability by capitalizing on our large store format, which affords us
the flexibility to more effectively merchandise a broad array of products and services, including higher margin products. An
integral part of our merchandising and marketing efforts is to promote increased customer traffic for our stores through our various
convenience service departments, such as in-store pharmacies and banks. Furthermore, we plan to leverage the Pathmark Advantage Card
loyalty program, which facilitates more effective category management and offers us the opportunity to more efficiently target sales
promotions while strengthening our customer base. We also intend to increase our focus on, and merchandising for, our private label
products, as well as product placement and adjacencies. Gross profit improvement initiatives include a focus on inventory control,
efficient ordering and shrink reduction.

Store Renovation and Expansion

We continue to renovate our store
base since we believe that keeping our stores fresh and up-to-date is critically important. We completed 14 store renovations during
fiscal 2006 and plan to complete 13 store renovations during 2007.

We regularly evaluate our stores
for necessary renovations. A typical store renovation requires an average capital expenditure of approximately $3.9 million, while a
typical store mini renovation requires an average capital expenditure of approximately $1.4 million. A store renovation generally
increases customer traffic and sales, responds to customer demand, competes more effectively against existing and new competitors or
updates a particular format to our current prototype. In certain circumstances, we may decide to replace a store instead of
conducting a renovation due to population shifts, availability of a more attractive site or cost considerations.

We spent $71.8 million on capital
expenditures in fiscal 2006 and expect to spend approximately $80 million on capital expenditures in fiscal 2007.

The following table sets forth,
for the fiscal years indicated, our store development and renovation activities:

Fiscal Year2006
     
     2005
     
     2004
     
     2003
     
     2002Stores in operation at beginning of the fiscal year
     
     
     141
        
     143
        
     143
        
     144
        
     141Opened or acquired during the fiscal year
     
        
     2
        
     2
        (a)
     2
        
     7Closed during the fiscal year
     
        
     (4
        )
     (2
        )
     (3
        )
     (4
        )Stores in operation at end of the fiscal year
     141
        
     141
        
     143
        
     143
        
     144Stores renovated during the fiscal year
     14
        
     8
        
     19
        
     16
        
     11(a) Does not include the acquisition
of a former joint venture which was already  included in our store count.






4






Advertising and Promotion

As part of our marketing strategy, we emphasize value through competitive pricing and weekly sales and promotions, supported by extensive advertising.  Our advertising expenditures are concentrated on print advertising, including advertisements and circulars in local and area newspapers, with an accent on radio and ad flyers distributed in stores.

We plan to continue to increase our focus on the Pathmark Advantage Card program to enhance our understanding of customer purchasing patterns and develop targeted sales promotions to our customer base.  In addition, we have a website (www.pathmark.com) which offers promotional discounts and assorted on-line services.

Given our leading position in our trading area, our large customer base and our established marketing skills, we are able to offer vendors significant opportunities to feature their products effectively in a desirable market area.  As a result, we are well-positioned to continue to realize purchasing and cooperative marketing benefits from our vendors.

Purchasing and Distribution

We have outsourced a major portion of our distribution function and all of our trucking function.  This approach allows us to focus on our customers and stores.  We have a long-term agreement expiring in February 2013 with C&S Wholesale Grocers, Inc. (C&S), one of the nations largest grocery wholesalers in terms of sales, to supply us with substantially all of our products other than general merchandise, pharmacy, health and beauty care and tobacco products as well as products delivered by vendors directly to our stores.  This agreement may only be terminated for cause or certain events of bankruptcy by either party.  Under our arrangement with C&S, we negotiate prices, discounts and promotions directly with vendors and pay C&S an agreed upon rate per case.

McKesson Corp., one of the nations leading pharmaceutical wholesalers, currently supplies the vast majority of our pharmacy products.  In addition, we have an agreement with Grocery Haulers, Inc. (GHI), a third-party trucking company, to transport our products from our outsourced and internally operated warehouse and distribution facilities to our stores.  Our general merchandise and health and beauty care products are self-distributed from our 290,000 square foot leased distribution center in Edison, New Jersey.  We believe that our warehouse and distribution facilities contain sufficient capacity for the continued expansion of our store base for the foreseeable future.  All of our stores are located within 100 miles of these distribution facilities.

Management Information Systems

In February 2005, we entered into a seven-year extension of an existing outsourcing agreement with International Business Machines Corporation (IBM) to continue to provide a wide range of information systems services, which commenced in 1991.  Under the agreement, IBM provides data center operations, mainframe processing, business applications and systems development to enhance our customer service and efficiency.  The charges under this agreement are based upon the services requested at predetermined rates.  We may terminate this agreement upon 90 days notice with a payment of a specified termination charge.  We believe that this arrangement allows us to focus our management resources on our customers and stores.  Over the last several years, we:



        installed the latest point-of-sale (POS) technology from IBM in all our stores, which improved cashier productivity and customer service, and self-checkout equipment in 94 stores, which we believe improved our customers shopping experience and lowered store-level operating costs,




        implemented a Data Warehouse developed by 1010data Inc. that compiles detailed transactional information and through its unique ad-hoc report generating system provides the Company with the flexibility to customize data into a variety of formats for sales reporting, loyalty marketing, category management and store operations.




5






Competition

The supermarket business is
highly competitive. Our earnings are primarily dependent on the maintenance of relatively high sales volume per supermarket,
efficient product acquisition and distribution and cost-effective store operations. Principal competitive factors include price,
store location, advertising and promotion, product mix, quality and service. We compete against national, regional and local
supermarkets, club stores, drug stores, convenience stores, discount merchandisers and other local retailers in our market area. Our
principal supermarket competitors include Acme, A&P, Foodtown, King Kullen, ShopRite, Stop & Shop, Wegmans and Whole Foods.

Trade Names, Service Marks and Trademarks

We have registered a variety of
trade names, service marks and trademarks with the U.S. Patent and Trademark Office, including Pathmark. We consider our
Pathmark service marks to be of material importance to our business and actively defend and enforce such service marks.

Regulation

Our business requires us to hold
licenses and to register certain of our facilities with state and federal health, drug and alcoholic beverage regulatory agencies.
By virtue of these licenses and registration requirements, we are obliged to observe certain rules and regulations, and a violation
of such rules and regulations could result in a suspension of our licenses or registrations. In addition, most of our licenses
require periodic renewals. We have experienced no material difficulties with respect to obtaining or retaining our licenses and
registrations.

Associates

As of February 3, 2007, we
employed approximately 22,400 people, of whom approximately 15,000 were employed on a part-time basis. Approximately 90% of our
associates are covered by 14 collective bargaining agreements, typically having three-year or four-year terms, negotiated with 11
different unions. During fiscal 2006, three collective bargaining agreements covering approximately 7,400 associates were ratified.
During fiscal 2007, one contract which expired in fiscal 2006, covering approximately 900 associates, was negotiated and ratified,
and another contract which expired in fiscal 2006, covering approximately 250 associates, is currently being negotiated. During
fiscal 2007, five contracts covering approximately 4,200 associates expire, one of which, covering approximately 650 associates, has
been negotiated and ratified.

Available Information

We routinely file reports and other information with the Securities and Exchange Commission (the SEC), including Forms 8-K, 10-K, 10-Q and DEF 14A.  The public may read and copy any materials we file with the SEC at the SECs Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549.  The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  The SEC maintains an internet website that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.  The address of that website iswww.sec.gov.

We maintain an internet website on which we make available, free of charge, copies of our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC.  These materials may be accessed by going to our website atwww.pathmark.comand selecting Investor Relations.  Paper copies of these documents may be obtained, free of charge, by writing to us at Pathmark Stores, Inc., Office of Investor Relations, M-409, 200 Milik Street, Carteret, NJ 07008.



6






Item 1A.  Risk Factors.*

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 of 1933 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, ongoing, 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.  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 marketing, renovation and expansion strategies and cost reduction initiatives; and




        natural disasters.


Our industry is intensely competitive and the competition we encounter may have a negative impact on the prices we may charge for our products, our revenues and profitability.The supermarket business is highly competitive and is characterized by high inventory turnover and narrow profit margins.  Results of operations are therefore sensitive to, and may be materially adversely impacted by, among other things, competitive pricing and promotional programs and competitor store openings.  We compete with national and regional supermarkets, club stores, supercenters, drug stores, convenience stores, dollar stores, discount merchandisers and other local retailers in the market areas we serve.  Competition with these outlets is based on price, store location, advertising and promotion, product mix, quality and service.  Some of these competitors may have greater
financial resources, lower merchandise acquisition cost and lower operating expenses than we do, and we may be unable to compete successfully in the future.

We are concentrated in the New York  New Jersey and Philadelphia metro areas.We are vulnerable to economic downturns in that region, in addition to those that may affect the country as a whole, as well as natural and other catastrophic events that may impact that region.  Economic conditions such as interest rates, energy costs and unemployment rates may adversely affect our sales which may lead to higher losses, and may also adversely affect our future growth and expansion.  Further, since we are concentrated in densely populated metro areas, opportunities for future store expansion may be limited, which may adversely affect our business and results of operations.





*  Unless otherwise indicated, all information in Item 1A is given as of February 3, 2007.



7






Our renovation and expansion plans may not be
successful, which may adversely affect our business and financial condition.A key to our business strategy
has been, and will continue to be, the renovation and expansion of total selling square footage. In fiscal 2007, we expect to invest
approximately $80 million for capital expenditures on store projects and equipment purchases and plan to complete 13 store
renovations. We expect cash flows from operations, supplemented by the unused borrowing capacity under our bank credit facility and
the availability of capital lease financing, will be sufficient to fund our capital renovation and expansion programs; however, in
the event that cash flows from operations continue to decrease, we may decide to limit our future capital expenditure program. In
addition, the greater financial resources of some of our competitors for real estate sites could adversely affect our ability to
open new stores. The inability to renovate our existing stores, add new stores or increase the selling area of existing stores could
adversely affect our business, our results of operations and our ability to compete successfully.

We rely on C&S for supply
of a majority of our products.Pursuant to the terms of a long-term supply agreement, we rely on C&S for
supply of substantially all of the products we sell other than direct store deliveries, general merchandise, pharmacy, health and
beauty care and tobacco products. During fiscal 2006, the products supplied from C&S accounted for over 60% of all of our
supermarket inventory purchases. Although we have not experienced difficulty in the supply of these products to date, supply
interruptions by C&S may occur in the future. Any significant interruption in this supply stream, either as a result of
disruptions at C&S or if the C&S agreement were terminated for any reason, could have a material adverse effect on our
business and results of operations.

We are affected by increasing
labor and benefit and other operating costs and a competitive labor market and are subject to the risk of unionized labor
disruptions.The majority of our operating costs is attributed to associate expenses and, therefore, our
financial performance is greatly influenced by increasing wage and benefit costs, a competitive labor market and the risk of labor
disruption of our highly unionized workforce. Additionally, our profitability is particularly sensitive to the cost of oil. Oil
prices directly affect our product transportation costs, as well as our utility and petroleum-based supply costs (e.g., plastic
bags).

We face the risk of being held
liable for environmental damages that may occur.Our operations subject us to various laws and regulations
relating to the protection of the environment, including those governing the management and disposal of hazardous materials and the
cleanup of contaminated sites. Under some environmental laws, such as the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, also known as CERCLA or the Superfund law, and similar state statues, responsibility for the entire cost of
cleanup of a contaminated site can be imposed upon any current or former site owners or operators, or upon any party who sent waste
to the site, regardless of the lawfulness of the original activities that lead to the contamination. From time to time we have been
named as one of many potentially responsible parties at Superfund sites, although our share of liability has typically beende minimis. We believe we are currently in substantial compliance with applicable
environmental requirements. However, future developments such as more aggressive enforcement policies, new laws or discoveries of
unknown conditions may require expenditures that may have a material adverse effect on our business and financial
condition.

We could be affected if
consumers lose confidence in the food supply chain.We could be adversely affected if consumers lose
confidence in the safety and quality of the food supply chain. Adverse publicity about these types of concerns, whether or not
valid, could discourage consumers from buying our products. The real or perceived sale of contaminated food products by us could
result in a loss of consumer confidence and product liability claims, which could have a material adverse effect on our sales and
operations.

We currently have, and expect
to continue to have, a significant amount of debt, which could adversely affect our financial health.As of
February 3, 2007, we had $618.0 million in debt and capital lease obligations outstanding. This substantial indebtedness could
increase our vulnerability to general adverse economic and industry conditions. A substantial portion of our cash flow from
operations is used to service our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital
expenditures and other general corporate purposes, limit our flexibility in planning for, or reacting to, changes in our business;
place ourselves at a competitive disadvantage relative to our competitors that have less debt; and limit, along with the financial
and other restrictive covenants in the documents governing our indebtedness, among other things, our ability to borrow additional
funds. Additionally, interest expense could be adversely affected by changes in the interest rate environment, fluctuations in the
amount of outstanding debt, and any other factor that results in an increase in debt.



8








We participate in various
multi-employer pension plans for substantially all employees represented by unions. We are required to make
contributions to these plans in amounts established under collective bargaining agreements. Pension expense for these plans is
recognized as contributions are funded. Benefits generally are based on a fixed amount for each year of service. We contributed
$24.3 million, $22.5 million and $22.8 million to these funds in fiscal 2006, fiscal 2005 and fiscal 2004, respectively. Based on
the most recent information available to us, we believe a number of these multi-employer plans are underfunded. As a result, we
expect that contributions to these plans may increase. Additionally, the benefit levels and related items will be issues in the
negotiation of our collective bargaining agreements. Under current law, an employer that withdraws or partially withdraws from a
multi-employer pension plan may incur withdrawal liability to the plan, which represents the portion of the plans underfunding
that is allocable to the withdrawing employer under very complex actuarial and allocation rules. The amount of any increase or
decrease in our required contributions to these multi-employer pension plans will depend upon the outcome of collective bargaining,
actions taken by trustees who manage the plans, government regulations and the actual return held in the plans, among other
factors.



Failure to complete the Merger with A&P
may negatively impact our stock price and financial results. The Merger is subject to a number of closing conditions, and there
is no assurance that the conditions to the completion of the Merger will be satisfied. The pendency of the Merger may cause a disruption
to our business and a distraction of our management and employees from day-to-day operations because matters related to the Merger may require commitments of time and resources,
which could otherwise have been devoted to other opportunities that could have been beneficial to us. If the Merger is not completed, we
will be subject to several risks, including (1) the current market price of our Common Stock may reflect a market assumption that the Merger
will occur and a failure to complete the Merger could result in a negative perception of us by the stock market and a resulting decline
in the market price of our Common Stock; (2) we may be required to pay A&P a termination fee if the Merger Agreement is terminated
under certain circumstances; and (3) we would not realize any of the expected benefits of having completed the Merger. If the Merger
is not completed, these risks may materialize and materially adversely affect our business, financial results, financial condition and stock price.



Item 1B.  Unresolved Staff Comments.


None.

Item 2.  Properties.*

As of February 3, 2007, we operated 141 supermarkets located in New Jersey, New York, Pennsylvania and Delaware as follows:


State
     Number ofStoresNew Jersey
     65New York
     55Pennsylvania
     17Delaware
     4Total
     141Our 141 supermarkets have total square footage of approximately 7.4 million square feet with an aggregate selling area of approximately 5.5 million square feet.  Thirteen of these stores are owned and the remaining 128 are leased.  These supermarkets are either freestanding stores or are located in shopping centers.  Fifty-four leases will expire through fiscal 2011.  There are options to renew 49 of these leases.

We lease our corporate headquarters in Carteret, New Jersey in premises totaling approximately 150,000 square feet in size.  Our lease will expire in fiscal 2011.  We have five five-year options remaining on this property.

Nine of the 13 facilities owned by us are subject to mortgages.  We plan to acquire leasehold or fee interests in any property on which new stores or other facilities are opened and will consider entering into sale-leaseback or mortgage transactions with respect to owned properties if we believe such transactions are financially advantageous.

We operate a 290,000 square foot leased general merchandise and health and beauty care products distribution center in Edison, New Jersey.  Our lease will expire in fiscal 2009.  We have two five-year options remaining on this property.






*  Unless otherwise indicated, all information in Item 2 is given as of February 3, 2007.





9






Item 3.  Legal Proceedings.

Complaints.On March 6, 2007, Chris Larson, a stockholder in the Company, filed in the Superior Court of New Jersey, Law Division, Middlesex
County a purported class action complaint (the "Larson Complaint") against us and our directors (the "Individual Defendants"; the
Company and the Individual Defendants hereinafter collectively referred to as the "Defendants"). The Larson Complaint asserts on
behalf of a purported class of our stockholders claims against the Defendants for alleged self-dealing and breach of fiduciary
duties in connection with the Merger. The Larson Complaint seeks
(a) an injunction of the Merger unless and until the Company adopts and implements certain procedures to obtain the
highest possible price for its stockholders; (b) imposition of a constructive trust, in favor of plaintiffs, upon any benefits
received by Defendants as a result of their alleged wrongful conduct; and (c) recovery of attorneys' fees, costs and disbursements.
Defendants have not filed answers, or otherwise responded, to the Larson Complaint as of this date.

In a related action, on March 12,
2007, Sarah Kleinmann, a stockholder in the Company, also filed in the Superior Court of New Jersey, Law Division, Middlesex County
a purported class action complaint (the "Kleinmann Complaint") against the Defendants, as defined in the above paragraph, and
A&P. The Kleinmann Complaint asserts similar claims and seeks the same relief as the Larson Complaint. Defendants have not filed
answers, or otherwise responded, to the Kleinmann Complaint as of this date.

We are subject to claims and suits
against us in the ordinary course of our business. While the outcome of these claims cannot be predicted with certainty, we do not
believe that the outcome of any of these legal matters will have a material adverse effect on our results of operations, financial
position or cash flows.

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


None.





10






Executive Officers of the Registrant

The
following table sets forth the name, age as of April 7, 2007, principal occupation or employment in the present time and during the
last five years, and the name of any corporation or other organization in which such occupation or employment is or was conducted,
of our executive officers, all of whom are citizens of the United States and serve at the discretion of our Board of Directors. Our
executive officers listed below were elected to office for an indefinite period of time. No family relationship exists between any
executive officer and any other executive officer or director of the Company.


Name
        Age
        Positions and Office
        Officer of theCompany SinceJohn T. Standley (1)
        44
        Joined us as Chief Executive Officer in August 2005.  Senior Executive Vice President, Chief Financial Officer and Chief Administrative Officer of Rite Aid Corporation (Rite Aid) from January 2004 to August 2005; Senior Executive Vice President and Chief Administrative Officer of Rite Aid from June 2002 to January 2004; Senior Executive Vice President and Chief Financial Officer of Rite Aid prior thereto.
        2005Kenneth A. Martindale
        47
        Joined us as President and Chief Marketing and Merchandising Officer in January 2006.  Chairman of the Board, Chief Executive Officer and President of Intesource, Inc. from November 2004 to December 2005.  Principal of the Martindale Development Group, LLC since 1999.  Managing Director and Chief Executive Officer of Orchard Street, Inc. from September 1999 through July 2003.
        2006Frank G. Vitrano
        51
        President, Chief Financial Officer and Treasurer since October 2002; Executive Vice President, Chief Financial Officer and Treasurer prior thereto.  Mr. Vitrano joined us in 1972.
        1995John T. Derderian
        48
        Executive Vice President, Business Strategy and Marketing since February 2004; Senior Vice President, Sales, Advertising and Market Research prior thereto.  Mr. Derderian joined us in 1975.
        2004Robert J. Joyce
        61
        Executive Vice President, Human Resources. Mr. Joyce joined us in 1963.
        1989Mark C. Kramer
        57
        Executive Vice President, Store Operations since February 2004; Senior Vice President, Northern Division prior thereto.  Mr. Kramer joined us in 1977.
        2004Kevin R. Darrington
        39
        Joined us as Senior Vice President and Corporate Controller in May 2006.  Chief Financial Officer of Pharmaca Integrative Pharmacy from September 2005 to May 2006;  Vice President and Corporate Controller of Foot Locker, Inc. (Foot Locker) from June 2002 to September 2005; Retail Controller of Foot Locker prior thereto.
        2006Marc A. Strassler
        58
        Senior Vice President, Secretary and General Counsel.     Mr. Strassler joined us in 1974.
        1987(1)  Member of the Board of Directors.







11









Item 5. Market for Registrants Common Equity and Related Stockholder Matters.

Market for Common
Stock.Common Stock and warrants are currently trading on the NASDAQ under the ticker
symbols PTMK and PTMKW, respectively. The following table represents the high and low closing prices for our
common stock for each quarter in the two fiscal years ended February 3, 2007, as reported by the NASDAQ Global Market.


Fiscal 2006
     
     Fiscal 2005High
        
     Low
        
     High
        
     Low1st quarter
     
     
     $11.12
        
     $9.76
        
     $7.93
        
     $4.482nd quarter
     10.56
        
     7.90
        
     11.21
        
     7.723rd quarter
     10.42
        
     8.47
        
     12.28
        
     8.774th quarter
     11.48
        
     10.04
        
     11.03
        
     9.62Holders of Record.  As of April 7, 2007, there were 532 holders of record of our Common Stock. Dividends.We paid no cash dividends to our stockholders during the last five fiscal years and do not currently anticipate paying cash dividends during fiscal 2007.  We are prohibited from paying cash dividends to holders of Common Stock under terms of our $250 million senior secured credit facility dated as of October 1, 2004, (the Credit Agreement) with a group of lenders led by Fleet Retail Group, a Bank of America company.  We are restricted from paying cash dividends to holders of Common Stock under the indenture governing our $350 million 8.75% Senior Subordinated Notes, due 2012 (the Senior Subordinated Notes).  Refer to Note 21 for information related to guarantor subsidiaries. Securities Authorized for Issuance Under Equity Compensation Plans.The table below provides information for fiscal 2006 with respect to compensation plans (including individual compensation arrangements) under which equity securities are authorized for issuance. Plan Category
     
     (a)Number of securities tobe issued upon exerciseof outstanding options,warrants and rights
        
     (b)Weighted-averageexercise price ofoutstanding options,warrants and rights
        
     (c)Number of securitiesremaining available forfuture issuance underequity compensationplans (excludingsecurities reflected incolumn (a))Equity compensation plans approved by security holders (1)
     
     5,676,099
        
     $11.84
        
     5,095,614Equity compensation plans not approved by security holders (2)
     2,424,818
        
     $10.32
        
       (1)

Comprised
of the 2000 Employee Equity Plan and the 2000 Non-Employee Directors' Plan. (2)

Represents
stock options and restricted stock granted by the Board of Directors pursuant to
employment contracts with two executive officers.  Issuer Repurchases of Equity Securities.The table below is a listing of repurchases of Common Stock during the fourth quarter of fiscal 2006. (a)Total Number ofShares Purchased
        
     (b)Average PricePaid Per Share
        
     (c)Total Number ofShares Purchased asPart of PubliclyAnnounced Plans orPrograms
        
     (d)MaximumNumber of SharesThat May Yet BePurchased Underthe Plans orProgramsNovember 26 to December 30, 2006 (1)
     
     
     
     25,474
     
     $
     11.04
     
     
     
     
     
       (1)

Represents shares withheld, at the election of certain holders of
restricted stock, by the Company from the vested portion of restricted stock awards with a market value approximating the amount of
withholding taxes due.     12   Stock Performance Graph(1). The following graph compares the cumulative total stockholder return on Pathmark Common Stock for the
five-year period from February 2, 2002 to February 3, 2007 to that of the Standard & Poor (S&P) Group (Food
Retail) Index and the S&P 500 Index. The graph assumes: (a) $100 invested on February 2, 2002, and (b) that all dividends have
been reinvested. The stock price performance shown is not necessarily indicative of the Companys future performance and in no
way reflects the Companys forecast of future financial performance.   February 2,2002
        
        February 1,2003
        
        January 31,2004
        
        January 29,2005
        
        January 28,2006
        
        February 3,2007Pathmark
        
        $100.00
        
        $ 21.26
        
        $ 34.12
        
        $ 19.71
        
        $ 47.50
        
        $ 48.19S&P Group (Food Retail) Index
        
        100.00
        
        69.28
        
        75.31
        
        70.17
        
        78.44
        
        95.20S&P 500 Index
        
        100.00
        
        76.98
        
        103.60
        
        110.05
        
        121.47
        
        139.10
 (1)The
performance graph above is being provided to accompany this annual report on Form 10-K
pursuant to Item 201(e) of Regulation S-K and is not being filed for purposes of Section
18 of the Exchange Act and is not being incorporated by reference into any Company
filing, whether made before or after the date hereof, regardless of any general
incorporation language in such filing.   13   Item 6.   Selected Financial Data. The following table (in millions,
except per share amounts) should be read in conjunction with Managements Discussion and Analysis of Financial Condition
and Results of Operations and our financial statements included elsewhere in this report. The operating results for the 53
weeks ended February 3, 2007 and the 52 weeks ended January 28, 2006 and January 29, 2005 and the financial position as of February
3, 2007 and January 28, 2006 are derived from our audited financial statements included elsewhere in this report. The operating
results for the 52 weeks ended January 31, 2004 and February 1, 2003 and the financial position as of January 29, 2005, January 31,
2004 and February 1, 2003 are derived from our audited financial statements not included in this report:  53 WeeksEndedFebruary 3,2007
     
     52 WeeksEndedJanuary 28,2006
     
     52 WeeksEndedJanuary 29,2005
     
     52 WeeksEndedJanuary 31,2004
     
     52 WeeksEndedFebruary 1,2003Operating Results:Sales
     $4,058.0
        
     $3,977.0
        
     $3,978.5
        
     $3,991.3
        
     $3,937.7Cost of goods sold
     (2,875.2
        )
     (2,846.3
        )
     (2,846.1
        )
     (2,852.6
        )
     (2,816.7
        )Gross profit
     1,182.8
        
     1,130.7
        
     1,132.4
        
     1,138.7
        
     1,121.0Selling, general and administrative expenses (a)
     (1,056.8
        )
     (1,040.9
        )
     (984.9
        )
     (953.9
        )
     (944.4
        )Depreciation and amortization (b)
     (92.6
        )
     (90.8
        )
     (89.4
        )
     (84.0
        )
     (84.6
        )Impairment of goodwill and long-lived assets (c)
     
        
     
        
     (309.0
        )
     
        
     Operating earnings (loss)
     33.4
        
     (1.0
        )
     (250.9
        )
     100.8
        
     92.0Interest expense, net (d)
     (62.3
        )
     (64.7
        )
     (67.0
        )
     (72.5
        )
     (65.1
        )Earnings (loss) before income taxes and cumulativeeffect of an accounting change
     (28.9
        )
     (65.7
        )
     (317.9
        )
     28.3
        
     26.9Income tax benefit (provision)
     10.6
        
     25.6
        
     9.3
        
     (11.8
        )
     (13.0
        )Earnings (loss) before cumulative effectof an accounting change
     (18.3
        )
     (40.1
        )
     (308.6
        )
     16.5
        
     13.9Cumulative effect of an accounting change,net of tax (e)
     
        
     
        
     
        
     
        
     (0.6
        )Net earnings (loss)
     $(18.3
        )
     $(40.1
        )
     $(308.6
        )
     $16.5
        
     $13.3Weighted-average number of shares outstanding - basic
     52.1
        
     43.5
        
     30.1
        
     30.1
        
     30.1Weighted-average number of shares outstanding - diluted
     52.1
        
     43.5
        
     30.1
        
     30.4
        
     30.4Net earnings (loss) per share - basic
     $(0.35
        )
     $(0.92
        )
     $(10.26
        )
     $0.55
        
     $0.44Net earnings (loss) per share - diluted
     $(0.35
        )
     $(0.92
        )
     $(10.26
        )
     $0.54
        
     $0.44Same-store sales increase (decrease)
     0.4
        %
     (0.8
        )%
     (0.8
        )%
     1.2
        %
     (1.7
        )%Capital expenditures, including property acquired undercapital leases and technology investments
     $71.8
        
     $64.5
        
     $119.0
        
     $79.3
        
     $121.1 February 3,2007
     
     January 28,2006
     
     January 29,2005
     
     January 31,2004
     
     February 1,2003Financial Position:Total assets (f)
     $1,132.4
        
     $1,254.6
        
     $1,253.4
        
     $1,520.9
        
     $1,522.6Cash, cash equivalents and marketable securities
     28.1
        
     77.4
        
     42.6
        
     8.9
        
     11.3Debt (excluding capital lease obligations)
     448.2
        
     425.9
        
     481.2
        
     428.4
        
     451.7Capital lease obligations
     169.8
        
     179.6
        
     193.4
        
     196.5
        
     201.2Total debt, including capital lease obligations
     618.0
        
     605.5
        
     674.6
        
     624.9
        
     652.9Stockholders' equity (f)
     128.4
        
     171.3
        
     65.2
        
     375.0
        
     356.8 See notes to selected financial data   14   Notes to Selected Financial Data (a)
        Selling, general and administrative expenses (SG&A) in fiscal 2006 included a $9.7 million non-cash charge related to stock-based compensation in accordance with the Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 123 (R), Shared-Based Payment and $2.9 million in expenses related to the proposed merger with A&P, partially offset by gift card breakage income of $3.5 million.  SG&A in fiscal 2005 included a $14.6 million charge related to employee-related separation costs, comprised of (a) a $8.4 million charge related to a corporate headcount reduction program, (b) a $3.6 million charge related to a store labor buyout initiative, and (c) a $2.6 million charge related to separation agreements with two former executives.
In addition, SG&A in fiscal 2005 included a $4.7 million charge related to a merchandising and store initiative.  SG&A in fiscal 2004 is net of a $1.4 million credit to correct, on a cumulative basis, the accounting related to straight-line rent expense and long-term disability and a $1.5 million gain from the sale of real estate.  Fiscal 2003 included a $13.7 million gain from the sale of real estate related to the assignment of two real estate leases and a $8.1 million charge related to a store labor buyout initiative and a corporate headcount reduction program.  Fiscal 2002 included a $2.0 million charge related to a store labor buyout program.
 (b)
        Depreciation and amortization in fiscal 2004 included a charge of $2.0 million to correct, on a cumulative basis, the amortization of certain leasehold improvements. (c)
        In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, the Companys goodwill balance is evaluated for impairment annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired.  Based on an evaluation of its fair value in fiscal 2002, fiscal 2003, fiscal 2005 and fiscal 2006, the Company concluded that there was no impairment of its goodwill.

Based on the Companys evaluation of its goodwill and long-lived assets performed in fiscal 2004, the Company recorded a non-cash impairment charge of $309.0 million.  The goodwill impairment of $293.8 million, which is not deductible for income tax purposes, represented the write down of the carrying value of the Companys goodwill to its implied fair value and was due to the Companys declining operating performance in fiscal 2004 and the reduced valuation multiples in the retail grocery industry, which were reflected in the Companys stock price and market capitalization.  The long-lived assets impairment of $15.2 million represented the write down of under-performing stores to their fair market values. (d)
        Interest expense in fiscal 2005 included a charge of $2.8 million as a result of the defeasance of the Companys mortgage borrowings utilizing a portion of the proceeds of the Purchased Securities.  Fiscal 2004 included a write-off of deferred financing costs of $1.7 million related to the refinancing and pay down the Companys previous credit agreement.  Fiscal 2003 included a derivative settlement charge of $3.7 million related to the termination and settlement of the Companys $150 million interest rate zero-cost collar and the write off of deferred financing costs of $2.1 million as a result of the repayment of $153 million of the Companys term loan primarily from proceeds from the issuance of an additional $150 million ($100 million on September 19, 2003 and $50 million on December 18, 2003) aggregate
principal amount of Senior Subordinated Notes.  Fiscal 2002 included the reversal of an accrued interest liability of $2.2 million related to the favorable resolution of certain tax issues. (e)
        In fiscal 2002, the Company adopted Emerging Issues Task Force (EITF) Issue No. 02-16, Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor.  In adopting EITF Issue No. 02-16, vendor payments related to advertising reimbursements are recorded as a reduction of cost of goods sold when both the required advertising is performed and the inventory is sold; prior to this change, these reimbursements were recorded as a reduction of advertising expense when the required advertising was performed.  As a result, the Company recorded a charge in fiscal 2002 of $0.6 million, net of an income tax benefit of $0.4 million, for the cumulative effect of an accounting change. (f)
        In fiscal 2006, the
Company adopted SFAS No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans  an
amendment of SFAS No. 87, 88, 106 and 132(R). As a result, the Company recognized the funded status of its defined benefit
postretirement plans as an asset or liability, with changes resulting from adoption reducing stockholders equity by $36.0
million as of February 3, 2007. SFAS No. 158 did not change the existing criteria for measurement of periodic benefit costs, plan
assets or benefit obligations. Refer to Notes 1 and 17 for information related to the impact of SFAS No. 158.  15   Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations.
 General Our sales are derived from the retail sale of products at our stores. Internally, we look to a variety of indicators to evaluate our sales and gross profit performance, including, among others: same-store sales; sales per store; sales per selling square foot; percentage of total sales by department; inventory shrink and department gross margins.  We focus on increasing same-store sales, sales per selling square foot and sales per store through programs which provide greater customer service and better store-level execution, promotional activities and merchandising, including product placement and adjacencies, private label and enhanced use of the Pathmark Advantage Card, as well as high sanitation standards. Our operating expenses are primarily incurred from selling, general and administrative costs.  Almost 68% of these costs are for labor and labor-related benefits.  Internally, we focus on a variety of indicators to evaluate our expense performance, including, among others: labor costs, including labor hours and hourly labor rates and labor-related expenses such as welfare costs, pension costs, payroll taxes and workers compensation costs.  Selling, general and administrative expenses other than labor and labor-related costs include occupancy expenses, supplies and customer accident claims, among others. As has been our practice in the
past, we will continue to evaluate the profitability, strategic positioning, impact of potential competition, and sales growth
potential of all our stores on an ongoing basis. We may, from time to time, make decisions regarding acquisitions, closures,
relocations or renovations in accordance with such evaluations. We completed 14 store renovations during fiscal 2006 and plan to
complete 13 store renovations during fiscal 2007. Fiscal 2006 Compared to Fiscal 2005 The following table sets forth selected consolidated statements of operations data (dollars in millions): 53 Weeks EndedFebruary 3, 2007
     
     52 Weeks EndedJanuary 28, 2006Amount
        
     %
        
     Amount
        
     %Sales
     
     
     $4,058.0
        
     100.0
        %
     $3,977.0
        
     100.0
        %Gross profit
     $1,182.8
        
     29.1
        %
     $1,130.7
        
     28.4
        %Selling, general and administrative expenses
     (1,056.8
        )
     (26.0
        )
     (1,040.9
        )
     (26.1
        )Depreciation and amortization
     (92.6
        )
     (2.3
        )
     (90.8
        )
     (2.3
        )Operating earnings (loss)
     33.4
        
     0.8
        
     (1.0
        )
     Interest expense, net
     (62.3
        )
     (1.5
        )
     (64.7
        )
     (1.6
        )Loss before income taxes
     (28.9
        )
     (0.7
        )
     (65.7
        )
     (1.6
        )Income tax benefit
     10.6
        
     0.2
        
     25.6
        
     0.6Net loss
     $(18.3
        )
     (0.5
        )%
     $(40.1
        )
     (1.0
        )%   16   Sales. The following table sets forth data related to sales for fiscal 2006 and fiscal 2005: 53 WeeksEndedFebruary 3,2007
        
     52 WeeksEndedJanuary 28,2006Total sales increase
     
     
     %(a)
        
     %Same-store sales increase (decrease)
     0.4%(a)
        
     (0.8)%Sales per selling square foot
     $725(a)
        
     $725  (a)

Excluding
the extra week in fiscal 2006.   Sales in 53-week fiscal 2006 were
$4.06 billion compared to $3.98 billion in 52-week fiscal 2005. Sales in fiscal 2006, excluding estimated sales of $79.0 million in
the extra week, were flat with sales in fiscal 2005, and were comprised of an increase of 0.4% from new stores and 0.4% from
same-store sales (stores open the entire year in both fiscal 2006 and fiscal 2005, including replacement stores and enlargements),
offset by a 0.8% decrease from closed stores. We operated 141 stores at the end of fiscal 2006 and fiscal 2005. Gross Profit.Gross profit represents the difference between sales and cost of goods sold, which includes the costs of inventory sold and
the related purchase and distribution costs, net of vendor allowances and rebates. Gross profit in fiscal 2006 was $1.18 billion or
29.1% of sales compared to $1.13 billion or 28.4% of sales in fiscal 2005. The increase in gross profit as a percentage of sales of
0.7% in fiscal 2006 compared to fiscal 2005 was primarily due to higher margins in the grocery, nonfoods, produce and meat
departments, lower inventory shrink in the perishable departments and lower logistic costs, partially offset by lower pharmacy
margins associated with the new Medicare Part D program. We estimated that $22.5 million of the $52.1 million increase in gross
profit was the result of the 53rd week and the remainder was primarily the result of our merchandising initiatives and
lower inventory shrink. SG&A.SG&A in fiscal 2006 was $1,056.8 million or 26.0% of sales compared to $1,040.9 million or 26.1% of sales in fiscal
2005, an increase of $15.9 million. SG&A in fiscal 2006 included: $9.7 million in non-cash stock-based compensation expense due
to the adoption of SFAS No. 123 (R), (2) $2.9 million in expenses related to the Merger Agreement, and (3) $3.5 million in gift card
breakage income. SG&A in fiscal 2005 included: (1) a $14.6 million charge related to employee-related separation costs,
comprised of (a) a $8.4 million charge related to a corporate headcount reduction program, (b) a $3.6 million charge related to a
store labor buyout initiative, and (c) a $2.6 million charge related to separation agreements with two former executives, (2) a $4.7
million charge related to a merchandising and store initiative, (3) a $1.2 million charge related to stock-based compensation
expense, and (4) a $1.1 million charge related to a review of strategic alternatives, which resulted in the Yucaipa investment. The
balance of the increase in SG&A of $28.4 million in fiscal 2006 compared to fiscal 2005 was primarily due to the estimated
impact of the extra week of $16.9 million, higher utility expenses of $4.7 million, higher self-insured workers compensation
and general liability claims of $4.7 million, higher rent and real estate taxes of $3.0 million, higher incentive expenses of $2.4
million, higher technology expenses of $2.0 million, higher bank charges of $1.7 million and higher repairs of $1.4 million,
partially offset by lower store payroll of $6.6 million and lower advertising expenses of $2.0 million. Depreciation and
Amortization.Depreciation and amortization expense of $92.6 million in fiscal 2006 was $1.8 million higher
than the $90.8 million in fiscal 2005. The increase in depreciation and amortization expense in fiscal 2006 compared to fiscal 2005
was due to capital expenditures made as part of our store renovation program. Operating Earnings
(Loss).Operating earnings were $33.4 million in fiscal 2006 compared to an operating loss of $1.0 million
in fiscal 2005. The increase in operating earnings in fiscal 2006 compared to fiscal 2005 was primarily due to a higher gross
margin, partially offset by higher SG&A costs. Interest Expense,
Net.Interest expense was $62.3 million in fiscal 2006 compared to $64.7 million in fiscal 2005. The
decrease in interest expense in fiscal 2006 was primarily due to lower lease obligations and the nonrecurring mortgage debt
extinguishment charge of $2.8 million in fiscal 2005, partially offset by higher interest rates.  17  Income Tax Benefit.The income
tax benefit of $10.6 million in fiscal 2006 was based on an effective tax rate of 36.6% and the income tax benefit of $25.6 million
in fiscal 2005 was based on an effective income tax rate of 38.9%. During fiscal 2006 and fiscal 2005, we made income tax payments
of $5.1 million and $3.2 million, respectively. Refer to Note 18 for information related to our income taxes. Summary of
Operations.The net loss in fiscal 2006 was $18.3 million compared to $40.1 million in fiscal 2005. The
decrease in the net loss in fiscal 2006 compared to fiscal 2005 was primarily due to higher operating earnings and lower interest
expense, partially offset by a lower income tax benefit. Fiscal 2005 Compared to Fiscal 2004 The following table sets forth
selected consolidated statements of operations data (dollars in millions): 52 Weeks EndedJanuary 28, 2006
     
     January 29, 2005Amount
        
     %
        
     Amount
        
     %Sales
     
     
     $3,977.0
        
     100.0
        %
     $3,978.5
        
     100.0
        %Gross profit
     $1,130.7
        
     28.4
        %
     $1,132.4
        
     28.5
        %Selling, general and administrative expenses
     (1,040.9
        )
     (26.1
        )
     (984.9
        )
     (24.8
        )Depreciation and amortization
     (90.8
        )
     (2.3
        )
     (89.4
        )
     (2.2
        )Impairment of goodwill and long-lived assets
     
        
     
        
     (309.0
        )
     (7.8
        )Operating loss
     (1.0
        )
     
        
     (250.9
        )
     (6.3
        )Interest expense, net
     (64.7
        )
     (1.6
        )
     (67.0
        )
     (1.7
        )Loss before income taxes
     (65.7
        )
     (1.6
        )
     (317.9
        )
     (8.0
        )Income tax benefit
     25.6
        
     0.6
        
     9.3
        
     0.2Net loss
     $(40.1
        )
     (1.0
        )%
     $(308.6
        )
     (7.8
        )% Sales.
 The following table sets forth data related to sales for fiscal 2005 and fiscal 2004: 52 Weeks EndedJanuary 28,2006
 
 January 29,2005Total sales decrease
     
     
     %
        
     (0.3)%Same-store sales decrease
     (0.8)%
        
     (0.8)%Sales per selling square foot
     $725
        
     $724  Sales in both fiscal 2005 and fiscal 2004 were $3.98 billion.  Sales in fiscal 2005 increased 1.2% from new stores, offset by a 0.8% decrease in same-store sales (stores open the entire year in both fiscal 2005 and fiscal 2004, including replacement stores and enlargements) and a 0.4% decrease from closed stores.  We believe sales benefited from an increase in average order size, but continued to be negatively affected by a decrease in customer traffic.  During fiscal 2005, we opened two new stores, one of which was a replacement for a closed store, closed four stores and completed eight store renovations.  We operated 141 stores at the end of fiscal 2005 and 143 stores at the end of fiscal 2004. Gross Profit.Gross profit represents the difference between sales and cost of goods sold, which includes the costs of inventory sold and the related purchase and distribution costs, net of vendor allowances and rebates.  Gross profit in both fiscal 2005 and fiscal 2004 was $1.13 billion.  As a percentage of sales, gross profit was 28.4% in fiscal 2005 compared to 28.5% in fiscal 2004; the reduction in the gross profit percentage in fiscal 2005 was primarily due to increased inventory shrink and logistic costs, offset by improved departmental mix.  As a result of the merchandising and store initiative, we incurred higher inventory shrink in the third and fourth quarters of fiscal 2005 of $10.3 million, as compared to the prior year, primarily in the perishable departments.  18  SG&A.SG&A in fiscal 2005 was $1,040.9 million or 26.1% of sales compared to $984.9 million or 24.8% of sales in fiscal 2004,
an increase of $56.0 million. SG&A in fiscal 2005 included: (1) a $14.6 million charge related to employee-related separation
costs, (2) a $4.7 million charge related to a merchandising and store initiative, (3) a $1.2 million charge related to the
amortization of stock-based compensation, and (4) a $1.1 million charge related to a review of strategic alternatives, which
resulted in the Yucaipa investment. SG&A in fiscal 2004 was net of a $1.4 million credit to correct, on a cumulative basis, the
accounting for our operating leases and long-term disability plan and a $1.5 million gain from the sale of real estate. The balance
of the increase in SG&A in fiscal 2005 compared to fiscal 2004 is primarily due to the following factors: (1) supply and utility
expenses increased by 0.3% of sales, due to higher oil prices, (2) welfare, pension and medical expenses increased by 0.1% of sales,
and (3) store labor expenses increased by 0.1% of sales, due to contractual increases. Impairment of Goodwill and Long-Lived Assets.Based on the evaluation of our goodwill and long-lived assets performed in the fourth quarter of fiscal 2005, we concluded there was no impairment in fiscal 2005 compared to a non-cash impairment charge of $309.0 million in fiscal 2004. Depreciation and Amortization.Depreciation and amortization of $90.8 million in fiscal 2005 was $1.4 million higher than the $89.4 million in fiscal 2004.  The increase in depreciation and amortization expense in fiscal 2005 compared to fiscal 2004 was primarily due to the amortization of the first phase, completed in fiscal 2004, of a multi-year project to upgrade our merchandising system.   Depreciation and amortization in fiscal 2004 included a charge of $2.0 million to correct, on a cumulative basis, the amortization of certain leasehold improvements. Operating Loss.The operating loss was $1.0 million in fiscal 2005 compared to $250.9 million in fiscal 2004.  The decrease in the operating loss in fiscal 2005 compared to fiscal 2004 was primarily due to the goodwill and long-lived assets impairment charge of $309.0 million in fiscal 2004, partially offset by higher SG&A expenses in fiscal 2005. Interest Expense, Net.Interest expense was $64.7 million in fiscal 2005 compared to $67.0 million in fiscal 2004.  The decrease in interest expense in fiscal 2005 was primarily due to lower debt and higher cash investments resulting from the Yucaipa investment.  We used a portion of the net proceeds to pay down our Working Capital Facility borrowings and defease our mortgage borrowings, which resulted in a mortgage debt extinguishment charge of $2.8 million.  Fiscal 2004 included a write-off of deferred financing costs of $1.7 million related to the refinancing of our previous credit agreement. Income Tax Benefit.The income tax benefit of $25.6 million in fiscal 2005 was based on an effective tax rate of 38.9% and the income tax benefit of $9.3 million in fiscal 2004 was based on an effective income tax rate of 42.0%.  During fiscal 2005 and fiscal 2004, we made income tax payments of $3.2 million and $3.9 million, respectively.  Refer to Note 18 for information related to our income taxes. Summary of Operations.The net loss in fiscal 2005 was $40.1 million compared to $308.6 million in fiscal 2004.  The decrease in the net loss in fiscal 2005 compared to fiscal 2004 was primarily due to the goodwill and long-lived assets impairment charge of $309.0 million in fiscal 2004 and higher SG&A expenses, lower interest expense and higher income tax benefits in fiscal 2005. Liquidity and Capital Resources Cash Flows.  The following table sets forth certain consolidated statements of cash flow data (in millions): 53 WeeksEndedFebruary 3,2007
 
 52 WeeksEndedJanuary 28,2006
 
 52 WeeksEndedJanuary 29,2005Cash provided by (used for):Operating activities
     $6.9
        
     $27.4
        
     $101.2Investing activities
     (66.0
        )
     (67.9
        )
     (99.6
        )Financing activities
     13.8
        
     71.3
        
     32.1   19  The decrease in cash provided by
operating activities in fiscal 2006 compared to fiscal 2005 was primarily due to higher cash used for operating assets and
liabilities, partially offset by an increase in operating earnings. The increase in cash used for operating assets and liabilities
was primarily due to (1) the transfer in fiscal 2006 of our disbursing account to the same financial institution we utilize for our
depository accounts, thereby allowing for the right of offset, which resulted in the reduction of cash and book overdrafts of $23.1 million at February 3, 2007, and (2) the
timing of our February 1 semi-annual Senior Subordinated Notes interest payment of $15.3 million and our prepaid rent payments of
$6.8 million; such payments were made prior to February 3, 2007 in fiscal 2006, but subsequent to January 28, 2006 in fiscal 2005.
The decrease in cash provided by operating activities in fiscal 2005 compared to fiscal 2004 was primarily due to a higher net loss,
excluding the non-cash goodwill and long-lived assets impairment charge in fiscal 2004, an increase in the deferred income tax
benefit and lower cash generated by operating assets and liabilities. The decrease in cash used for
investing activities in fiscal 2006 compared to fiscal 2005 was primarily due to net sales of marketable securities, partially
offset by higher capital expenditures,including technology investments. The
decrease in cash used for investing activities in fiscal 2005 compared to fiscal 2004 was primarily due to lower capital
expenditures,including technology investments, partially offset by net
purchases of marketable securities. The decrease in cash provided by
financing activities in fiscal 2006 compared to fiscal 2005 was primarily due to the fiscal 2005 proceeds from the issuance of the
Purchased Securities, net of debt repayments (seeDebt Service and Liquidity below),partially offset by increased borrowings under the Working Capital Facility. The increase in cash used for financing
activities in fiscal 2005 compared to fiscal 2004 was primarily due to the proceeds related to the issuance of the Purchased
Securities, net of debt repayments (seeDebt Service and Liquidity below). Debt Service and
Liquidity.On June 9, 2005, pursuant to the Purchase Agreement, we issued the Purchased Securities to the
Investors for an aggregate purchase price of $150 million in cash. We received $137.5 million for the Purchased Securities, net of
$12.5 million of costs directly attributable to the offering. We used $40.3 million of the net proceeds to pay down our working
capital facility borrowings and $23.3 million to defease our mortgage borrowings. The remaining net proceeds were invested in
short-term cash investments and have been used for general corporate purposes, including capital expenditures. During fiscal 2004, we entered
into the Credit Agreement which expires on October 1, 2009 and consists of a $180 million working capital facility, including
letters of credit, (Working Capital Facility) and a $70 million term loan (Term Loan). 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, mergers and
consolidations, changing lines of business, repayments of other indebtedness, amendments to organizational documents and other
matters customarily restricted in such agreements. The Credit Agreement also contains provisions permitting us to increase the size
of the Working Capital Facility by $25 million and to repay and subsequently reborrow any portion of the Term Loan, in each instance
subject to certain conditions. The Credit Agreement further provides that we must maintain a minimum inventory level of $150
million, that the maximum annual cash capital expenditures in a fiscal year are limited to the lesser of $150 million or an amount
equal to our Consolidated EBITDA for the immediately preceding fiscal year plus any unused cash capital expenditures in the
immediately preceding fiscal year up to a maximum of $20 million, and that we shall not, at any time, permit the ratio of Credit
Extensions to Consolidated EBITDA (calculated on a trailing four-fiscal-quarters basis) at the end of any fiscal quarter to be more
than 2.4:1.0 for each fiscal quarter (the Senior Leverage Ratio). As used in the Credit Agreement, Credit Extensions
mean the sum of the principal balance of all outstanding borrowings thereunder ($70.0 million under the Term Loan and $22.7 million
under the Working Capital Facility as of February 3, 2007) and the amount of outstanding letters of credit ($84.4 million as of
February 3, 2007). Based on the Senior Leverage Ratio at the end of fiscal 2006, we have full availability under the Working Capital
Facility after giving effect to Credit Extensions of $72.9 million. Also, the Credit Agreement prohibits the payment of cash
dividends and 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 (excluding the
purchase by the Investors of the Purchased Securities). We were in compliance with all Credit Agreement covenants as of February 3,
2007.  20   We believe that cash flows from
operations, supplemented by 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 at least
the next fiscal year. However, in the event that cash flows from operations continue to decrease, we may decide to limit our future
cash capital expenditure program and, subject to the Senior Leverage Ratio, our ability to utilize the full amount available under
the Working Capital Facility could be limited. There are no credit agency
ratings-related triggers in either the Credit Agreement or in the indenture related to the Senior Subordinated Notes (the
Indenture) that would adversely impact the cost of borrowings, annual amortization of principal or related debt
maturities. Borrowings under the Credit
Agreement bear interest at floating rates equal to LIBOR plus a premium that ranges between 1.50% 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 1.75%. 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
7.1% during fiscal 2006 and 5.3% during fiscal 2005. All of the obligations under the
Credit Agreement are guaranteed by our 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, including $150 million issued at a premium, which mature on February 1,
2012 and 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 February 3, 2007. Contractual Obligations and
Commitments.We enter into a variety of legally binding obligations and commitments in the normal course of
our business. The table below presents our long-term contractual obligations and commitments which represent known future cash
payments that we will be required to make under existing contractual arrangements. Some amounts are based on managements
estimates and assumptions and amounts actually paid may vary from those reflected below. The following table presents contractual
obligations as of February 3, 2007 (in millions): Payments Due by Fiscal YearsTotal
     
     2007
     
     2008and2009
     
     2010and2011
     
     ThereafterLong-term debt obligations (1)
     
     
     $448.2
        
     $25.1
        
     $71.3
        
     $1.2
        
     $350.6Interest on debt obligations
     169.2
        
     37.7
        
     54.8
        
     61.3
        
     15.4Capital lease obligations (1)
     169.8
        
     11.3
        
     15.8
        
     19.3
        
     123.4Interest on capital lease obligations
     142.9
        
     15.8
        
     31.2
        
     27.5
        
     68.4Operating lease obligations (2)
     470.4
        
     62.1
        
     107.4
        
     88.2
        
     212.7Purchase obligations (3)
     681.4
        
     105.5
        
     209.8
        
     205.0
        
     161.1Other liabilities (4)
     242.3
        
     42.2
        
     58.9
        
     46.8
        
     94.4Total
     $2,324.2
        
     $299.7
        
     $549.2
        
     $449.3
        
     $1,026.0  (1)

Debt
and capital lease obligations include principal payments only. (2)

Operating
lease obligations, net of sublease income of $48.8 million, are $421.6 million.   21  (3)

In
addition to the purchase obligations reflected in the table above, we enter into supply
contracts to purchase products for resale in the ordinary course of business.  This
category of contracts covers a broad spectrum of products and sometimes includes specific
merchandising obligations relative to those products.  These supply contracts typically
include either a volume commitment or a fixed expiration date; pricing terms based on the
vendor's published list price; termination provisions; and other standard contractual
considerations.  Our obligation related to these contracts is typically limited to return
of unearned allowances and therefore no amounts have been included above.  Purchase
obligations shown above relate to the outsourcing of a major portion of our distribution,
trucking and information systems functions through long-term agreements, as noted below.  
        We have a supply agreement with C&S, expiring in January 2013, pursuant to which C&S supplies substantially all of our grocery, frozen and perishable merchandise requirements.  Under our arrangement with C&S, we negotiate prices, discounts and promotions with vendors.  We pay C&S a per case upcharge, and have annual minimum case commitments.  The table above reflects the minimum upcharge.  During fiscal 2006, the products supplied from C&S accounted for over 60% of all of our supermarket inventory purchases.  This agreement may only be terminated for cause or certain events of bankruptcy by either party.
 
        In February 2005, we entered into a seven-year extension of our existing outsourcing agreement with IBM, which commenced in 1991, to continue to provide a wide range of information systems services.  Under the agreement, expiring in January 2012, IBM provides data center operations, mainframe processing, business applications and systems development to enhance our customer service and efficiency.  The charges under this agreement are based upon the services requested at predetermined rates.  We may terminate this agreement with a payment of a specified termination charge.
 
        We have an agreement,
expiring in January 2014, with GHI to provide us with trucking services. Under this arrangement, there is
an annual fixed fee in addition to transportation charges. The fixed fee is reflected in the table above. We may terminate this
agreement with a payment of a specified termination charge.
 (4)

Other
liabilities include self-insured obligations, unfunded pension liabilities and
post-retirement and post-employment obligations.  Off-Balance Sheet Arrangements.In the normal course of business, we have assigned to third parties various leases related to former businesses that we sold as well as former operating Pathmark supermarkets (the Assigned Leases).  When the Assigned Leases were assigned, we generally remained secondarily liable with respect to these lease obligations.  As such, if any of the assignees were to become unable to continue making rental payments under the Assigned Leases, under certain circumstances we could be required to assume the lease obligation.  As of February 3, 2007, our records indicate that 58 Assigned Leases may still have term remaining; however, we have no way of knowing in some instances if such Assigned Leases are still actually in effect or have been terminated by our assignees or their successors.  Assuming that each Assigned Lease is
still in effect and that each respective assignee became unable to continue to make rental payments under an Assigned Lease, an event we believe to be remote, management estimates our maximum potential obligation with respect to the Assigned Leases to be approximately $99 million, which could be partially or totally offset by reassigning or subletting such leases.  We have a liability on our consolidated balance sheet as of February 3, 2007 of $2.4 million, which represents certain guarantees attributable to our secondary liability in connection with Assigned Leases assigned after December 31, 2002. Additionally, in connection with the 1997 sale of our trucking business to GHI and distribution operation to C&S, GHI and C&S agreed to continue making contributions to the Local 863 Teamsters Pension Fund (the Fund), a multi-employer pension plan.  With respect to GHI, we agreed that in the event GHI were to withdraw from the Fund, to indemnify GHI under certain circumstances against all liabilities it would have arising from such a withdrawal.  We also agreed to provide GHI with a letter of credit to secure the potential indemnification obligation.  As of February 3, 2007, we have caused our bank to issue stand-by letters of credit in favor of GHI, or the Fund, in the aggregate amount of $20 million.  Under the agreement with GHI, we have  22  agreed to adjust said letters of credit up or down annually to reflect any change in the maximum estimated amount of the Fund withdrawal liability attributable to GHI, provided that any annual increase in said letters of credit will not exceed $5 million; provided further, that in the event of a change in control (excluding the Yucaipa investment), a failure to provide an annual increase in the letters of credit when due or a material adverse change in our financial condition, we would be required to furnish an increased letter of credit equal to the full amount of the estimated Fund withdrawal liability attributable to GHI, less any outstanding letters of credit in favor of GHI or the Fund.  The estimated Fund withdrawal liability attributable to GHI as of August 31, 2006 (the Funds last completed fiscal year), according to the Fund actuary, is $51.0 million.  With respect to C&S, we agreed that
in the event C&S were to withdraw from the Fund, to indemnify C&S under certain circumstances against liabilities it would have arising from such a withdrawal; provided, however, that our indemnification obligation is limited to an amount not to exceed what our Fund withdrawal liability would have been as of August 31, 1997.  We are also a party to a variety of contracts under which we may be obligated to indemnify the other party for certain matters.  These contracts primarily relate to our commercial contracts, purchase and sale agreements, leases, financial agreements and various other agreements.  Under these contracts, we may provide routine indemnification relating to representations and warranties, or personal injury matters.  The terms of these indemnifications range in duration and may not be explicitly defined.  Historically, we have not made a significant payment for these indemnifications. We had outstanding letters of credit of $84.4 million as of February 3, 2007, of which $84.0 million were standby letters of credit covering primarily self-insured or performance obligations.  The remaining $0.4 million were commercial letters of credit supporting purchases of imported products. Capital Expenditures.
Capital expenditures, including technology investments, were $71.8 million in fiscal 2006
compared to $64.5 million in fiscal 2005 and $119.0 million in fiscal 2004. During fiscal 2006, we completed 14 store renovations.
During fiscal 2005, we opened two new stores, one of which was a replacement for a closed store, closed four stores and completed
eight store renovations. During fiscal 2007, our capital expenditure plan is to invest approximately $80 million in 13 store
renovations and in technology investments.  23  Critical Accounting Policies Our discussion of results of operations and financial condition relies on our 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 this report are those that depend most heavily on these judgments and estimates. Goodwill Impairment.We perform our annual evaluation of goodwill in accordance with SFAS No. 142, Goodwill and Other Intangible Assets, in the fourth quarter of each fiscal year.  Based on our fiscal 2006 and fiscal 2005 evaluations, we concluded there were no impairments of our goodwill.  In fiscal 2004 we concluded that there was a $293.8 million impairment of our goodwill.  Since such impairment analysis is based on economic and business assumptions, the goodwill impairment analysis in the future could be affected by changes in these business and economic conditions, changes in consumer spending, the competitive environment in which we operate and other risks detailed elsewhere in this report. Impairment of Long-Lived Assets.It is our policy to assess the carrying value of our long-lived assets for possible impairment on an individual store basis to determine if the carrying value of such assets are recoverable from their related undiscounted cash flows.  Based on our fiscal 2006 and fiscal 2005 assessments, we concluded there were no impairments of our long-lived assets.  In fiscal 2004, we concluded that there was an impairment of $15.2 million.  Since our estimates project cash flow several years into the future, they could be affected by variable factors such as inflation and economic conditions. Pension Plans.For all our pension plans, pension income was $2.0 million for fiscal 2006, pension expense was $5.3 million (including a $7.5 million charge related to the retirement incentive program and executive separations) for fiscal 2005 and pension income was $4.1 million for fiscal 2004.  Pension income and expense are calculated based upon a number of actuarial assumptions.  The expected return on assets of the Pathmark Stores, Inc. Pension Plan (the Qualified Plan) represents the weighted-average of expected returns for each asset category, which have been developed using information from a number of third-party consultants and long-term historical data on returns for different asset categories and inflation.  We also considered the Qualified Plans historical 10-year and 20-year compounded returns of 9.4% and 11.8%, respectively,
which have exceeded broad market returns over comparable periods, indicating a significant premium has been gained through active management of plan assets.  Based on these factors and the asset allocation discussed below, we elected to use a 9.0% expected return on plan assets in determining pension cost for fiscal 2006.  This was consistent with fiscal 2005 and fiscal 2004.  Our assumption was net of expected plan expenses payable from the trust fund, which were less than 0.8% of plan assets. The expected long-term rate of return on our Qualified Plan assets is based on an asset allocation assumption of 70% with equity managers, with an expected long-term rate of return of 10.5%, and 30% with fixed income managers, with an expected long-term rate of return of 5.5% (both were net of expected plan expenses payable from the trust fund).  Because of market fluctuation, our actual asset allocation as of December 31, 2006 was 73% with equity managers and 27% with fixed income managers. We believe, however, that our long-term asset allocation on average will approximate 70% with equity managers and 30% with fixed income managers.  We regularly review our actual asset allocation and periodically rebalance our investments to our targeted allocation when considered appropriate.  A 0.5% reduction in our expected long-term rate of return on Qualified Plan assets, holding all other factors
constant, would have decreased pension income during fiscal 2006 by approximately $1.3 million. We base our determination of
pension expense or income, in part, on a market-related valuation of assets that reduces year-to-year volatility. This
market-related valuation recognizes investment gains or losses over a three-year period from the year in which they occur.
Investment gains or losses for this purpose are the difference between the expected return calculated using the market-related value
of assets and the actual return based on the market value of assets. As of February 3, 2007, due to offsetting gains and losses, the
market value and market-related value of assets differed by less than 1.0%.  24  The discount rate used reflects
the market rate for high-quality fixed-income investments on our annual measurement date (December 31) and is subject to change each
year. The discount rate was determined by matching, on an approximate basis, a theoretical zero-coupon spot yield curve derived from
a portfolio of high-quality bonds as of the measurement date to the expected plan benefit payments defined by the projected benefit
obligation and solving for a single equivalent discount rate that resulted in the same projected benefit obligation. The discount
rate was 6.0% as of February 3, 2007 and 5.75% as of January 28, 2006. Pension income is sensitive to the discount rate and salary
increase assumptions used. A 0.25% decrease in the discount rate used would have decreased fiscal 2006 pension income by
approximately $0.7 million. A 0.25% increase in the salary increase assumption would have decreased fiscal 2006 pension income by
approximately $0.6 million. Based on an expected return on
plan assets assumption of 9.0%, a discount rate of 6.0% and our various other relevant current assumptions, we estimate that our
pension income for all pension plans combined will approximate $2.5 million for fiscal 2007, $3.7 million for fiscal 2008 and $5.7
million for fiscal 2009. Actual pension income in the future will depend on future investment performance, changes in discount rates
and various other factors related to the populations participating in our pension plans. The value of our Qualified Plan
assets has increased from $270.7 million at December 31, 2005 to $279.8 million at December 31, 2006. The actual return in excess of
that expected and the increase in the discount rate have raised the overfunded status of our Qualified Plan, net of benefit
obligations, from $58.3 million at December 31, 2005 to $72.9 million at December 31, 2006. We believe that, based on our actuarial
assumptions and due to the overfunded status of our Qualified Plan, we will not be required to make any cash contributions to our
Qualified Plan for at least the next three years. In September 2006, the FASB issued
SFAS No. 158, which requires us to recognize the funded status of our defined benefit postretirement plans as an asset or liability
in our statement of financial position. We are also required to disclose information about certain effects on net periodic benefit
costs for the next fiscal year that arise from delayed recognition of gains or losses, prior service costs or credits, and
transition assets or obligations. We adopted SFAS No. 158 as of February 3, 2007, resulting in a reduction in the funded pension
asset of $69.2 million, a decrease in net deferred income taxes of $26.4 million, a decrease in postretirement benefit obligations
of $7.2 million, an increase in unfunded pension liabilities of $0.4 million and a reduction in stockholders equity of $36.0
million. SFAS No. 158 also requires us to measure the funded status of our plan as of the date of our fiscal year-end statement of
financial position. As we have always used the calendar year for measurement, this will result in a change in our consolidated
financial statements. We are not required to adopt this change until our fiscal year ending February 1, 2009. We do not expect that
the adoption of this portion of SFAS No. 158 will have a material impact on our consolidated financial statements. Self-Insured Claims Liabilities
and Postemployment Benefits.We are self insured for claims relating to customer, associate and vehicle
accidents, as well as certain associate medical and disability benefits, and, except for associate medical insurance, we maintain
third-party excess insurance coverage for such claims. It is our accounting policy to record a self-insured liability, as determined
actuarially on a consistent basis, based on the facts and circumstances of each individual claim filed and an estimate of claims
incurred but not yet reported discounted at a risk-free interest rate of 4.75%. All claims and their related liabilities are
reviewed and monitored on an ongoing basis. Any actuarial projection of losses concerning such claims is subject to variability
primarily due to external factors affecting future inflation rates, litigation trends, benefit levels and claim settlement patterns.
At February 3, 2007, liabilities for self-insured claims and benefits were $58.3 million and for postemployment benefits were $5.7
million. New Accounting Pronouncements In June 2006, FASB Interpretation
(FIN) No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of SFAS No. 109 was issued.
This interpretation clarifies the accounting for uncertainty in income taxes recognized in an entitys financial statements in
accordance with SFAS No. 109, Accounting for Income Taxes, and prescribes a recognition threshold and measurement
attribute for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For
benefits to be realized, a tax position must be more likely than not to be sustained upon examination. The amount  25  recognized is measured as the largest amount of
benefit that is greater than 50 percent likely of being realized upon settlement. FIN No. 48 is effective for our fiscal year
beginning February 4, 2007. The cumulative effect of adopting FIN No. 48 will be recorded in accumulated deficit and other accounts,
as applicable. We are currently evaluating the provisions of FIN No. 48 and have not yet completed our determination of the impact
of adoption on our consolidated financial position. In June 2006, the FASB ratified
the consensus of EITF No. 06-03, How Taxes Collected from Customers and Remitted to Governmental Authorities Should be
Presented in the Income Statement (That is, Gross Versus Net Presentation). The scope of this issue includes any tax assessed
by a government authority that is directly imposed on a revenue producing activity between a seller and a customer. EITF No. 06-03
states that the income statement presentation of taxes within the scope of this issue on either a gross (included in revenues at
cost) basis or a net (excluded from revenues) basis is an accounting policy decision that should be disclosed, effective for our
fiscal year beginning February 4, 2007. We will continue to use the net basis for presentation. In September 2006, the FASB issued
SFAS No. 157, Fair Value Measurements, which clarifies the principle that fair value should be based on the assumptions
market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the
information used to develop those assumptions. Under this statement, fair value measurements would be separately disclosed by level
within the fair value hierarchy. This statement is effective for our fiscal year beginning February 3, 2008, with early adoption
permitted. We are in the process of evaluating this statement, but do not expect that the adoption of SFAS No. 157 will have a
material impact on our consolidated financial statements. In September 2006, the SEC issued
Staff Accounting Bulletin (SAB) No. 108, Considering the Effects of Prior Year Misstatements When Quantifying
Misstatements in Current Year Financial Statements. This bulletin provides interpretive guidance on how the effects of the
carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement. The SEC staff
believes that registrants should quantify errors using both a balance sheet and an income statement approach and evaluate whether
either approach results in quantifying a misstatement that, when all relevant quantitative and qualitative facts are considered, is
material. SAB No. 108 was effective for our fiscal year ended February 3, 2007. The adoption of SAB No. 108 did not result in any
adjustments to our consolidated financial statements. In February 2007, the FASB issued
SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of SFAS No.
115. This statement permits entities to choose to measure many financial instruments and certain other items at fair value.
The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported
earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions.
This statement is expected to expand the use of fair value measurement, which is consistent with the FASBs long-term
measurement objectives for accounting for financial instruments. SFAS No. 159 is effective for our fiscal year beginning February 3,
2008. We are in the process of evaluating this statement, but do not expect that the adoption of SFAS No. 159 will have a material
impact on our consolidated financial statements. Item 7A.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 February 3, 2007. During fiscal 2006, the average interest rate in effect on borrowings under our Term
Loan was 7.1%. A 1.0% 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 treasury 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.  26  Item 8.Financial Statements.
 Pathmark Stores, Inc. Consolidated Statements of Operations (in millions, except per share amounts)  53 WeeksEndedFebruary 3,2007
 
 52 WeeksEndedJanuary 28,2006
 
 52 WeeksEndedJanuary 29,2005Sales
     
     
     $4,058.0
        
     $3,977.0
        
     $3,978.5Cost of goods sold
     (2,875.2
        )
     (2,846.3
        )
     (2,846.1
        )Gross profit
     1,182.8
        
     1,130.7
        
     1,132.4Selling, general and administrative expenses
     (1,056.8
        )
     (1,040.9
        )
     (984.9
        )Depreciation and amortization
     (92.6
        )
     (90.8
        )
     (89.4
        )Impairment of goodwill and long-lived assets
     
        
     
        
     (309.0
        )Operating earnings (loss)
     33.4
        
     (1.0
        )
     (250.9
        )Interest expense, net
     (62.3
        )
     (64.7
        )
     (67.0
        )Loss before income taxes
     (28.9
        )
     (65.7
        )
     (317.9
        )Income tax benefit
     10.6
        
     25.6
        
     9.3Net loss
     $(18.3
        )
     $(40.1
        )
     $(308.6
        )Weighted-average number of shares outstanding  basic and diluted
     52.1
        
     43.5
        
     30.1Net loss per share  basic and diluted
     $(0.35
        )
     $(0.92
        )
     $(10.26
        )   See notes to consolidated financial statements. 27  Pathmark Stores, Inc. Consolidated Balance Sheets (in millions, except share and per share amounts)  February 3,2007
        
     January 28,2006ASSETSCurrent AssetsCash and cash equivalents
     $28.1
        
     $73.4Marketable securities
     
        
     4.0Accounts receivable, net
     20.6
        
     21.1Merchandise inventories
     180.3
        
     180.6Due from suppliers
     69.8
        
     69.6Other current assets
     33.5
        
     23.9Total current assets
     332.3
        
     372.6Property and equipment, net
     535.7
        
     552.3Goodwill
     144.7
        
     144.7Other noncurrent assets
     119.7
        
     185.0Total assets
     $1,132.4
        
     $1,254.6LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesAccounts payable
     $78.2
        
     $100.2Current maturities of debt
     25.1
        
     2.1Current portion of capital lease obligations
     11.4
        
     11.1Accrued expenses and other current liabilities
     136.9
        
     167.1Total current liabilities
     251.6
        
     280.5Long-term debt
     423.1
        
     423.8Long-term capital lease obligations
     158.4
        
     168.5Other noncurrent liabilities
     170.9
        
     210.5Total liabilities
     1,004.0
        
     1,083.3Stockholders equityPreferred stock
     
        
     Authorized: 5,000,000 shares; no shares issuedCommon stock, $0.01 par value
     0.5
        
     0.5Authorized: 100,000,000 shares; issued: 52,226,498 shares at February 3, 2007and 52,012,553 shares at January 28, 2006Common stock warrants
     69.7
        
     69.7Paid-in capital
     754.3
        
     743.6Accumulated deficit
     (656.7
        )
     (638.4
        )Accumulated other comprehensive loss
     (39.4
        )
     (4.1
        )Total stockholders equity
     128.4
        
     171.3Total liabilities and stockholders equity
     $1,132.4
        
     $1,254.6   See notes to consolidated financial statements. 28  Pathmark Stores, Inc. Consolidated Statements of Cash Flows (in millions)  53 WeeksEndedFebruary 3,2007
 
 52 WeeksEndedJanuary 28,2006
 
 52 WeeksEndedJanuary 29,2005Operating ActivitiesNet loss
     $(18.3
        )
     $(40.1
        )
     $(308.6
        )Adjustments to reconcile net earnings (loss) to cash provided byoperating activities:Depreciation and amortization
     92.6
        
     90.8
        
     89.4Amortization of stock-based compensation
     9.7
        
     1.2
        
     Amortization and write off of deferred financing costs
     1.5
        
     1.8
        
     3.4Deferred income tax benefit
     (13.7
        )
     (28.3
        )
     (12.4
        )Tax benefit related to stock-based compensation (under SFAS No. 123)
     
        
     1.9
        
     Loss on mortgage debt extinguishment
     
        
     2.8
        
     Gain on the sale of property and equipment
     
        
     (0.2
        )
     (1.5
        )Impairment of goodwill and long-lived assets
     
        
     
        
     309.0Cash provided by (used for) operating assets and liabilities:Accounts receivable, net
     0.5
        
     (1.2
        )
     1.3Merchandise inventories
     0.3
        
     1.6
        
     5.0Due from suppliers
     (0.2
        )
     5.1
        
     6.6Other current assets
     (9.6
        )
     (2.5
        )
     8.9Other noncurrent assets
     (3.1
        )
     2.1
        
     (2.8
        )Accounts payable
     (23.8
        )
     (1.9
        )
     14.9Accrued expenses and other current liabilities
     (19.7
        )
     6.8
        
     2.9Other noncurrent liabilities
     (9.3
        )
     (12.5
        )
     (14.9
        )Cash provided by operating activities
     6.9
        
     27.4
        
     101.2Investing ActivitiesCapital expenditures, including technology investments
     (70.0
        )
     (64.2
        )
     (98.8
        )Sale of marketable securities
     4.0
        
     36.0
        
     Purchase of marketable securities
     
        
     (40.0
        )
     Proceeds from the sale of property and equipment
     
        
     0.3
        
     3.7Acquisition of Community Supermarket Corporation
     
        
     
        
     (4.5
        )Cash used for investing activities
     (66.0
        )
     (67.9
        )
     (99.6
        )Financing ActivitiesBorrowings (repayments) under the working capital facility, net
     22.7
        
     (34.4
        )
     29.9Repayments of capital lease obligations
     (9.8
        )
     (13.8
        )
     (15.2
        )Borrowings under other debt
     3.4
        
     3.1
        
     2.8Repayments of other debt
     (3.3
        )
     (2.5
        )
     (4.7
        )Proceeds from the exercise of stock options
     1.6
        
     5.9
        
     Purchase of treasury stock
     (1.0
        )
     (0.2
        )
     Tax benefit related to stock-based compensation (under SFAS No. 123 (R))
     0.4
        
     
        
     Deferred financing costs
     (0.2
        )
     (0.5
        )
     (4.9
        )Proceeds from issuance of common stock and common stock warrants, net of expenses
     
        
     137.5
        
     Mortgage debt repayments and extinguishment
     
        
     (23.8
        )
     Borrowings under the term loan
     
        
     
        
     70.0Repayments of the term loan
     
        
     
        
     (45.8
        )Cash provided by financing activities
     13.8
        
     71.3
        
     32.1Increase (decrease) in cash and cash equivalents
     (45.3
        )
     30.8
        
     33.7Cash and cash equivalents at beginning of period
     73.4
        
     42.6
        
     8.9Cash and cash equivalents at end of period
     $28.1
        
     $73.4
        
     $42.6Supplemental Disclosures of Cash Flow InformationInterest paid
     $74.3
        
     $65.0
        
     $64.4Income taxes paid
     $5.1
        
     $3.2
        
     $3.9Non-Cash Investing ActivitiesAdditions (primarily due to property and equipment)
     $1.8
        
     $0.3
        
     $15.7   See notes to consolidated financial statements. 29  Pathmark Stores, Inc. Consolidated Statements of Stockholders Equity (in millions)   CommonStock
     
     CommonStockWarrants
     
     Paid-inCapital
     
     AccumulatedDeficit
     
     AccumulatedOtherComprehensiveLoss
     
     TreasuryStock
     
     TotalStockholdersEquityBalance, January 31, 2004
     
     
     $0.3
        
     $60.0
        
     $607.9
        
     $(289.7
        )
     $(2.8
        )
     $(0.7
        )
     $375.0Net loss
     
        
     
        
     
        
     (308.6
        )
     
        
     
        
     (308.6
        )Minimum pension liability, net of tax
     
        
     
        
     
        
     
        
     (1.2
        )
     
        
     (1.2
        )Comprehensive loss
     
        
     
        
     
        
     (308.6
        )
     (1.2
        )
     
        
     (309.8
        )Balance, January 29, 2005
     0.3
        
     60.0
        
     607.9
        
     (598.3
        )
     (4.0
        )
     (0.7
        )
     65.2Net loss
     
        
     
        
     
        
     (40.1
        )
     
        
     
        
     (40.1
        )Minimum pension liability, net of tax
     
        
     
        
     
        
     
        
     (0.1
        )
     
        
     (0.1
        )Comprehensive loss
     
        
     
        
     
        
     (40.1
        )
     (0.1
        )
     
        
     (40.2
        )Issuance of common stock andcommon stock warrants
     0.2
        
     9.7
        
     127.6
        
     
        
     
        
     
        
     137.5Purchase of treasury stock
     
        
     
        
     
        
     
        
     
        
     (0.2
        )
     (0.2
        )Exercise of stock options
     
        
     
        
     5.0
        
     
        
     
        
     0.9
        
     5.9Tax benefit related to stock-basedcompensation
     
        
     
        
     1.9
        
     
        
     
        
     
        
     1.9Stock-based compensation expense
     
        
     
        
     1.2
        
     
        
     
        
     
        
     1.2Balance, January 28, 2006
     0.5
        
     69.7
        
     743.6
        
     (638.4
        )
     (4.1
        )
     
        
     171.3Net loss
     
        
     
        
     
        
     (18.3
        )
     
        
     
        
     (18.3
        )Minimum pension liability, net of tax
     
        
     
        
     
        
     
        
     0.7
        
     
        
     0.7Comprehensive loss
     
        
     
        
     
        
     (18.3
        )
     0.7
        
     
        
     (17.6
        )SFAS No. 158 adjustment, net of tax
     
        
     
        
     
        
     
        
     (36.0
        )
     
        
     (36.0
        )Purchase of treasury stock
     
        
     
        
     
        
     
        
     
        
     (1.0
        )
     (1.0
        )Exercise of stock options
     
        
     
        
     0.6
        
     
        
     
        
     1.0
        
     1.6Tax benefit related to stock-basedcompensation
     
        
     
        
     0.4
        
     
        
     
        
     
        
     0.4Stock-based compensation expense
     
        
     
        
     9.7
        
     
        
     
        
     
        
     9.7Balance, February 3, 2007
     $0.5
        
     $69.7
        
     $754.3
        
     $(656.7
        )
     $(39.4
        )
     $
        
     $128.4   See notes to consolidated financial statements. 30  Pathmark Stores, Inc. Notes to Consolidated Financial Statements  Note 1. Significant Accounting Policies Business.Pathmark Stores, Inc. (the Company or Pathmark) operated 141 supermarkets as of February 3, 2007,
primarily in the New YorkNew Jersey and Philadelphia metro areas. 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. Segment
Reporting.The Company has one reportable retail grocery segment, operates in one geographical area in the
United States, and has no major customers representing 10% or more of sales. Each store location is considered to be a component of
the Companys business as this is the lowest level at which the operations and cash flows can be clearly distinguished for
operational and financial reporting purposes. Use of
Estimates.The preparation of financial statements in accordance with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions. These estimates affect the reported
amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those
estimates. Fiscal Year.The Companys fiscal year ends on the Saturday nearest to January 31 of the following calendar year. The Companys
fiscal 2006 consisted of the 53-week period ended February 3, 2007, fiscal 2005 consisted of the 52-week period ended January 28,
2006 and fiscal 2004 consisted of the 52-week period ended January 29, 2005. Normally, each fiscal year consists of 52 weeks, but
every five or six years, the fiscal year consists of 53 weeks. Cash and Cash Equivalents.Bank accounts at the same financial institution are combined for purposes of evaluating whether a net book
overdraft exists. Net book overdrafts are reclassified to accounts payable. Cash equivalents represent highly liquid investments
with a maturity of three months or less when purchased. Marketable Securities.Marketable securities are recorded at fair value and consisted of auction-rate securities in fiscal 2005,
which are securities earning interest income at a rate that is periodically reset, typically within 35 days. These securities are
considered as available-for-sale securities under the provisions of the Financial Accounting Standards Board
(FASB) Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for Certain Investments
in Debt and Equity Securities and are classified as marketable securities in current assets since they will be utilized in
operations within one year of the balance sheet date. Any net unrealized gain or loss would be included as a separate component of
stockholders equity. Realized gains and losses and interest income are included in earnings. Merchandise
Inventories.Merchandise inventories are valued at the lower of cost or market. Cost for substantially all
merchandise inventories is determined on a last-in, first out (LIFO) basis. Property and
Equipment.Property and equipment are stated at cost. Depreciation and amortization expense on owned
property and equipment is computed on the straight-line method over the following useful lives: buildings, 40 years; fixtures and
equipment, 3 to 10 years; and leasehold improvements, 8 to 15 years or lease term, whichever is shorter. Leasehold improvements are
amortized when placed in service over the lesser of the useful life or the lease term, including option periods that are reasonably
assured of being exercised. Capital leases are recorded at the present value of the minimum lease payments or the fair market value
of the related property, whichever is less. Property and equipment under capital leases are amortized using the straight-line method
over the term of the lease or over the estimated useful life of the leased asset, if ownership transfers to the Company at the end
of the lease term.  31  Pathmark Stores, Inc. Notes to Consolidated Financial Statements  (Continued)  Note 1. Significant Accounting Policies  (Continued) Goodwill.The Companys goodwill balance is evaluated for impairment annually, or more frequently if events or changes in
circumstances indicate that the asset might be impaired. The Company performs its annual evaluation of goodwill in the fourth
quarter of each fiscal year. The first step of this evaluation is to determine whether the carrying value of the Company exceeds its
fair value, which is based on the Companys recent enterprise value. In fiscal 2006 and fiscal 2005, the Company concluded that
there was no impairment of its goodwill. In fiscal 2004, since the fair value of the Company was less than its carrying value, the
Company measured its impairment by comparing the implied fair value of goodwill, determined in the same manner as in a business
combination, with the carrying value of the goodwill. Based on such evaluation of its fair value, the Company recorded in fiscal
2004 a goodwill impairment charge of $293.8 million. This charge was included as a component of impairment of goodwill and
long-lived assets (seeImpairment of Goodwill and Long-Lived Assetsbelow). Long-Lived
Assets.The Company assesses the carrying value of its long-lived assets for possible impairment on an
individual store basis to determine if the carrying value of such assets are recoverable from their related undiscounted cash flows.
If the estimated future cash flows are less than the carrying value of the asset, an impairment loss is recognized to the extent the
carrying value exceeds the fair value, which approximates the net realizable value, of the asset. In fiscal 2006 and fiscal 2005,
the Company concluded there was no impairment of its long-lived assets. The Company recorded a non-cash impairment charge of $15.2
million in fiscal 2004, which was included as a component of impairment of goodwill and long-lived assets (seeImpairment of Goodwill and Long-Lived Assetsbelow). Impairment of Goodwill and
Long-Lived Assets.In fiscal 2004, the Company recorded a charge of $309.8 million, comprised of impairments
of goodwill of $293.8 million and long-lived assets of $15.2 million. The goodwill impairment, which is not deductible for income
tax purposes, represents the write down of the carrying value of the Companys goodwill to its implied fair value and was due
to the Companys declining operating performance in fiscal 2004 and the reduced valuation multiples in the retail grocery
industry. Such negative factors were reflected in the Companys stock price and market capitalization. The long-lived assets
impairment represents the write down of under-performing stores to their fair market values. Software.Internally developed software, which creates a new system or adds identifiable functionality to an existing system, and
externally purchased software are capitalized and amortized on a straight-line method over three to five years; such amortization is
classified in depreciation and amortization. Unearned Vendor Allowances and Rebates.The Company receives vendor allowances and rebates under vendor contracts which require the Company to purchase the vendors product based on either a volume or specified time period commitment or require the Company to perform a specific activity such as promote and/or advertise the vendors product.  When payment is received prior to fulfillment of the contractual terms, our accounting policy is to record such amounts as unearned vendor allowances and rebates within due from suppliers on our consolidated balance sheet; such unearned vendor allowances and rebates are earned through a reduction in cost of goods sold when the required contractual terms are completed and when the inventory is sold.  Unearned vendor allowances and rebates are based on the amount projected to be earned in fiscal 2007 are included in
current liabilities, whereas unearned vendor allowance and rebates are based on amounts projected to be earned subsequent to fiscal 2007 are included in other noncurrent liabilities. Self-Insured Claims Liabilities.The Company is self insured for claims relating to customer, associate and vehicle accidents, as well as certain associate medical and disability benefits, and maintains third-party excess insurance coverage for such claims.  It is the Companys accounting policy to record a self-insured liability, as determined actuarially, based on the facts and circumstances of each individual claim filed and an estimate of claims incurred but not yet reported.  Such self-insured claims liabilities are recorded at present value utilizing a risk-free interest rate based on the projected payout of these claims.  All claims and their related liabilities are reviewed and monitored on an ongoing basis.  Any actuarial projection of losses concerning such claims is subject to variability primarily due to external factors affecting future
inflation rates, litigation trends, benefit levels and claim settlement patterns.  32  Pathmark Stores, Inc. Notes to Consolidated Financial Statements  (Continued)  Note 1. Significant Accounting Policies  (Continued) Rent Holidays.Certain of the Companys operating leases contain rent holidays.  For these leases, the Company recognizes the related rent expense on a straight-line basis at the earlier of the first rent payment or the date of possession of the leased property.  The difference between the amounts charged to expense and the rent paid is recorded as deferred rent and amortized over the lease term. Fair Value of Financial Instruments.The fair values of the publicly-traded 8.75% Senior Subordinated Notes, due 2012 (the Senior Subordinated Notes - refer to Note 21 for information related to guarantor subsidiaries), the term loan (the Term Loan) and the working capital facility (the Working Capital Facility) were based on quoted market prices as of February 3, 2007 and January 28, 2006.  The fair values of other debt approximated their carrying value as of February 3, 2007 and January 28, 2006.  As of February 3, 2007 and January 28, 2006, the carrying values of cash and cash equivalents, marketable securities, accounts receivable, due from suppliers, accounts payable, and accrued expenses and other current liabilities approximated their fair values due to the short-term maturities of these balances.  However,
considerable judgment is required in developing estimates of fair value.  Accordingly, the estimates presented are not necessarily indicative of the amounts that the Company could settle in a current market exchange.  The use of different market assumptions or methodologies could affect the estimated fair value. Income Taxes.The Company recognizes deferred tax assets and liabilities based on differences between the financial reporting and tax basis of assets and liabilities, applying enacted statutory rates in effect for the fiscal year in which differences are expected to reverse.  The effect on deferred taxes for a change in tax rates is recognized in income in the period that includes the enactment date.  The Company provides a valuation allowance against deferred tax assets for which it does not consider the realization of such assets to be more likely than not. The Company is subject to periodic audits by the Internal Revenue Service (IRS) and state and local taxing authorities.  These audits may challenge certain of the Companys tax positions such as the timing and amount of deductions and allocation of taxable income to the various tax jurisdictions.  Contingencies are accounted for in accordance with SFAS No. 5, Accounting for Contingencies, and may require significant management judgment in estimating final outcomes.  Actual results could materially differ from these estimates and could significantly affect the effective tax rate and cash flows in future years. Revenue Recognition.Revenue is recognized at the point of sale to the customer.  Sales tax is excluded from revenues.  Discounts provided to customers through Pathmark coupons are recorded as a reduction of sales.  From time-to-time the Company initiates customer loyalty programs which allow customers to earn points for each purchase completed during a specific time period.  Points earned enable customers to receive a certificate that may be redeemed on future purchases.  The value of points earned by our loyalty program customers is included as a liability and a reduction of revenue at the time the points are earned based on the percentage of points that are projected to be redeemed. Cost of Goods Sold.Cost of goods sold includes the costs of inventory sold and the related purchase and distribution costs.  Vendor allowances and rebates are adjusted through a reduction in cost of goods sold when the required contractual terms are completed and when the inventory is sold.  Cost of goods sold excludes depreciation and amortization shown separately in the consolidated statements of operations. Advertising Costs.Advertising costs, included in selling, general and administrative expenses, are expensed as incurred and were $41.6 million, $42.6 million and $41.1 million during fiscal 2006, fiscal 2005 and fiscal 2004, respectively. Store Preopening and Closing Costs.Store preopening costs are expensed as incurred.  The Company records a liability for store closing costs such as future rent and real estate taxes, net of expected sublease recovery, from the date of closure discounted using a risk-free rate of interest.  33  Pathmark Stores, Inc. Notes to Consolidated Financial Statements  (Continued)  Note 1. Significant Accounting Policies  (Continued) Net Earnings (Loss) Per
Share.Net earnings (loss) per share - basic is computed by dividing net earnings (loss) by the
weighted-average number of shares outstanding for the period. Net earnings (loss) per share - diluted assumes the issuance of
additional shares for all potentially dilutive securities outstanding, such as stock options, restricted stock units and warrants.
Since the Company reported a net loss in fiscal 2006, fiscal 2005 and fiscal 2004, the net loss per share - diluted is the same as
the net loss per share - basic, as any potentially dilutive securities would reduce the net loss per share. Potentially dilutive
securities were 2.0 million shares, 0.8 million shares and 0.3 million shares in fiscal 2006, fiscal 2005 and fiscal 2004,
respectively. Derivative and Hedging Activities.The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objectives and strategies for undertaking various hedging transactions.  The Company also assesses, both at the inception of a hedge and on an on-going basis, whether the derivative designated as a hedge is highly effective in offsetting changes in fair value of the item being hedged.  Should it be determined that a derivative is not highly effective as a hedge, the Company will discontinue hedge accounting prospectively.  The Company currently has no derivative instruments. Gift Cards and Gift Certificates.The Company sells gift cards and gift certificates (collectively Gift Cards) to its customers and certain charitable organizations through its retail stores. These Gift Cards do not have expiration dates.  The Company recognizes sales from Gift Cards when they are redeemed by the customer and income when the likelihood of the Gift Card being redeemed by the customer is remote (Gift Card breakage) and the Company determines that it does not have a legal obligation to remit the value of unredeemed Gift Cards to the relevant jurisdiction as abandoned property. The Company determines Gift Card breakage income based upon historical redemption patterns.  During the second quarter of fiscal 2006, the Company formed a new subsidiary to handle all sales and maintain the liability related to Gift Cards.  As a result of
transferring all existing obligations to the newly formed subsidiary, the Company recognized $3.5 million (including $3.2 million in the second quarter) of breakage income related to Gift Cards sold since the inception of the Gift Card program as a reduction to its selling, general and administrative expenses.  There was no breakage income recognized in fiscal 2005 or in fiscal 2004. Accounting Changes. Stock-Based
Compensation.Effective with the beginning of fiscal 2006, the Company adopted the fair value recognition
provisions of SFAS No. 123(R) Share-Based Payment, using the modified-prospective transition method. Under this
transition method, the Company recognized stock-based compensation expense for all stock options granted prior to, but not yet
vested on January 28, 2006, and stock options granted subsequent to January 28, 2006. The Company determined the fair value of such
grants using the Black-Scholes option pricing method. The adoption of this statement increased the Companys loss before income
taxes and its net loss for the year ended February 3, 2007 by $5.9 million and$3.4
million, respectively, or $0.07 per diluted share, compared to the accounting for stock-based compensation under Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees. For the year ended February
3, 2007, stock-based compensation expense of $9.7 million, or $0.11 per diluted share after tax, was comprised of $5.9 million, or
$0.07 per diluted share after tax, related to stock options and $3.8 million, or $0.04 per diluted share after tax, related to
restricted stock and restricted stock units. Prior to the adoption of this statement, the Company accounted for stock-based
compensation expense under APB Opinion No. 25 and the disclosure provisions under SFAS No. 123. Refer to Note 20 for information
related to the Companys stock-based compensation plans.  34  Pathmark Stores, Inc. Notes to Consolidated Financial Statements  (Continued)  Note 1. Significant Accounting Policies  (Continued) The pro forma net loss and pro forma net loss per share, including the pro forma effects of expensing stock options, are as follows (in millions, expect per share amounts): 52 WeeksEndedJanuary 28,2006
        
     52 WeeksEndedJanuary 29,2005Net loss, as reported
     
     
     $(40.1
        )
     $(308.6
        )Add: stock-based compensation expense included in reportednet loss, net of related tax effect
     0.7
        (a)
     Less: pro forma stock-based compensation expense, net of relatedtax effect
     (5.2
        )(b)
     (3.7
        )Net loss, pro forma
     $(44.6
        )
     $(312.3
        )Weighted average number of shares outstanding  basic and diluted
     43.5
        
     30.1Net loss per share  basic and diluted, as reported
     $(0.92
        )
     $(10.26
        )Add: stock-based compensation expense included in reportednet loss, net of related tax effect
     0.01
        
     Less: pro forma stock-based compensation expense, net of relatedtax effect
     (0.12
        )
     (0.12
        )Net loss per share  basic and diluted, pro forma
     $(1.03
        )
     $(10.38
        )  (a)

Represents
the after-tax amortization of stock-based compensation related to restricted stock and restricted stock units. (b)

For
purposes of the pro forma disclosures, the estimated fair value of the stock options issued is assumed to be expensed over the stock
options vesting period. Under the terms of both the 2000 Employee Equity Plan (the Employee Plan) and the 2000
Non-Employee Directors Equity Plan (the Directors Plan), the purchase by the Investors of the Shares on June
9, 2005 (as hereafter defined in Note 2) constituted a change in control (Change in Control), whereby all unvested
awards in the form of stock options outstanding immediately proceeding the Change in Control became vested immediately upon the
Change in Control. The net pro forma stock-based compensation expense of $5.2 million for fiscal 2005 included a net pro forma
charge of $2.5 million due to the Change in Control.  Accounting for Defined Benefit
Pension and Other Postretirement Plans.In September 2006, the FASB issued SFAS No. 158,
Employers Accounting for Defined Benefit Pension and Other Postretirement Plans  an amendment of SFAS No. 87, 88,
106 and 132 (R), which requires the Company to recognize the funded status of its defined benefit postretirement plans as an
asset or liability in its statement of financial position. The Company is also required to disclose information about certain
effects on net periodic benefit costs for the next fiscal year that arise from delayed recognition of gains or losses, prior service
costs or credits, and transition assets or obligations. SFAS No. 158 did not change the existing criteria for measurement of
periodic benefit costs, plan assets or benefit obligations. The Company adopted this portion of SFAS No. 158 as of February 3, 2007.  35  Pathmark Stores, Inc. Notes to Consolidated Financial Statements  (Continued)  Note 1. Significant Accounting Policies  (Continued) The following table summarizes the incremental effects of the adoption of SFAS No. 158 on the Companys consolidated balance sheet at February 3, 2007 (in millions): BeforeApplicationof SFASNo. 158
  
  SFASNo. 158Adjustment
  
  AfterApplicationof SFASNo. 158Other noncurrent assets
     
     
     $182.1
        
     $(62.4
        )(a)
     $119.7All other assets
     1,012.7
        
     
        
     1,012.7Total assets
     $1,194.8
        
     $(62.4
        )
     $1,132.4Accrued expenses and other current liabilities
     $135.9
        
     $1.0
        (b)
     $136.9Other noncurrent liabilities
     198.3
        
     (27.4
        )(c)
     170.9All other liabilities
     696.2
        
     
        
     696.2Total liabilities
     1,030.4
        
     (26.4
        )
     1,004.0Total stockholders equity
     164.4
        
     (36.0
        )
     128.4Total liabilities and stockholders equity
     $1,194.8
        
     $(62.4
        )
     $1,132.4  (a)

Comprised
of a decrease in the funded pension asset of $69.2 million, net of an increase in
     deferred income taxes of $6.8 million. (b)

Reflects
an increase in postretirement benefit obligations. (c)

Comprised of a decrease in deferred income taxes of $19.6 million
and a decrease in postretirement benefit obligations of $8.2 million, net of an increase in unfunded pension liabilities of $0.4 million.  SFAS No. 158 also requires the Company to measure the funded status of its plan as of the date of its fiscal year-end statement of financial position.  As the Company has always used the calendar year for measurement, this will result in a change in its consolidated financial statements.  The Company is not required to adopt this change until its fiscal year ending February 1, 2009.  The Company does not expect that the adoption of this portion of SFAS No. 158 will have a material impact on its consolidated financial statements. Refer to Note 17 for information related to the impact of SFAS No. 158 on the Companys pension and other postretirement benefits. Quantification of Misstatements.In September 2006, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 108, Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements.  This bulletin provides interpretive guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement.  The SEC staff believes that registrants should quantify errors using both a balance sheet and an income statement approach and evaluate whether either approach results in quantifying a misstatement that, when all relevant quantitative and qualitative facts are considered, is material.  SAB No. 108 was effective for the Companys fiscal year ended February 3, 2007.  The
adoption of SAB No. 108 did not result in any adjustments to the Companys consolidated financial statements. New Accounting Pronouncements. In June 2006, FASB Interpretation
(FIN) No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of SFAS No. 109 was issued.
This interpretation clarifies the accounting for uncertainty in income taxes recognized in an entitys financial statements in
accordance with SFAS No. 109, Accounting for Income Taxes, and prescribes a recognition threshold and measurement
attribute for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For
benefits to be realized, a tax position must be more likely than not to be sustained upon examination. The amount recognized is
measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon settlement. FIN No. 48 is
effective for the Companys fiscal year beginning February 4, 2007. The cumulative effect of adopting FIN No. 48 will be
recorded in accumulated deficit and other accounts, as applicable. The Company is currently evaluating the provisions of FIN No. 48
and has not yet completed its determination of the impact of adoption on the Companys consolidated financial
position.  36  Pathmark Stores, Inc. Notes to Consolidated Financial Statements  (Continued)  Note 1. Significant Accounting Policies  (Continued)  In June 2006, the FASB ratified the consensus of Emerging Issues Task Force (EITF) No. 06-03, How Taxes Collected from Customers and Remitted to Governmental Authorities Should be Presented in the Income Statement (That is, Gross Versus Net Presentation).  The scope of this issue includes any tax assessed by a government authority that is directly imposed on a revenue producing activity between a seller and a customer.  EITF No. 06-03 states that the income statement presentation of taxes within the scope of this issue on either a gross (included in revenues at cost) basis or a net (excluded from revenues) basis is an accounting policy decision that should be disclosed, effective for the Companys fiscal year beginning February 4, 2007.  The Company will continue to use the net basis for presentation. In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, which clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions.  Under this statement, fair value measurements would be separately disclosed by level within the fair value hierarchy.  This statement is effective for the Companys fiscal year beginning February 3, 2008, with early adoption permitted.  The Company is in the process of evaluating this statement, but does not expect that the adoption of SFAS No. 157 will have a material impact on its consolidated financial statements. In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of SFAS No. 115.  This statement permits entities to choose to measure many financial instruments and certain other items at fair value.  The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions.  This statement is expected to expand the use of fair value measurement, which is consistent with the FASBs long-term measurement objectives for accounting for financial instruments.  SFAS No. 159 is effective for the Companys fiscal year beginning February 3, 2008.  The Company is in the process of evaluating this statement, but does
not expect that the adoption of SFAS No. 159 will have a material impact on its consolidated financial statements. Note 2. Yucaipa Investment On June 9, 2005, the Company, pursuant to a securities purchase agreement dated as of March 23, 2005 (the Purchase Agreement), among the Company, The Yucaipa Companies LLC (Yucaipa) and certain investment funds affiliated with Yucaipa (the Investors), issued to the Investors:  (i) 20,000,000 shares (the Shares) of the common stock, par value $0.01 per share, of Pathmark (the Common Stock), (ii) Series A warrants (the Series A Warrants) to purchase 10,060,000 shares of Common Stock at an exercise price of $8.50 per share,  and (iii) Series B warrants (the Series B Warrants) to purchase 15,046,350 shares of Common Stock at an exercise price of $15.00 per share (the Shares, the Series A Warrants and the Series B Warrants are collectively referred to as the Purchased Securities; the Series A
Warrants and the Series B Warrants are collectively referred to as the Yucaipa Warrants) for an aggregate purchase price of $150 million in cash.  When issued, the shares represented 39.9% of the outstanding Common Stock.  Upon issuance, the Series A Warrants and the Series B Warrants will increase Yucaipas holdings to 48.2% and 58.3%, respectively, of the outstanding Common Stock.  The Company received $137.5 million for the Purchased Securities, net of $12.5 million of costs directly attributable to the offering, including a closing fee and transaction expenses of $6.2 million paid to Yucaipa.  At closing, the Company used $40.3 million of the net proceeds to pay down its working capital facility borrowings and subsequently used $23.3 million to defease its mortgage borrowings, including a redemption premium of $2.3 million.  The remaining net proceeds were invested in short-term investments and have been used for general corporate purposes, including capital
expenditures.  37  Pathmark Stores, Inc. Notes to Consolidated Financial Statements  (Continued)  Note 3.   Related-Party Transactions Concurrently with the execution of
the Purchase Agreement, the Company and Yucaipa entered into a Management Services Agreement (the MSA). The MSA became
effective on June 9, 2005 upon the closing of the Purchase Agreement. Pursuant to the MSA, Yucaipa provides certain business and
financial advice and management services to the Company in connection with the operation of its business. For such services, the
Company pays Yucaipa an annual fee of $3.0 million, payable monthly, and reimburses Yucaipa for expenses of up to $0.5 million per
annum. Michael Duckworth and Ira Tochner, two directors of the Company, are partners in Yucaipa. Effective January 13, 2007, the
Company engaged Yucaipa Advisors, LLC (a Yucaipa affiliate) to act as a consultant in connection with the Merger Agreement (as
defined in Note 24) in accordance with Section 5 of the MSA. In return for such services, the Company will pay Yucaipa Advisors, LLC,
upon the consummation of the Merger (as defined in Note 24), a fee equal to 1.0% of the transaction value (as defined in the
engagement letter) and reimburse its fees and expenses in connection with the provision of such consulting services (whether or not
the Merger is consummated), in each case, subject to certain conditions, including that, so long as the provision of Section 4.07 of
the Indenture (as hereafter defined) continues to apply, no amount in excess of $10.0 million shall be payable to Yucaipa Advisors,
LLC. Michael Duckworth, a current
member of the Companys Board of Directors, is Chairman of the Board and principal executive officer, of Source Interlink Companies, Inc. (Source
Interlink). As of February 3, 2007, the Companys due from suppliers included $2.3 million due from Source Interlink for
fees collected on the Companys behalf from vendors in connection with the Companys front-end racks program. Front-end racks
are fixtures used to display merchandise such as batteries, candy and magazines, subject to impulse buying. The Company entered into
its agreement with Source Interlink prior to the time Mr. Duckworth became its principal executive officer. Gregory Mays, a current member of
the Companys Board of Directors, is Chairman of the Board of Directors and the interim Chief Executive Officer of Wild Oats
Markets, Inc. (Wild Oats). During the fourth quarter of 2006, Pathmark began to carry Wild Oats branded products in its
stores. Total purchases from Wild Oats (including direct purchases and indirect purchases from the Companys primary
distributor) were $0.9 million during fiscal 2006, of which $0.5 million was paid as of February 3, 2007. The Company believes
that these transactions have been on terms no less favorable to the Company than if they had been entered into with disinterested
parties. Note 4. Cash and Cash Equivalents Cash and cash equivalents are comprised of the following (in millions): February 3,2007
        
     January 28,2006Cash
     
     
     $28.1
        
     $46.0Cash equivalents
     
        
     27.4Cash and cash equivalents
     $28.1
        
     $73.4 Net book overdrafts of $0.3
million and $23.4 million were reclassified to accounts payable at February 3, 2007 and January 28, 2006, respectively. The
reduction in the reclassification at February 3, 2007 is due to the transfer in fiscal 2006 of the Companys disbursing account
to the same financial institution the Company utilizes for its depository account, thereby allowing for the right of offset. Note 5. Accounts Receivable, Net Accounts receivable, net are comprised of the following (in millions): February 3,2007
        
     January 28,2006Prescription plans
     
     
     $18.7
        
     $18.7Other
     3.0
        
     3.0Accounts receivable
     21.7
        
     21.7Less: allowance for doubtful accounts
     (1.1
        )
     (0.6
        )Accounts receivable, net
     $20.6
        
     $21.1   38  Pathmark Stores, Inc. Notes to Consolidated Financial Statements  (Continued)  Note 6. Merchandise Inventories Merchandise inventories are comprised of the following (in millions): February 3,2007
        
     January 28,2006Merchandise inventories at FIFO cost
     
     
     $186.7
        
     $185.9Less: LIFO reserve
     (6.4
        )
     (5.3
        )Merchandise inventories at LIFO cost
     $180.3
        
     $180.6 Note 7. Other Current Assets Other current assets are comprised of the following (in millions): February 3,2007
        
     January 28,2006Prepaid expenses
     
     
     $19.8
        
     $11.8Supplies inventory
     4.3
        
     4.4Other
     9.4
        
     7.7Other current assets
     $33.5
        
     $23.9 Note 8. Property and Equipment, Net Property and equipment, net are comprised of the following (in millions): February 3,2007
        
     January 28,2006Land
     
     
     $30.3
        
     $30.3Buildings and building improvements
     104.3
        
     101.6Fixtures and equipment
     274.3
        
     251.5Leasehold costs and improvements
     323.5
        
     308.6Property and equipment, owned
     732.4
        
     692.0Buildings and equipment under capital leases (a)
     135.8
        
     150.1Property and equipment, at cost
     868.2
        
     842.1Less: accumulated depreciation and amortization (b)
     (332.5
        )
     (289.8
        )Property and equipment, net
     $535.7
        
     $552.3  (a)

Represents
buildings under capital leases of $125.4 million and equipment under capital leases of $10.4 million as of February 3, 2007 and
buildings under capital leases of $125.9 million and equipment under capital leases of $24.2 million as of January 28, 2006. (b)

Includes
accumulated depreciation of $39.9 million for buildings under capital leases and accumulated depreciation of $7.0 million for
equipment under capital leases as of February 3, 2007 and accumulated depreciation of $33.1 million for buildings under capital
leases and accumulated depreciation of $11.4 million for equipment under capital leases as of January 28 2006  Note 9. Other Noncurrent Assets Other noncurrent assets are comprised of the following (in millions): February 3,2007
        
     January 28,2006Funded pension asset (a)
     
     
     $72.9
        
     $137.5Capitalized software, net
     28.9
        
     33.4Deferred financing costs, net
     7.6
        
     9.5Deferred income taxes (a)
     5.9
        
     Other
     4.4
        
     4.6Other noncurrent assets
     $119.7
        
     $185.0  (a)

In fiscal 2006,
the Company adopted SFAS No. 158. Refer to Notes 1 and 17 for information related to the impact of SFAS No. 158.    39  Pathmark Stores, Inc. Notes to Consolidated Financial Statements  (Continued)  Note 10. Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities are comprised of the following (in millions): February 3,2007
        
     January 28,2006Payroll and payroll taxes
     
     
     $50.6
        
     $50.8Self-insured claims liabilities
     23.6
        
     22.1Unearned vendor allowances and rebates
     14.7
        
     18.1Utilities and common area maintenance
     9.0
        
     8.7Gift cards
     3.6
        
     7.9Interest (a)
     2.3
        
     17.6Deferred income taxes (b)
     0.2
        
     11.7Other
     32.9
        
     30.2Accrued expenses and other current liabilities
     $136.9
        
     $167.1  (a)

The
semi-annual interest payment of $15.3 million, due February 1, on the Senior
     Subordinated Notes was paid prior to February 3, 2007 in fiscal 2006, but subsequent
to      January 28, 2006 in fiscal 2005. (b)

Refer
to Note 18 for information related to the Companys income taxes.  Note 11. Long-Term Debt Long-term debt is comprised of the following (in millions): February 3,2007
        
     January 28,2006Senior subordinated notes
     
     
     $352.4
        
     $352.9Term loan
     70.0
        
     70.0Working capital facility
     22.7
        
     Other debt
     3.1
        
     3.0Total debt
     448.2
        
     425.9Less: current maturities and the working capital facility
     (25.1
        )
     (2.1
        )Long-term debt
     $423.1
        
     $423.8 Scheduled  Maturities of Debt. The amount of principal  payments required each fiscal year on outstanding debt as of February 3,
2007 are as follows (in millions): FiscalYear
     PrincipalPayments2007
     $    25.12008
     0.62009
     70.72010
     0.62011
     0.6Thereafter
     350.6Total
     $  448.2 Senior Subordinated
Notes. The Company has outstanding $350 million aggregate principal amount of Senior Subordinated Notes,
including $150 million issued at a premium, which mature on February 1, 2012 and pay cash interest semi-annually on February 1 and
August 1. The indenture related to the Senior Subordinated Notes (the Indenture) contains a number of restrictive
covenants, including a restriction on the Companys ability to declare cash dividends on Common Stock.  40  Pathmark Stores, Inc. Notes to Consolidated Financial Statements  (Continued)  Note 11. Long-Term Debt  (Continued) Credit Agreement. During fiscal 2004, the Company
entered into a senior secured credit facility (the Credit Agreement) with a group of lenders led by Fleet Retail Group,
a Bank of America company. The Credit Agreement expires on October 1, 2009 and consists of a $180 million Working Capital Facility,
including letters of credit, and a $70 million Term Loan. 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, mergers and consolidations, changing lines of business, repayments of other
indebtedness, amendments to organizational documents and other matters customarily restricted in such agreements. The Credit
Agreement also contains provisions permitting the Company to increase the size of the Working Capital Facility by $25 million and to
repay and subsequently reborrow any portion of the Term Loan, in each instance subject to certain conditions. The Credit Agreement
further provides that the Company must maintain a minimum inventory level of $150 million, that the maximum annual cash capital
expenditures in a fiscal year are limited to the lesser of $150 million or an amount equal to the Companys Consolidated EBITDA
for the immediately preceding fiscal year plus any unused cash capital expenditures in the immediately preceding fiscal year up to a
maximum of $20 million, and that the Company shall not, at any time, permit the ratio of Credit Extensions to Consolidated EBITDA
(calculated on a trailing four-fiscal-quarters basis) at the end of any fiscal quarter to be more than 2.4:1.0 for each fiscal
quarter (the Senior Leverage Ratio). As used in the Credit Agreement, Credit Extensions mean the sum of the principal
balance of all outstanding borrowings thereunder ($70.0 million under the Term Loan and $22.7 million under the Working Capital
Facility as of February 3, 2007) and the amount of outstanding letters of credit ($84.4 million as of February 3, 2007). Based on
the Senior Leverage Ratio at the end of fiscal 2006, the Companys had availability under the Working Capital Facility after
giving effect to Credit Extensions of $72.9 million. Also, the Credit Agreement prohibits the payment of cash dividends and 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 (excluding the purchase by the Investors of the
Purchased Securities). Interest on borrowings under the
Credit Agreement bear interest at floating rates equal to LIBOR plus a premium that ranges between 1.50% to 2.25%, depending on the
average availability under the Credit Agreement, and at February 3, 2007, was at LIBOR plus 1.75%. There are no credit agency
ratings-related triggers in either the Indenture or the Credit Agreement that would adversely impact the cost of borrowings, annual
amortization of principal or related debt maturities. The average interest rate in
effect on borrowings under the Term Loan was 7.1% during fiscal 2006 and 5.3% during fiscal 2005. The Company pays a quarterly
commitment fee of 0.375% on the unused portion of the Working Capital Facility; in addition, the Company currently pays fees of 2.0%
for each standby letter of credit and 1.0% for each import letter of credit issued under the Working Capital Facility. All of the obligations under the
Credit Agreement are guaranteed by the Companys 100% owned subsidiaries, except its 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.  41  Pathmark Stores, Inc. Notes to Consolidated Financial Statements  (Continued)  Note 11. Long-Term Debt  (Continued) The Company believes 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 its debt service requirements, working capital needs and capital
expenditure program for at least the next fiscal year. However, in the event that cash flows from operations are lower in fiscal
2006 and beyond, the Company may need to adjust its future cash capital expenditure program. Note 12. Fair Value of Financial Instruments The carrying amounts and fair values of the Company's financial instruments are as follows (in millions): February 3, 2007
     
     January 28, 2006CarryingAmount
        
     FairValue
        
     CarryingAmount
        
     FairValueSenior subordinated notes
     
     
     $352.4
        
     $353.9
        
     $352.9
        
     $329.4Term loan
     70.0
        
     70.5
        
     70.0
        
     69.3Working capital facility
     22.7
        
     22.4
        
     
        
     Other debt
     3.1
        
     3.1
        
     3.0
        
     3.0Total debt
     $448.2
        
     $449.9
        
     $425.9
        
     $401.7 Note 13. Interest Expense, Net Interest
expense, net is comprised of the following (in millions): 53 WeeksEndedFebruary 3,2007
 
 52 WeeksEndedJanuary 28,2006
 
 52 WeeksEndedJanuary 29,2005Senior subordinated notes (a)
     
     
     $30.8
        
     $30.6
        
     $30.6Term loan (b)
     5.0
        
     3.7
        
     2.8Working capital facility
     0.8
        
     0.8
        
     2.4Lease obligations
     17.7
        
     19.0
        
     20.0Amortization of deferred financing costs
     1.5
        
     1.8
        
     1.7Write off of deferred financing costs (c)
     
        
     
        
     1.7Mortgages (d)
     
        
     0.6
        
     1.6Mortgage debt extinguishment (d)
     
        
     2.8
        
     Interest income
     (0.8
        )
     (1.4
        )
     Capitalized interest
     (0.1
        )
     (0.3
        )
     (1.2
        )Other
     7.4
        
     7.1
        
     7.4Interest expense, net
     $62.3
        
     $64.7
        
     $67.0  (a)

The
Senior Subordinated Notes bear interest at a fixed rate of 8.75%. (b)

The
weighted-average interest rates in effect on borrowings under the Term Loan were 7.1%,
5.3% and 5.2%      during fiscal 2006, fiscal 2005 and fiscal 2004, respectively. (c)

Interest
expense in fiscal 2004 included the write off of deferred financing costs of $1.7 million
     related to the refinancing and paydown of the Companys previous credit agreement. (d)

The
mortgage debt extinguishment charge of $2.8 million in fiscal 2005 included a redemption
premium of      $2.3 million and the write off of deferred financing costs of $0.5
million.    42  Pathmark Stores, Inc. Notes to Consolidated Financial Statements  (Continued)  Note 14. Lease Obligations Future
minimum rental payments (receipts) for noncancellable leases as of February 3, 2007 are
as follows (in millions):  FiscalYear
     
     CapitalLeases
     
     OperatingLeases
        
     Subleases2007
     
     
     $27.1
        
     $62.1
        
     $(13.2
        )2008
     23.6
        
     57.0
        
     (9.3
        )2009
     23.5
        
     50.4
        
     (6.8
        )2010
     23.3
        
     47.2
        
     (4.4
        )2011
     23.4
        
     41.0
        
     (3.6
        )Thereafter
     191.7
        
     212.7
        
     (11.5
        )Total minimum lease payments (receipts)
     312.6
        
     $470.4
        
     $(48.8
        )Less: amounts representing interest
     (142.8
        )Present value of net minimum capital lease payments (a)
     169.8Less: current portion of lease obligations
     (11.4
        )Long-term lease obligations
     $158.4  (a)

Includes $24.6 million related to sale and leaseback transactions
accounted for as lease financings.  Rent expense, under all operating
leases having noncancellable terms of more than one year, is summarized as follows (in millions):  53 WeeksEndedFebruary 3,2007
 
 52 WeeksEndedJanuary 28,2006
 
 52 WeeksEndedJanuary 29,2005Minimum rentals
     
     
     $61.8
        
     $59.9
        
     $57.3Less: sublease income (a)
     (14.5
        )
     (14.6
        )
     (14.5
        )Minimum rentals, net
     $47.3
        
     $45.3
        
     $42.8  (a)

Sublease
income excludes rental income on owned properties of $3.5 million, $3.4 million and $3.1
million for fiscal      2006, fiscal 2005 and fiscal 2004, respectively.  Note 15. Other Noncurrent Liabilities Other noncurrent liabilities are comprised of the following (in millions):
 February 3,2007
        
     January 28,2006Deferred income taxes (a) (b)
     
     
     $40.0
        
     $62.3Self-insured claims liabilities
     34.7
        
     37.2Unfunded pension plan benefits (b)
     31.5
        
     31.3Unearned vendor allowances and rebates
     30.5
        
     37.7Other postretirement benefits (b)
     17.6
        
     25.2Deferred rent
     5.2
        
     5.1Other postemployment benefits
     4.9
        
     6.0Other
     6.5
        
     5.7Other noncurrent liabilities
     $170.9
        
     $210.5  (a)

Refer to Note 18 for information related to the Companys income taxes. (b)

In fiscal 2006, the Company adopted SFAS No. 158. Refer to Notes 1 and 17 for information related to the impact of SFAS No. 158.    43  Pathmark Stores, Inc. Notes to Consolidated Financial Statements  (Continued)  Note 16. Accumulated Other Comprehensive Loss (AOCL) AOCL is comprised of the following pension-related balances (in millions):  53 WeeksEndedFebruary 3,2007
 
 52 WeeksEndedJanuary 28,2006
 
 52 WeeksEndedJanuary 29,2005AOCL at beginning of fiscal year
     
     
     $(4.1
        )
     $(4.0
        )
     $(2.8
        )Comprehensive earnings (loss) - minimum pension liability,net of tax
     0.7
        
     (0.1
        )
     (1.2
        )SFAS No. 158 adjustment, net of tax (a)
     (36.0
        )
     
        
     AOCL at end of fiscal year
     $(39.4
        )
     $(4.1
        )
     $(4.0
        )  (a)

In fiscal 2006, the Company adopted SFAS No. 158.
Refer to Notes 1 and 17 for information related to the impact of SFAS No. 158. Note 17.  Pension and Other Benefit Plans SFAS No. 158.Effective February 3, 2007, the Company adopted SFAS No. 158.  Refer to Note 1 for information related to the impact of this statement on the Companys balance sheet. Retirement Benefits.The Company maintains three defined benefit plans.  One is a tax-qualified plan which covers substantially all non-union and certain union associates (the Qualified Plan).  The second plan is an unfunded plan that provides benefits in excess of amounts permitted to be paid from the Qualified Plan due to limitations on pay and benefits imposed by the Internal Revenue Code (the Excess Plan).  The third plan is an aggregation of individual retirement agreements the Company has entered into with certain current and retired executives providing for unfunded supplemental pension benefits upon their retirement after attainment of age 60 (the Supplemental Agreements).  The defined benefit plans are non contributory and are generally based on associates years of service and average earnings for a defined
period prior to retirement or a minimum formula. Retirement Incentive Program.During fiscal 2005, the Company offered a retirement incentive program to certain non-union associates.  Additional retirement benefits were provided to those 82 associates who elected to retire under the program, including a retirement bonus, an enhanced pension based on an additional three years of age or service, whichever proved more advantageous, the right to take a portion of their benefit in an immediate lump sum and continued medical coverage, subject to retiree contributions, for a period of three years.  The financial impact of the retirement incentive program was included within pension and other postretirement benefits expense during fiscal 2005. Other Postretirement Benefits.The Company provides certain of its associates who retire from the Company with other postretirement benefits, generally on a contributory basis.  These postretirement benefits primarily include health care, prescription drug coverage and life insurance.  For non-union associates, health care and prescription drug coverage are only provided to those associates who retired prior to January 1, 1998.  For certain union associates, health care, life insurance and certain other benefits are provided in retirement for certain periods of time during retirement, subject to the terms of applicable collective bargaining agreements.  44  Pathmark Stores, Inc. Notes to Consolidated Financial Statements  (Continued)  Note 17.   Pension and Other Benefit Plans  (Continued) Pension and Other Postretirement Benefits.The following table provides a reconciliation of benefit obligations, the funded plan assets and the funded status of the plans, accounted for on a calendar-year basis, with the measurement dates of December 31, 2006 and December 31, 2005, along with the amounts recognized in the consolidated balance sheets (in millions): Pension Benefits
     
     
     Other PostretirementBenefitsFebruary 3,2007
        
     January 28,2006
        
     
     February 3,2007
        
     January 28,2006Change in benefit obligations:Benefit obligations at beginning of year
     $247.0
        
     $223.0
        
     
     $30.3
        
     $30.0Interest cost
     13.5
        
     12.8
        
     
     1.4
        
     1.6Service cost (excluding expenses)
     3.4
        
     3.6
        
     
     0.6
        
     0.8Benefits and expenses paid
     (22.8
        )(a)
     (8.6
        )
     
     (0.9
        )
     (1.3
        )Actuarial experience loss (gain)
     (0.7
        )
     8.7
        
     
     (0.9
        )
     (1.9
        )Retirement incentive program and     executive separations
     
        
     7.5
        
     
     
        
     1.1Plan amendments
     
        
     
        
     
     (11.9
        )(b)
     Benefit obligations at end of year
     $240.4
        
     $247.0
        
    
     $18.6
        
     $30.3Change in fair value of funded plan assets:  Fair value of plan assets at beginning of year
     $270.9
        
     $262.8
        
     
     $
        
     $Actual return on plan assets
     29.7
        
     14.9
        
     
     
        
     Benefits and expenses paid
     (20.8
        )
     (6.8
        )
     
     
        
     Fair value of plan assets at end of year
     $279.8
        
     $270.9
        
     
     $
        
     $Reconciliation of funded status at end of year:
        Funded status (plan assets less benefit obligations)
     $39.4
        
     $23.9
        
     
     $(18.6
        )
     $(30.3
        )Unrecognized prior service cost (benefit)
     
        
     1.3
        
     
     
        
     (12.2
        )Unrecognized net actuarial loss
     
        
     85.4
        
     
     
        
     17.3Net amount recognized in retained earnings
     $39.4
        (c)
     $110.6
        
     
     $(18.6
        )(c)
     $(25.2
        )Amounts recognized in the consolidated balance sheet and stockholders equity consist of:  Other noncurrent assets (funded plan)
     $72.9
        
     $137.5
        
     
     $
        
     $Accrued expenses and other current liabilities (unfunded plans)
     (2.0
        )
     (2.8
        )
     
     (1.0
        )
     Noncurrent liabilities (unfunded plans)
     (31.5
        )
     (28.2
        )
     
     (17.6
        )
     (25.2
        )Comprehensive loss
     
        
     4.1
        
     
     
        
     Net amount recognized
     $39.4
        (c)
     $110.6
        
     
     $(18.6
        )(c)
     $(25.2
        )  (a)

Includes
the lump sum benefit payments of $12.5 million related to the fiscal 2005 retirement
incentive program. (b)

Reflects
negotiated reductions in medical and prescription coverage for certain union associates
in fiscal 2006. (c)

Upon
adoption of SFAS No. 158 in fiscal 2006, these amounts were recognized as a reduction to
stockholders equity as of February 3, 2007.  Refer to Note 1 for information
related to the impact of SFAS No. 158. The nonqualified pension plans had an unfunded accumulated benefit obligation of $33.2 million for the fiscal year ended February 3,
2007 and $34.0 million for the fiscal year ended January 28, 2006. The fair value of the assets of the qualified plan exceeded the
accumulated benefit obligation of $190.2 million for the fiscal year ended February 3, 2007 and $196.4 million for the fiscal year
ended January 28, 2006.   45  Pathmark Stores, Inc. Notes to Consolidated Financial Statements  (Continued)  Note 17. Pension and Other Benefit Plans  (Continued) The components of net periodic benefit cost (cost reduction) are as follows (in millions): Pension Benefits
     
     
     Other Postretirement Benefitsfor the 52 Weeks Ended53 WeeksEndedFebruary 3,2007
        
     52 WeeksEndedJanuary 28,2006
        
     52 WeeksEndedJanuary 29,2005
        
     
     53 WeeksEndedFebruary 3,2007
        
     52 WeeksEndedJanuary 28,2006
        
     52 WeeksEndedJanuary 29,2005Service cost
     
     
     $
     3.4
     
     $
     3.6
     
     $
     3.1
     
     
     $
      0.6
        
     $
      0.8
        
     $
      0.8Interest cost
     13.5
        
     12.8
        
     12.1
        
     
     1.4
        
     1.6
        
     1.9Expected return on plan assets
     (23.7
        )
     (23.0
        )
     (22.3
        )
     
     
        
     
        
     Amortization of prior service    costs (benefits)
     0.2
        
     0.2
        
     0.2
        
     
     (1.6
        )
     (1.0
        )
     (0.1
        )Amortization of loss
     4.6
        
     4.2
        
     2.8
        
     
     1.2
        
     1.4
        
     0.7Retirement incentive program and    executive separations
     
        
     7.5
        
     
        
     
     
        
     1.1
        
     Net periodic benefit cost (cost reduction)
     $(2.0
        )
     $5.3
        
     $(4.1
        )
     
     $1.6
        
     $3.9
        
     $3.3 Other
changes in plan assets and benefit obligations recognized in net benefit cost reduction
and accumulated other comprehensive loss are as follows (in millions): February 3, 2007Pension Benefits
 
 OtherPostretirementBenefitsNet actuarial gain
     
     
     $(6.6
        )
     $(0.9
        )Recognized actuarial gain
     (4.6
        )
     (1.2
        )Prior service cost
     
        
     (11.8
        )Recognized prior service cost (gain)
     (0.2
        )
     1.6Total recognized in accumulated other comprehensive loss(before tax effect)
     (11.4
        )
     (12.3
        )Net periodic benefit cost (cost reduction)
     (2.0
        )
     1.6Total recognized in net benefit cost reduction and accumulatedother comprehensive loss (before tax effect)
     $(13.
        4)
     $(10.
        7) Amounts expected to be recognized in net periodic cost in fiscal 2007 are as follows (in
millions): Pension Benefits
 
 OtherPostretirementBenefitsLoss recognition
     
     
     $3.8
        
     $1.1Prior service cost (gain) recognition
     0.2
        
     (2.1
        )   46  Pathmark Stores, Inc. Notes to Consolidated Financial Statements  (Continued)  Note 17.   Pension and Other Benefit Plans  (Continued) During fiscal 2006 the unrecognized net loss for the Qualified Plan, the nonqualified pension plans, and other postretirement benefits plans decreased by $10.0 million, $1.2 million and $2.1 million, respectively.  The variance between the actual and expected return on plan assets during fiscal 2006 decreased the Qualified Plans unrecognized net loss by $6.0 million.  Because the total unrecognized net gain or loss amounts for each plan exceed the greater of 10% of the projected benefit obligation or 10% of the plan assets, the excess will be amortized over the average expected future working lifetime of active plan participants.  As of January 1, 2006, the average expected future working lifetime of active participants was approximately 12.2 years for the Qualified and Excess Plans, 7.0 years for the Supplemental Plan, and 12.0 years for other postretirement benefits.  Actual
results for fiscal 2007 will depend on the fiscal 2007 actuarial valuation of the plan. The change in unrecognized net gain (loss) is one measure of the degree to which important assumptions have coincided with actual experience.  During fiscal 2006 the unrecognized net loss for the Qualified Plan, the nonqualified pension plans, and other postretirement benefits plans decreased by 4.7%, 3.4% and 6.9% of their respective December 31, 2005 projected benefit obligations.  The Company changes important assumptions whenever changing conditions warrant.  The discount rate is typically changed at least annually and the expected long-term return on plan assets will typically be revised every three to five years.  Other material assumptions include the salary increase rates, rates of employee termination, and rates of participant mortality. Estimated Future Benefit Payments.The following benefit payments, which reflect expected future service as appropriate, are expected to be paid as follows (in millions): Pension Benefits
        
     OtherPostretirementBenefitsFiscalYear
        
        
     QualifiedPensionPlan
        
     NonqualifiedPensionPlans2007
     
     
     $8.0
        
     $2.1
        
     $0.92008
     8.4
        
     2.1
        
     1.02009
     8.8
        
     2.1
        
     0.72010
     9.3
        
     2.1
        
     0.72011
     9.9
        
     2.1
        
     0.82012 to 2016
     58.7
        
     11.3
        
     5.8Total
     $103.1
        
     $21.8
        
     $9.9 Actuarial Assumptions.
The weighted-average economic assumptions used on each measurement date are as follows: December 31,2006
        
        2005
        
        2004Discount rate
        
        6.00%
        
        5.75%
        
        5.75%Expected return on plan assets
        
        9.00%
        
        9.00%
        
        9.00%Rate of salary increase
        
        3.25%
        
        3.00%
        
        3.00%Health care cost trend rate assumed for subsequent year
        
        9.00%
        
        10.00%
        
        10.00%Ultimate health care cost trend rate
        
        4.50%
        
        4.50%
        
        4.00%Fiscal year that the ultimate health care cost trend rate is reached
        
        2012
        
        2012
        
        2010
   47  Pathmark Stores, Inc. Notes to Consolidated Financial Statements  (Continued)  Note 17.  Pension and Other Benefit Plans  (Continued) The discount rate reflects the market rate for high-quality fixed-income investments on the annual measurement date (December 31) and is subject to change each year.  The discount rate was determined by matching, on an approximate basis, a theoretical zero-coupon spot yield curve derived from a portfolio of high-quality bonds as of the measurement date to the expected plan benefit payments defined by the projected benefit obligation and solving for a single equivalent discount rate that resulted in the same projected benefit obligation.  Pension income is sensitive to the discount rate and salary increase assumptions used.  A 0.25% decrease in the discount rate used would have decreased pension income during fiscal 2006 by $0.7 million.  A 0.25% increase in salary increase assumption would have decreased pension income by approximately $0.6 million. Assumed health care cost trend rates also have a significant effect on the amounts reported for the health care plans.  A 1.0% change in assumed health care cost trend rates would have the following effects as of February 3, 2007 (in millions): 1%Increase
 
 DecreaseTotal of service and interest cost components
     
     
     $0.2
        
     $(0.2
        )Postretirement benefit obligation
     2.4
        
     (1.9
        )  Plan Assets and Expected Returns.Assets of the Qualified Plan are invested in equities, corporate bonds, U.S. Government instruments and cash.  The Qualified Plans asset allocation as of December 31, 2005 and 2006 and the target allocation for fiscal 2007 between equity and fixed income managers is as follows: 2007 TargetAllocation
        
     Percent of Plan AssetsAs of December 31,Asset Managers
     
        
     2006
        
     2005Equity
     
     
     70%
        
     73%
        
     74%Fixed income
     30%
        
     27%
        
     26%Total
     100%
        
     100%
        
     100% The
expected return on Qualified Plan assets represents the weighted-average of expected
returns for each asset category.  The expected returns for each asset category have been
developed using information from a number of third-party consultants and long-term
historical data on returns for different asset categories and inflation.  The Company
also considered the Qualified Plans historical 10-year and 20-year compounded
returns of 9.4% and 11.8%, respectively, which have exceeded broad market returns over
comparable periods, indicating a significant premium has been gained through active
management of the Qualified Plan assets.  Based on these factors and the asset allocation
shown above, the Company elected to use a 9.0% expected return on Qualified Plan assets
in determining pension income for fiscal 2006 and fiscal 2005.  Both assumptions were net
of expected Qualified Plan expenses payable from the trust fund, which are less than 0.8%
of Qualified Plan assets. The Company based its
determination of pension income for the Qualified Plan, in part, on a market-related valuation of assets which reduces year-to-year
volatility. This market-related valuation recognizes gains or losses over a three-year period from the year in which they occur.
Investment gains or losses for this purpose are the difference between the expected return on a market-related valuation of assets
and the actual return on a market value basis. As of February 3, 2007, due to offsetting gains and losses, the market value and
market related value of assets differed by less than 1.0%. The Company estimates that a 0.5%
reduction in the expected return on Qualified Plan assets, holding all others factor constant, would have decreased pension income
during fiscal 2006 by approximately $1.3 million.  48  Pathmark Stores, Inc. Notes to Consolidated Financial Statements  (Continued)  Note 17.  Pension and Other Benefit Plans  (Continued) Participant and Company
Contributions.Based on the Companys actuarial assumptions and due to the overfunded status of its
Qualified Plan, the Company believes it will not be required to make any contributions to its Qualified Plan for at least the next
three years. Contributions to the Excess Plan and to the Supplemental Agreements are made in cash in amounts necessary to provide
current benefit payments to those former associates who have retired under the programs and are presently in pay status. It is
estimated that Company payments to those former associates will total approximately $2.1 million for the combined Excess Plan and
Supplemental Agreements during fiscal 2007 Annual contributions for other
postretirement benefits are made in cash in amounts necessary to purchase insurance coverage or directly pay benefits to those who
are currently retired and covered under these programs. It is estimated that Company payments during fiscal 2007 will total
approximately $0.9 million. As some of the benefits provided to those former associates are provided on a contributory basis, it is
further estimated that retiree contributions for coverage will total approximately $0.2 million during fiscal 2007. Estimated Pension Income for
Future Years.Based on an expected return on Qualified Plan assets assumption of 9.0%, a discount rate of
6.0% and various other relevant assumptions, the Company estimates that its pension income for all pension plans combined will
approximate $2.5 million for fiscal 2007, $3.7 million for fiscal 2008 and $5.7 million for fiscal 2009. Actual pension income in
the future will depend on future investment performance, changes in discount rates and various other factors related to the
populations participating in the Companys pension plans. Multi-Employer Pension
Plans.The Company also contributes to several multi-employer pension plans that provide defined benefits to
certain associates whose benefits are subject to collective bargaining. The expenses related to participation in such plans were
$24.3 million during fiscal 2006, $22.5 million during fiscal 2005 and $22.8 million during fiscal 2004. Under federal law
applicable to multi-employer pension plans, a company is required to continue funding its proportionate share of a plans
unfunded vested benefits in the event of withdrawal (as defined by the Employee Retirement Income Security Act of 1974
(ERISA)) from a multi-employer plan or a plan termination. The Company participates in a number of these multi-employer
pension plans, and the potential withdrawal liability as a participant in these plans may be significant. Additionally, in
connection with the 1997 sale of the Companys trucking business to Grocery Haulers, Inc. (GHI) and distribution
operation to C&S Wholesalers, Inc. (C&S), GHI and C&S agreed to continue making contributions to the Local
863 Teamsters Pension Fund (the Fund), a multi-employer pension plan. With respect to GHI, the Company agreed that in
the event GHI were to withdraw from the Fund, to indemnify GHI under certain circumstances against all liabilities it would have
arising from such a withdrawal. The Company also agreed to provide GHI with a letter of credit to secure the potential
indemnification obligation. As of February 3, 2007, the Company has caused its bank to issue stand-by letters of credit in favor of
GHI, or the Fund, in the aggregate amount of $20 million. Under its agreement with GHI, the Company has agreed to adjust said
letters of credit up or down annually to reflect any change in the maximum estimated amount of the Fund withdrawal liability
attributable to GHI, provided that any annual increase in said letters of credit will not exceed $5 million; provided further, that
in the event of a change in control of the Company (excluding the Yucaipa investment), a failure to provide an annual increase in
the letters of credit when due or a material adverse change in its financial condition, the Company would be required to furnish
a letter of credit equal to the full amount of the estimated Fund withdrawal liability attributable to GHI, less any
outstanding letters of credit in favor of GHI or the Fund. The estimated Fund withdrawal liability attributable to GHI as of August
31, 2006 (the Funds last completed fiscal year), according to the Fund actuary, is $51.0 million. With respect to C&S, the
Company agreed that in the event C&S were to withdraw from the Fund, to indemnify C&S under certain circumstances against
liabilities it would have arising from such a withdrawal; provided, however, that the Companys indemnification obligation is
limited to an amount not to exceed what its Fund withdrawal liability would have been as of August 31, 1997.  49  Pathmark Stores, Inc. Notes to Consolidated Financial Statements  (Continued)  Note 17.  Pension and Other Benefit Plans  (Continued) Savings Plan.The Company sponsors savings plans for certain eligible associates.  Contributions under the plans are based on specified percentages of associate contributions.  The expenses related to the savings plans were $2.3 million during fiscal 2006, $2.4 million during fiscal 2005 and $2.5 million during fiscal 2004. Other Postemployment Benefits.The Company also provides its associates postemployment benefits, primarily income continuation and medical, prescription and death benefits to those who become disabled.   The measurements include those on short-term as well as those on long-term disability.  The obligation for these benefits was determined by application of the provisions of the Companys short-term and long-term disability plans and includes the age of active claimants, the length of time on disability and the probability of the claimant remaining on disability to maximum duration.  These liabilities are recorded at their present value utilizing a discount rate of 4.75%.  At February 3, 2007 and January 28, 2006, the liability for accumulated postemployment benefits was $5.7 million and $6.7 million, respectively, of which $4.9 million and $6.0 million,
respectively, was classified in other noncurrent liabilities. Note 18. Income Taxes The income tax benefit was comprised of the
following (in millions): 53 WeeksEndedFebruary 3,2007
 
 52 WeeksEndedJanuary 28,2006
 
 52 WeeksEndedJanuary 29,2005CurrentFederal
     $(0.2
        )
     $
        
     $State
     (2.9
        )
     (2.7
        )
     (3.1
        )Subtotal
     (3.1
        )
     (2.7
        )
     (3.1
        )DeferredFederal
     9.0
        
     23.1
        
     11.2State
     5.2
        
     9.9
        
     5.5Valuation allowance
     (0.5
        )
     (4.7
        )
     (4.3
        )Subtotal
     13.7
        
     28.3
        
     12.4Income tax benefit
     $10.6
        
     $25.6
        
     $9.3  The income tax benefit differs from the expected federal statutory income tax benefit as follows (in millions): 53 WeeksEndedFebruary 3,2007
 
 52 WeeksEndedJanuary 28,2006
 
 52 WeeksEndedJanuary 29,2005Federal income tax benefit at statutory tax rate
     
     
     $10.1
        
     $23.0
        
     $111.3State income tax benefit
     1.4
        
     4.6
        
     1.4Goodwill impairment
     
        
     
        
     (102.8
        )Valuation allowance
     (0.5
        )
     (4.7
        )
     (4.3
        )Other
     (0.4
        )
     2.7
        
     3.7Income tax benefit
     $10.6
        
     $25.6
        
     $9.3   50  Pathmark Stores, Inc. Notes to Consolidated Financial Statements  (Continued)  Note 18. Income Taxes  (Continued) Deferred income tax assets and liabilities
consist of the following (in millions): February 3, 2007
     
     January 28, 2006Assets
        
     Liabilities
        
     Assets
        
     LiabilitiesProperty and equipment
     
     
     $
        
     $(95.9
        )
     $
        
     $(113.8
        )Merchandise inventory and gross profit
     
        
     (28.7
        )
     
        
     (28.9
        )Prepaid expenses
     
        
     (9.8
        )
     
        
     (9.6
        )Lease capitalization
     23.0
        
     
        
     22.7
        
     Net operating loss carryforwards
     22.7
        
     
        
     30.0
        
     Self-insured claims liabilities
     22.5
        
     
        
     22.6
        
     Alternative minimum tax credits
     16.4
        
     
        
     14.1
        
     Deferred income
     12.9
        
     
        
     17.1
        
     General business credits
     12.8
        
     
        
     11.0
        
     Benefit plans and other postretirement andpostemployment benefits
     0.4
        
     
        
     
        
     (25.8
        )Other
     
        
     (5.3
        )
     
        
     (5.4
        )Subtotal
     110.7
        
     (139.7
        )
     117.5
        
     (183.5
        )Less: valuation allowance
     (3.8
        )
     
        
     (8.0
        )
     Total deferred income tax assets and liabilities
     $106.9
        
     $(139.7
        )
     $109.5
        
     $(183.5
        )Net deferred income tax liabilities
     
        
     $(32.8
        )
     
        
     $(74.0
        ) The
balance sheet classification of the net deferred income tax assets and liabilities is as
follows (in millions): February 3, 2007
        
     January 28, 2006Current
        
     Noncurrent
        
     Total
        
     Current
        
     Noncurrent
        
     TotalAssets
     
     
     $1.5
        
     $5.9
        
     $7.4
        
     $
        
     $
        
     $Liabilities
     (0.2
        )
     (40.0
        )
     (40.2
        )
     (11.7
        )
     (62.3
        )
     (74.0
        )Total
     $1.3
        
     $(34.1
        )
     $(32.8
        )
     $(11.7
        )
     $(62.3
        )
     $(74.0
        ) The valuation allowance of $3.8
million at February 3, 2007 and $8.0 million at January 28, 2006 relate to state net operating losses that may not be utilized. The
net decrease in the valuation allowance of $4.2 million was primarily due to a write off of the deferred income tax asset related to
state net operating loss carryforwards. The Companys general business credits consist of federal and state work incentive
credits, which expire in fiscal 2009 through fiscal 2026, some of which are subject to an annual limitation. The federal net
operating loss carryforward of $9.8 million expires in fiscal 2025. State loss carryforwards have been recorded for various states
in various amounts and expire in fiscal 2007 through fiscal 2026. Income tax payments were $5.1 million during fiscal 2006, $3.2
million during fiscal 2005 and $3.9 million during fiscal 2004.  51  Pathmark Stores, Inc. Notes to Consolidated Financial Statements  (Continued)  Note 18.   Income Taxes  (Continued) In June 2005, the Company
experienced an ownership change (see Note 1) as defined under Section 382 of the Internal Revenue Code. As a result, there is a
limitation on the use of pre-change net operating loss carryforwards. Management believes this limitation will not have a material
impact on the Companys ability to utilize such pre-change net operating losses. During fiscal 2006, the IRS concluded an
examination of the Companys federal income tax returns for fiscal 2001 through fiscal 2004. The expected outcome of the IRS
examination had been provided for in the current taxes payable and adjusted for in the deferred income taxes and income tax reserves
in fiscal 2005. Note 19. Capital Stock Preferred Stock.As of February 3, 2007 and January 28, 2006, there were 5,000,000 shares of preferred stock authorized of which none are issued or outstanding. Common Stock.As of February 3, 2007 and January 28, 2006, there were 100,000,000 shares authorized of $0.01 par value common stock.  The following table summarizes the change in the number of shares of Common Stock outstanding: Common StockIssued
 
 TreasuryStock
 
 NetOutstandingBalance, January 28, 2006
     
     
     52,012,553
        
     
        
     52,012,553Exercise of stock options
     175,200
        
     97,975
        
     273,175Purchase of treasury stock
     
        
     (97,975
        )
     (97,975
        )Vesting of restricted stock units
     38,745
        
     
        
     38,745Balance, February 3, 2007
     52,226,498
        
     
        
     52,226,498 Shares
of Common Stock are subject to dilution from (1) the issuance of new shares of Common
Stock, (2) the exercise of Common Stock warrants, (3) the exercise of options to purchase
Common Stock issued pursuant to the Employee Plan, the Directors Plan and
employment agreements, and (4) the vesting of restricted stock units.  For further
information, see Note 20.  During fiscal 2006, 305,617 shares of restricted stock and
restricted stock units representing 38,745 shares of Common Stock vested.  Upon vesting,
97,975 shares of Common Stock were withheld by the Company  to satisfy tax withholding
requirements of the recipients; such shares were recorded as treasury stock at a cost of
$1.0 million. Common Stock Warrants.As of February 3, 2007 and January 28, 2006, warrants to purchase 5,294,118 shares of Common Stock at $22.31 per share were outstanding and expire on September 19, 2010.  As of February 3, 2007 and January 28, 2006, Series A Warrants to purchase 10,060,000 shares of Common Stock at $8.50 per share were outstanding and expire on June 9, 2008 and Series B Warrants to purchase 15,046,350 shares of Common Stock at $15.00 per share were outstanding and expire on June 9, 2015.  The Series A Warrants and Series B Warrants were issued under the Purchase Agreement (see Note 2. Yucaipa Investment). The Companys Common Stock
and Common Stock Warrants trade on the NASDAQ Global Market (NASDAQ) under the ticker symbols PTMK and PTMKW,
respectively.  52  Pathmark Stores, Inc. Notes to Consolidated Financial Statements  (Continued)  Note 20.  Stock-Based Compensation Plans The Employee Plan and the
Directors Plan authorize the granting of various forms of equity awards, including stock options, restricted stock and
restricted stock units aggregating 12,294,118 shares of the Companys Common Stock, of which 11,514,118 shares are authorized
under the Employee Plan and 780,000 shares are authorized under the Directors Plan. The Companys officers and certain
key employees are eligible to receive awards under the Employee Plan. The Directors Plan is available to members of the Board
of Directors who are not employees of the Company and who are Independent Directors as such term is used under the rules
and listing standards of the NASDAQ. In fiscal 2005, options for 2,000,000 additional shares of Common Stock (the Additional
Options) and 700,000 restricted shares of Common Stock (Additional Restricted Stock) were granted by the Board of
Directors outside of the Employee Plan in connection with the hiring of John Standley, Chief Executive Officer, and Kenneth
Martindale, President and Chief Marketing and Merchandising Officer. Options granted pursuant to the Directors Plan have a
term of five years and vest over three years. The Additional Options have a term of ten years and vest over three years. Restricted
stock units granted pursuant to the Employee Plan generally vest over three or four years. Restricted stock units granted pursuant
to the Directors Plan and the Additional Restricted Stock vest over three years. The Company is amortizing the restricted
stock and restricted stock unit grants as compensation expense on a straight-line basis over the respective vesting periods. As of
February 3, 2007, 7,088,567 options were outstanding, with a weighted-average exercise price of $11.64, a weighted-average
contractual life of 6.7 years and an intrinsic value of $19.7 million; 4,456,957 of these options were exercisable, with a
weighted-average exercise price of $12.56, a weighted-average contractual life of 5.5 years and an intrinsic value of $5.3 million.
There were 5,095,614 shares of Common Stock available for future grant under the Employee Plan and the Directors Plan. Stock Options.The following weighted-average assumptions were used to value the Companys grants of stock options, which are being recognized as stock-based compensation expense effective with the beginning of fiscal 2006: 53 WeeksEndedFebruary 3,2007
 
 52 WeeksEndedJanuary 28,2006
 
 52 WeeksEndedJanuary 29,2005Stock options granted
     
     
     725,580
        
     2,923,417
        
     48,750Weighted-average fair value of stock options at the date of grant
     $5.36
        
     $5.50
        
     $2.77Risk-free interest rate (a)
     5.0%
        
     4.1%
        
     4.6%Expected life (in years) (b)
     6.1
        
     5.9
        
     4.0Expected volatility (c)
     49.8%
        
     52.8%
        
     54.3%Expected dividend yield (d)
      %
        
      %
        
      %  (a)

The
risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time
of the grant. (b)

The
expected life of the grants was determined using the simplified method as defined in the
SECs SAB No. 107. (c)

The
expected volatility is based on a database of traded and quoted options on the Companys
Common Stock. (d)

The
Company does not expect to pay a dividend during the contractual life of the options
granted.    53  Pathmark Stores, Inc. Notes to Consolidated Financial Statements  (Continued)  Note 20.  Stock-Based Compensation Plans  (Continued) As of February 3, 2007, options to purchase 2,631,610 shares vest at various dates through fiscal 2010.  The change in the number of stock options was as follows: 53 WeeksEndedFebruary 3,2007
 
 52 WeeksEndedJanuary 28,2006
 
 52 WeeksEndedJanuary 29,2005Outstanding, beginning of fiscal year
     
     
     6,954,612
        
     5,496,747
        
     5,548,424Granted during the fiscal year
     725,580
        
     2,923,417
        
     48,750Exercised during the fiscal year
     (273,175
        )
     (1,147,400
        )
     Canceled, terminated and expired during the fiscal year
     (318,450
        )
     (318,152
        )
     (100,427
        )Outstanding, end of fiscal year
     7,088,567
        
     6,954,612
        
     5,496,747 Weighted-average
option exercise price information was as follows: 53 WeeksEndedFebruary 3,2007
 
 52 WeeksEndedJanuary 28,2006
 
 52 WeeksEndedJanuary 29,2005Outstanding, beginning of fiscal year
     
     
     $11.79
        
     $11.46
        
     $11.55Granted during the fiscal year
     9.89
        
     10.13
        
     6.86Exercised during the fiscal year
     5.96
        
     5.16
        
     Canceled, terminated and expired during the fiscal year
     15.59
        
     14.60
        
     14.38Outstanding, end of fiscal year
     11.64
        
     11.79
        
     11.46Exercisable, end of fiscal year
     12.56
        
     12.95
        
     12.83 The
Company received proceeds of $1.6 million from the exercise of stock options during
fiscal 2006 with an intrinsic value of $1.4 million.  As of February 3, 2007, there was
$16.0 million of unrecognized compensation cost related to non-vested options, which will
be recognized over a weighted-average period of 2.2 years.  As of February 3, 2007, the
Company had 2,631,610 unvested options outstanding with a weighted-average fair value of
$5.47 per share.  During fiscal 2006, 946,887 options, with an intrinsic value of $1.0
million vested.  The Companys policy related to the issuance of shares to cover the
exercise of options is to first utilize treasury stock, when available, and then issue
shares from currently authorized stock.  54  Pathmark Stores, Inc. Notes to Consolidated Financial Statements  (Continued)  Note 20.  Stock-Based Compensation Plans  (Continued) Stock option grants outstanding as of February 3, 2007 and related weighted-average price and remaining contractual life information were as follows: OptionGrant Date
     
     Numberof OptionsOutstanding
     
     AverageExercisePrice
     
     RemainingContractualLife (Years)
     
     Number ofOptionsExercisable10/25/00
     
     
     1,350,965
        
     $13.94
        
     3.7
        
     1,350,96503/29/01
     480,000
        
     17.25
        
     4.2
        
     480,00010/04/01
     398,545
        
     22.35
        
     4.7
        
     398,54506/13/02
     10,000
        
     18.50
        
     0.4
        
     10,00009/12/02
     507,670
        
     11.70
        
     5.6
        
     507,67010/22/02
     400,000
        
     4.75
        
     5.7
        
     400,00010/28/02
     123,000
        
     4.65
        
     5.8
        
     123,00006/13/03
     5,000
        
     7.36
        
     1.4
        
     5,00009/25/03
     214,890
        
     7.25
        
     6.7
        
     214,89006/11/04
     20,000
        
     6.76
        
     2.4
        
     20,00006/09/05
     158,500
        
     8.60
        
     8.3
        
     49,18408/15/05
     5,250
        
     10.44
        
     8.5
        
     1,31208/29/05
     1,500,000
        
     10.39
        
     8.6
        
     500,00011/30/05
     89,167
        
     10.47
        
     3.8
        
     29,72412/22/05
     600,000
        
     10.13
        
     8.9
        
     200,00001/01/06
     500,000
        
     9.99
        
     8.9
        
     166,66704/04/06
     80,000
        
     10.03
        
     9.2
        
     05/01/06
     42,000
        
     10.35
        
     9.2
        
     05/15/06
     542,360
        
     9.94
        
     9.3
        
     06/08/06
     35,000
        
     8.86
        
     9.3
        
     07/10/06
     8,740
        
     9.04
        
     9.4
        
     07/24/06
     8,740
        
     8.25
        
     9.5
        
     09/05/06
     8,740
        
     9.82
        
     9.6
        
     Total
     7,088,567
        
     $11.64
        
     6.7
        
     4,456,957 Options,
which are designed as incentive stock options under the Employee Plan, may be granted
with an exercise price not less than the fair market value of the underlying shares at
the date of grant, as defined in the plan document, and are subject to certain quantity
and other limitations specified in Section 422 of the Internal Revenue Code.  Options,
which are not intended to qualify as incentive stock options, may be granted at any
price, but not less than the par value of the underlying shares and without restriction
as to amount.  The options and the underlying shares are subject to adjustment in
accordance with the terms of each plan in the event of stock dividends, recapitalization
and similar transactions.  The options granted under the Employee Plan and the Directors Plan
expire ten years and five years after the date of grant, respectively, unless terminated
earlier by the Companys Board of Directors.  The right to exercise the options
granted vests in annual increments over four years under the Employee Plan and over three
years under the Directors Plan from the date of the grant.  Upon the closing of the
transaction described in Note 2 hereof, all such options granted prior to June 9, 2005
vested.  The Additional Options expire ten years after the date of grant, unless
terminated earlier and the right to exercise the Additional Options vests in annual
increments over three years from the date of grant.  55  Pathmark Stores, Inc. Notes to Consolidated Financial Statements  (Continued)  Note 20. Stock-Based Compensation Plans  (Continued) Restricted Stock and Restricted
Stock Units.During fiscal 2006, restricted stock units representing 419,199 shares of Common Stock were
granted pursuant to the Employee Plan and restricted stock units representing 25,200 shares of Common Stock were granted pursuant to
the Directors Plan. The aggregate value of the restricted stock units granted of $4.1 million is being amortized as
compensation expense over the respective vesting periods. The change in the number of
restricted stock units was as follows: 53 WeeksEndedFebruary 3,2007
        
     52 WeeksEndedJanuary 28,2006Outstanding, beginning of fiscal year
     
     
     906,320
        
     Granted during the fiscal year
     444,399
        
     973,202Vested during the fiscal year
     (305,617
        )
     (52,350
        )Forfeited during the fiscal year
     (32,692
        )
     (14,532
        )Outstanding, end of fiscal year
     1,012,410
        
     906,320 In
accordance with the Merger Agreement (as defined in Note 24), prior to the effective date
of the Merger, all outstanding options to purchase Common Stock granted pursuant to a
stock plan (Options) will become vested and become exercisable. At the
effective date of the Merger, each of the in-the-money Options granted on or after June
9, 2005 (a Post-Amendment Option) will be cancelled in exchange for the right
to receive an amount in cash equal to the excess of the closing price of the Common Stock
on the day before the closing (the Closing Price) over the per share exercise
price of such Post-Amendment Option (net of applicable withholding taxes).
Out-of-the-money Post-Amendment Options will be cancelled without consideration. The
Company has agreed to use commercially reasonable efforts to obtain the consent of the
holders of each option granted prior to June 9, 2005 (a Pre-Amendment Option)
to the treatment set forth above with respect to the Post-Amendment Options. To the
extent that such consent is not obtained, at the effective date the Pre-Amendment Options
will be converted into stock options to acquire A&P Common Stock (as defined in Note
24), based on an exchange ratio equal to the Closing Price divided by $27.00. At the
effective date of the Merger, each outstanding share of restricted Common Stock and each
outstanding restricted stock unit relating to the Common Stock will become vested and
automatically converted into a right to receive a single lump-sum cash payment based upon
the Closing Price.   56  Pathmark Stores, Inc. Notes to Consolidated Financial Statements  (Continued)  Note 21. Condensed Consolidating Financial Information The following represents the
consolidating financial information of Pathmark and its 100% owned guarantor and non-guarantor subsidiaries. The guarantor
subsidiaries are comprised of six 100% owned entities, including Pathmarks distribution and gift card subsidiaries, and
guarantee on a full and unconditional and joint and several basis, the Senior Subordinated Notes. The non-guarantor subsidiaries are
comprised of four 100% owned single-purpose entities. Each of these entities owns the real estate on which a supermarket leased to
Pathmark is located. Pathmark
        
     GuarantorSubsidiaries
        
     Non-GuarantorSubsidiaries
        
     IntercompanyEliminations
        
     ConsolidatedTotal(in millions)Consolidating Statements of Operations:For the 53 Weeks Ended February 3, 2007Sales
     $4,058.0
        
     $2,381.4
        
     $
        
     $(2,381.4
        )
     $4,058.0Cost of goods sold
     (2,875.2
        )
     (2,381.4
        )
     
        
     2,381.4
        
     (2,875.2
        )Gross profit
     1,182.8
        
     
        
     
        
     
        
     1,182.8Selling, general and administrative expenses
     (1,069.2
        )
     10.1
        (a)
     2.3
        
     
        
     (1,056.8
        )Depreciation and amortization
     (85.4
        )
     (5.6
        )
     (1.6
        )
     
        
     (92.6
        )Operating earnings
     28.2
        
     4.5
        
     0.7
        
     
        
     33.4Interest expense, net
     (61.7
        )
     (0.6
        )
     
        
     
        
     (62.3
        )Equity in earnings of subsidiaries
     4.6
        
     
        
     
        
     (4.6
        )
     Earnings (loss) before income taxes
     (28.9
        )
     3.9
        
     0.7
        
     (4.6
        )
     (28.9
        )Income tax benefit
     10.6
        
     
        
     
        
     
        
     10.6Net earnings (loss)
     $(18.3
        )
     $3.9
        
     $0.7
        
     $(4.6
        )
     $(18.3
        )For the 52 Weeks Ended January 28, 2006Sales
     $3,977.0
        
     $2,371.7
        
     $
        
     $(2,371.7
        )
     $3,977.0Cost of goods sold
     (2,846.3
        )
     (2,371.7
        )
     
        
     2,371.7
        
     (2,846.3
        )Gross profit
     1,130.7
        
     
        
     
        
     
        
     1,130.7Selling, general and administrative expenses
     (1,051.2
        )
     6.6
        
     3.7
        
     
        
     (1,040.9
        )Depreciation and amortization
     (83.8
        )
     (5.6
        )
     (1.4
        )
     
        
     (90.8
        )Operating earnings (loss)
     (4.3
        )
     1.0
        
     2.3
        
     
        
     (1.0
        )Interest expense, net
     (60.6
        )
     (0.7
        )
     (3.4) (b
        )
     
        
     (64.7
        )Equity in loss of subsidiaries
     (0.8
        )
     
        
     
        
     0.8
        
     Earnings (loss) before income taxes
     (65.7
        )
     0.3
        
     (1.1
        )
     0.8
        
     (65.7
        )Income tax benefit
     25.6
        
     
        
     
        
     
        
     25.6Net earnings (loss)
     $(40.1
        )
     $0.3
        
     $(1.1
        )
     $0.8
        
     $(40.1
        )  (a)

Includes
Gift Card breakage income of $3.5 million. (b)

Includes
mortgage debt extinguishment of $2.8 million.    57  Pathmark Stores, Inc. Notes to Consolidated Financial Statements  (Continued)  Note 21. Condensed Consolidating Financial Information  (Continued) Pathmark
        
     GuarantorSubsidiaries
        
     Non-GuarantorSubsidiaries
        
     IntercompanyEliminations
        
     ConsolidatedTotal(in millions)Consolidating Statements of Operations (Continued):For the 52 Weeks Ended January 29, 2005Sales
     $3,978.5
        
     $2,355.3
        
     $
        
     $(2,355.3
        )
     $3,978.5Cost of goods sold
     (2,846.1
        )
     (2,355.3
        )
     
        
     2,355.3
        
     (2,846.1
        )Gross profit
     1,132.4
        
     
        
     
        
     
        
     1,132.4Selling, general and administrative expenses
     (995.8
        )
     7.2
        
     3.7
        
     
        
     (984.9
        )Depreciation and amortization
     (82.0
        )
     (6.1
        )
     (1.3
        )
     
        
     (89.4
        )Impairment of goodwill and long-lived assets
     (309.0
        )
     
        
     
        
     
        
     (309.0
        )Operating earnings (loss)
     (254.4
        )
     1.1
        
     2.4
        
     
        
     (250.9
        )Interest expense, net
     (64.5
        )
     (0.8
        )
     (1.7
        )
     
        
     (67.0
        )Equity in earnings of subsidiaries
     1.0
        
     
        
     
        
     (1.0
        )
     Earnings (loss) before income taxes
     (317.9
        )
     0.3
        
     0.7
        
     (1.0
        )
     (317.9
        )Income tax benefit
     9.3
        
     
        
     
        
     
        
     9.3Net earnings (loss)
     $(308.6
        )
     $0.3
        
     $0.7
        
     $(1.0
        )
     $(308.6
        )Consolidating Balance Sheets:As of February 3, 2007Merchandise inventories
     $159.7
        
     $20.6
        
     $
        
     $
        
     $180.3Other current assets
     149.2
        
     4.4
        
     0.3
        
     (1.3
        )
     152.6Total current assets
     308.9
        
     25.0
        
     0.3
        
     (1.3
        )
     332.9Property and equipment, net
     450.0
        
     56.2
        
     29.5
        
     
        
     535.7Goodwill
     144.7
        
     
        
     
        
     
        
     144.7Investment in subsidiaries
     86.8
        
     
        
     
        
     (86.8
        )
     Other noncurrent assets (a)
     119.7
        
     
        
     
        
     
        
     119.7Total assets
     $1,110.1
        
     $81.2
        
     $29.8
        
     $(88.1
        )
     $1,133.0Accounts payable
     $69.1
        
     $9.1
        
     $
        
     $
        
     $78.2Other current liabilities
     168.1
        
     5.6
        
     1.6
        
     (1.3
        )
     174.0Total current liabilities
     237.2
        
     14.7
        
     1.6
        
     (1.3
        )
     252.2Long-term debt
     423.1
        
     
        
     
        
     
        
     423.1Long-term capital lease obligations
     150.8
        
     7.6
        
     
        
     
        
     158.4Other noncurrent liabilities (a)
     170.6
        
     0.3
        
     
        
     
        
     170.9Total liabilities
     981.7
        
     22.6
        
     1.6
        
     (1.3
        )
     1,004.6Stockholders equity (a)
     128.4
        
     58.6
        
     28.2
        
     (86.8
        )
     128.4Total liabilities and stockholders equity
     $1,110.1
        
     $81.2
        
     $29.8
        
     $(88.1
        )
     $1,133.0  (a)

In
September 2006, the FASB issued SFAS No. 158. Refer to Notes 1 and 17 for information related to the impact of SFAS No. 158.    58  Pathmark Stores, Inc. Notes to Consolidated Financial Statements  (Continued)  Note 21. Condensed Consolidating Financial Information  (Continued) Pathmark
        
     GuarantorSubsidiaries
        
     Non-GuarantorSubsidiaries
        
     IntercompanyEliminations
        
     ConsolidatedTotal(in millions)Consolidating Balance Sheets (Continued):As of January 28, 2006Merchandise inventories
     $157.8
        
     $22.8
        
     $
        
     $
        
     $180.6Other current assets
     188.2
        
     3.5
        
     0.3
        
     
        
     192.0Total current assets
     346.0
        
     26.3
        
     0.3
        
     
        
     372.6Property and equipment, net
     465.0
        
     58.7
        
     28.6
        
     
        
     552.3Goodwill
     144.7
        
     
        
     
        
     
        
     144.7Investment in subsidiaries
     82.7
        
     
        
     
        
     (82.7
        )
     Other noncurrent assets
     185.0
        
     
        
     
        
     
        
     185.0Total assets
     $1,223.4
        
     $85.0
        
     $28.9
        
     $(82.7
        )
     $1,254.6Accounts payable
     $98.4
        
     $1.8
        
     $
        
     $
        
     $100.2Other current liabilities
     178.9
        
     1.4
        
     
        
     
        
     180.3Total current liabilities
     277.3
        
     3.2
        
     
        
     
        
     280.5Long-term debt
     423.8
        
     
        
     
        
     
        
     423.8Long-term capital lease obligations
     160.3
        
     8.2
        
     
        
     
        
     168.5Other noncurrent liabilities
     190.7
        
     19.8
        
     
        
     
        
     210.5Total liabilities
     1,052.1
        
     31.2
        
     
        
     
        
     1,083.3Stockholders equity
     171.3
        
     53.8
        
     28.9
        
     (82.7
        )
     171.3Total liabilities and stockholders equity
     $1,223.4
        
     $85.0
        
     $28.9
        
     $(82.7
        )
     $1,254.6Consolidating Cash Flow Statements:53 Weeks Ended February 3, 2007Operating ActivitiesCash provided by operating activities
     $2.5
        
     $0.4
        
     $4.0
        
     $
        
     $6.9Investing ActivitiesCapital expenditures, including technology investments
     (66.8
        )
     (0.8
        )
     (2.4
        )
     
        
     (70.0
        )Sale of marketable securities
     4.0
        
     
        
     
        
     
        
     4.0Intercompany investment transactions
     (6.1
        )
     6.1
        
     
        
     
        
     Cash provided by (used for) investing activities
     (68.9
        )
     5.3
        
     (2.4
        )
     
        
     (66.0
        )Financing ActivitiesBorrowings under the working capital facility, net
     22.7
        
     
        
     
        
     
        
     22.7Repayments of capital lease obligations
     (9.3
        )
     (0.5
        )
     
        
     
        
     (9.8
        )Borrowings under other debt
     3.4
        
     
        
     
        
     
        
     3.4Repayments of other debt
     (3.3
        )
     
        
     
        
     
        
     (3.3
        )Proceeds from exercise of stock options
     1.6
        
     
        
     
        
     
        
     1.6Purchase of treasury stock
     (1.0
        )
     
        
     
        
     
        
     (1.0
        )Tax benefit related to stock-based compensation
     0.4
        
     
        
     
        
     
        
     0.4Deferred financing costs
     (0.2
        )
     
        
     
        
     
        
     (0.2
        )Intercompany debt transactions
     6.1
        
     (6.1
        )
     
        
     
        
     Intercompany equity transactions
     0.5
        
     0.9
        
     (1.4
        )
     
        
     Cash provided by (used for) financing activities
     20.9
        
     (5.7
        )
     (1.4
        )
     
        
     13.8Increase (decrease) in cash and cash equivalents
     (45.5
        )
     
        
     0.2
        
     
        
     (45.3
        )Cash and cash equivalents at beginning at period
     73.4
        
     
        
     
        
     
        
     73.4Cash and cash equivalents at end of period
     $27.9
        
     $
        
     $0.2
        
     $
        
     $28.1   59  Pathmark Stores, Inc. Notes to Consolidated Financial Statements  (Continued)  Note 21. Condensed Consolidating Financial Information  (Continued) Pathmark
        
     GuarantorSubsidiaries
        
     Non-GuarantorSubsidiaries
        
     IntercompanyEliminations
        
     ConsolidatedTotal(in millions)Consolidating Cash Flow Statements (Continued):52 Weeks Ended January 28, 2006Operating ActivitiesCash provided by operating activities
     $23.4
        
     $0.5
        
     $3.5
        
     $
        
     $27.4Investing ActivitiesCapital expenditures, including technology investments
     (60.5
        )
     (3.7
        )
     
        
     
        
     (64.2
        )Purchases of marketable securities
     (40.0
        )
     
        
     
        
     
        
     (40.0
        )Sales of marketable securities
     36.0
        
     
        
     
        
     
        
     36.0Proceeds from the sale of assets
     0.3
        
     
        
     
        
     
        
     0.3Cash used for investing activities
     (64.2
        )
     (3.7
        )
     
        
     
        
     (67.9
        )Financing ActivitiesProceeds from issuance of common stock andcommon stock warrants, net of expenses
     137.5
        
     
        
     
        
     
        
     137.5Repayments of  the working capital facility, net
     (34.4
        )
     
        
     
        
     
        
     (34.4
        )Mortgage debt repayments and extinguishment
     
        
     
        
     (23.8
        )
     
        
     (23.8
        )Repayments of capital lease obligations
     (13.4
        )
     (0.4
        )
     
        
     
        
     (13.8
        )Proceeds from exercise of stock options
     5.9
        
     
        
     
        
     
        
     5.9Borrowings under other debt
     3.1
        
     
        
     
        
     
        
     3.1Repayments of other debt
     (2.5
        )
     
        
     
        
     
        
     (2.5
        )Deferred financing costs
     (0.5
        )
     
        
     
        
     
        
     (0.5
        )Purchase of treasury stock
     (0.2
        )
     
        
     
        
     
        
     (0.2
        )Intercompany equity transactions
     (23.6
        )
     3.6
        
     20.0
        
     
        
     Cash provided by (used for) financing activities
     71.9
        
     3.2
        
     (3.8
        )
     
        
     71.3Increase (decrease) in cash and cash equivalents
     31.1
        
     
        
     (0.3
        )
     
        
     30.8Cash and cash equivalents at beginning at period
     42.2
        
     
        
     0.4
        
     
        
     42.6Cash and cash equivalents at end of period
     $73.3
        
     $
        
     $0.1
        
     $
        
     $73.452 Weeks Ended January 29, 2005Operating ActivitiesCash provided by operating activities
     $95.3
        
     $3.8
        
     $2.1
        
     $
        
     $101.2Investing ActivitiesCapital expenditures, including technology investments
     (96.3
        )
     
        
     (2.5
        )
     
        
     (98.8
        )Acquisition of Community Supermarket Corporation
     (4.5
        )
     
        
     
        
     
        
     (4.5
        )Proceeds from sale of real estate
     2.4
        
     1.3
        
     
        
     
        
     3.7Cash provided by (used for) investing activities
     (98.4
        )
     1.3
        
     (2.5
        )
     
        
     (99.6
        )Financing ActivitiesBorrowings under the term loan
     70.0
        
     
        
     
        
     
        
     70.0Repayments of the term loan
     (45.8
        )
     
        
     
        
     
        
     (45.8
        )Borrowings under the working capital facility, net
     29.9
        
     
        
     
        
     
        
     29.9Decrease in capital lease obligations
     (10.6
        )
     (4.6
        )
     
        
     
        
     (15.2
        )Deferred financing costs
     (4.9
        )
     
        
     
        
     
        
     (4.9
        )Repayments of other debt
     (4.4
        )
     
        
     (0.3
        )
     
        
     (4.7
        )Borrowings under other debt
     2.8
        
     
        
     
        
     
        
     2.8Intercompany equity transactions
     (0.3
        )
     (0.5
        )
     0.8
        
     
        
     Cash provided by (used for) financing activities
     36.7
        
     (5.1
        )
     0.5
        
     
        
     32.1Increase in cash
     33.6
        
     
        
     0.1
        
     
        
     33.7Cash at beginning at period
     8.7
        
     
        
     0.2
        
     
        
     8.9Cash at end of period
     $42.3
        
     $
        
     $0.3
        
     $
        
     $42.6   60  Pathmark Stores, Inc. Notes to Consolidated Financial Statements  (Continued)  Note 22. Commitments and Contingencies Outsourcing Agreements.In February 2005, the Company entered into a seven-year extension of an existing outsourcing agreement with International Business Machines Corporation (IBM), expiring in January 2012, to continue to provide a wide range of information systems services, which commenced in 1991.  Under the agreement, IBM provides data center operations, mainframe processing, business applications and systems development to enhance the Companys customer service and efficiency.  The charges under this agreement are based upon the services requested at predetermined rates.  The Company may terminate this agreement upon 90 days notice with a payment of a specified termination charge. The Company has a 15-year supply agreement with C&S, expiring in January 2013, pursuant to which C&S supplies substantially all of the Companys grocery, frozen and perishable merchandise requirements.  Under this arrangement with C&S, the Company negotiates prices, discounts and promotions directly with vendors and pays C&S an agreed upon rate per case.  During fiscal 2006, the products supplied from C&S accounted for over 60% of  the Companys supermarket inventory purchases.  This agreement may be terminated for cause or certain events of bankruptcy by either party. The Company also has an agreement with GHI, expiring in January 2014, to provide trucking services for the Company.  The Company may terminate the agreement with a payment of a specified termination charge. Contingencies.On March 6, 2007, Chris Larson, a stockholder in the Company, filed in the Superior Court of New Jersey, Law Division,
Middlesex County a purported class action complaint (the "Larson Complaint") against the Company and its directors (the "Individual
Defendants"; the Company and the Individual Defendants hereinafter collectively referred to as the "Defendants"). The Larson
Complaint asserts on behalf of a purported class of the Companys stockholders claims against the Defendants for alleged
self-dealing and breach of fiduciary duties in connection with a proposed acquisition of the Company (the "proposed Acquisition") by
The Great Atlantic & Pacific Tea Company, Inc. ("A&P" - refer to Note 24). The Larson Complaint seeks (a) an injunction of
the proposed Acquisition unless and until the Company adopts and implements certain procedures to obtain the highest possible price
for its stockholders; (b) imposition of a constructive trust, in favor of plaintiffs, upon any benefits received by Defendants as a
result of their alleged wrongful conduct; and (c) recovery of attorneys' fees, costs and disbursements. Defendants have not filed
answers, or otherwise responded, to the Larson Complaint as of this date. In a related action, on March 12, 2007, Sarah Kleinmann, a stockholder in the Company, also filed in the Superior Court of New Jersey, Law Division, Middlesex County a purported class action complaint (the "Kleinmann Complaint") against the Defendants, as defined in the above paragraph, and A&P.  The Kleinmann Complaint asserts similar claims and seeks the same relief as the Larson Complaint.  Defendants have not filed answers, or otherwise responded, to the Kleinmann Complaint as of this date. The Company is subject to claims and suits in the ordinary cause of business.  While the outcome of these claims cannot be predicted with certainty, the Company does not believe that the outcome of any of these legal matters will have a material adverse effect on the Companys results of operations, financial position or cash flows.  The Company has taken certain tax positions, which may be challenged, and has reserved for such tax positions in noncurrent liabilities as payment, if any, is not expected within one year.  While the ultimate resolution of these positions cannot be determined with any degree of certainty, management believes that the aggregate contingencies, if any, when compared to the amounts reserved, will not have a material effect on the Companys financial statements taken as a whole. 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 February 3, 2007, the Company has a liability on its consolidated balance sheet of $2.4 million, which represents certain guarantees attributable to the Companys secondary liability in connection with two Assigned  61  Pathmark Stores, Inc. Notes to Consolidated Financial Statements  (Continued)  Note 22. Commitments and Contingencies  (Continued) Leases.  The Companys records indicate that an additional 58 Assigned Leases may still be in effect; however, the Company is unable to determine if such Assigned Leases are still actually in effect or have been terminated by the assignees or their successors.  Assuming that each Assigned Lease is still in effect and 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 these Assigned Leases to be approximately $99 million, which could be partially or totally offset by reassigning or subletting such leases.  Additionally, the Company is a party to a variety of contracts under which it may be obligated to indemnify the other party for certain matters.  These contracts primarily relate to the Companys commercial contracts, leases, financial
agreements and various other agreements.  Under these contracts, the Company may provide routine indemnification relating to representations and warranties, or personal injury matters.  The terms of these indemnifications range in duration and may not be explicitly defined.  Historically, the Company has not made a significant payment for these indemnifications.  For further information in regard to the Companys indemnification obligations with respect to contingent withdrawal liabilities (as defined by ERISA) see Note 17.  62  Pathmark Stores, Inc. Notes to Consolidated Financial Statements  (Continued)  Note 23. Quarterly Financial Data (Unaudited) 13 WeeksEndedApril 29,2006
     
     13 WeeksEndedJuly 29,2006
     
     13 WeeksEndedOctober 28,2006
     
     14 WeeksEndedFebruary 3,2007
     
     53 WeeksEndedFebruary 3,2007(in millions, except per share amounts)Fiscal 2006Sales
     $998.5
        
     $1,002.9
        
     $978.1
        
     $1,078.5
        
     $4,058.0Cost of goods sold
     (709.0
        )
     (718.0
        )
     (690.8
        )
     (757.4
        )
     (2,875.2
        )Gross profit
     289.5
        
     284.9
        
     287.3
        
     321.1
        
     1,182.8Selling, general and administrative expenses (a)
     (259.8
        )
     (261.1
        )
     (259.5
        )
     (276.4
        )
     (1,056.8
        )Depreciation and amortization
     (23.0
        )
     (23.1
        )
     (23.0
        )
     (23.5
        )
     (92.6
        )Operating earnings
     6.7
        
     0.7
        
     4.8
        
     21.2
        
     33.4Interest expense, net
     (15.5
        )
     (15.4
        )
     (15.0
        )
     (16.4
        )
     (62.3
        )Earnings (loss) before income taxes
     (8.8
        )
     (14.7
        )
     (10.2
        )
     4.8
        
     (28.9
        )Income tax benefit (provision)
     3.4
        
     5.9
        
     4.4
        
     (3.1
        )
     10.6Net earnings (loss)
     $(5.4
        )
     $(8.8
        )
     $(5.8
        )
     $1.7
        
     $(18.3
        )Net earnings (loss) per share  basic and diluted
     $(0.10
        )
     $(0.17
        )
     $(0.11
        )
     $0.03
        
     $(0.35
        ) 13 WeeksEndedApril 30,2005
     
     13 WeeksEndedJuly 30,2005
     
     13 WeeksEndedOctober 29,2005
     
     13 WeeksEndedJanuary 28,2006
     
     52 WeeksEndedJanuary 28,2006(in millions, except per share amounts)Fiscal 2005Sales
     $1,002.5
        
     $1,000.7
        
     $980.5
        
     $993.3
        
     $3,977.0Cost of goods sold
     (717.5
        )
     (714.8
        )
     (707.3
        )
     (706.7
        )
     (2,846.3
        )Gross profit
     285.0
        
     285.9
        
     273.2
        
     286.6
        
     1,130.7Selling, general and administrative expenses (b)
     (250.9
        )
     (254.9
        )
     (264.1
        )
     (271.0
        )
     (1,040.9
        )Depreciation and amortization
     (22.2
        )
     (22.3
        )
     (22.5
        )
     (23.8
        )
     (90.8
        )Operating earnings (loss)
     11.9
        
     8.7
        
     (13.4
        )
     (8.2
        )
     (1.0
        )Interest expense, net (c)
     (16.3
        )
     (18.2
        )
     (15.0
        )
     (15.2
        )
     (64.7
        )Loss before income taxes
     (4.4
        )
     (9.5
        )
     (28.4
        )
     (23.4
        )
     (65.7
        )Income tax benefit
     2.3
        
     4.4
        
     10.1
        
     8.8
        
     25.6Net loss
     $(2.1
        )
     $(5.1
        )
     $(18.3
        )
     $(14.6
        )
     $(40.1
        )Net loss per share  basic and diluted (d)
     $(0.07
        )
     $(0.12
        )
     $(0.36
        )
     $(0.28
        )
     $(0.92
        )  (a)

The quarterly financial data for the 13 weeks ended April 29, 2006,
July 29, 2006 and October 28, 2006 and for the 14 weeks ended February 3, 2007 included charges of $2.1 million, $2.4 million, $2.5
million and $2.7 million, respectively, related to stock-based compensation. The quarterly financial data for the 13 weeks ended
July 29, 2006 included breakage income of $3.2 million related to Gift Cards. The quarterly financial data for the 14 weeks ended
February 3, 2007 included charges of $2.9 million related to the proposed merger with A&P. (b)

The
quarterly financial data for the 13 weeks ended April 30, 2005 and July 30, 2005 included a charge of $0.9 million and $0.2 million,
respectively, related to a review of strategic alternatives, which resulted in the Yucaipa investment. The quarterly financial data
for the 13 weeks ended October 29, 2005 included a charge of $4.2 million related to a merchandising and store initiative, a charge
of $3.6 million related to the store labor buyout initiative, a charge of $1.6 million related to executive separation agreements
and a charge of $0.5 million related to stock-based compensation. The quarterly financial data for the 13 weeks ended January 28,
2006 included a charge of $8.4 million related to the corporate headcount reduction program, a charge of $1.0 million related to an
executive separation agreement, a charge of $0.7 million related to stock-based compensation, a charge of $0.5 million related to a
merchandising and store initiative and is net of a gain of $0.3 million from the sale of assets. (c)

The
quarterly financial data for the 13 weeks ended July 30, 2005 included a charge of $2.8 million related to the early extinguishment
of mortgage debt. (d)

Due
to the issuance of Common Stock during fiscal 2005, the sum of the quarterly net losses per share did not equal the annual net loss
per share.   63  Pathmark Stores, Inc. Notes to Consolidated Financial Statements  (Continued)   Note 24.  Subsequent Event - Merger Agreement On March 5, 2007, A&P and
Pathmark announced that they had entered into a definitive agreement and plan of merger (the Merger Agreement) pursuant
to which A&P will acquire the Company for $1.3 billion in cash, stock and debt assumption or retirement (the
Merger). Pursuant to the Merger Agreement, each issued and outstanding share of Common Stock will be automatically
converted into the right to receive without interest, $9.00 in cash and 0.12963 shares of A&P common stock, par value $1.00 per
share (A&P Common Stock) at the effective time of the Merger. All outstanding warrants to purchase Common Stock,
other than the Yucaipa Warrants, will be assumed by A&P at the effective time of the Merger and converted into the right to
acquire upon exercise the Merger consideration. The Yucaipa Warrants will be exchanged at the effective time of the Merger for new
warrants to acquire A&P Common Stock pursuant to the terms and conditions set forth in an amended and restated warrant agreement
entered into between A&P and Yucaipa (the Yucaipa Warrant Agreement) concurrently with the Merger Agreement. Pursuant to
the Yucaipa Warrant Agreement, at the effective time of the Merger (i) the Series A Warrants to purchase 10,060,000 shares of Common
Stock at an exercise price of $8.50 per share will be exchanged for warrants to purchase 4,657,377.61 shares of A&P Common Stock at
an exercise price of $18.36 per share, and (ii) the Series B Warrants to purchase 15,046,350 shares of Common Stock at an exercise
price of $15.00 per share will be exchanged for warrants to purchase 6,965,858.19 shares of A&P Common Stock at an exercise price of
$32.40 per share. The Merger is subject to customary closing conditions, including, among others, (i) approval of the Merger by our
shareholders; (ii) approval of both the issuance of A&P Common Stock in connection with the Merger and the amendment of certain
preemptive rights provision contained in A&Ps charter by A&P stockholders, and (iii) the expiration or termination of
the waiting period under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended. In connection with the execution
of the Merger Agreement, Pathmark entered into a stockholder voting agreement (the Tengelmann Voting Agreement) with
Tengelmann Warenhandelsgesellschaft KG (Tengelmann). As of February 26, 2007, Tengelmann beneficially owned 21,995,371
shares of A&P Common Stock, representing approximately 52.9% of the outstanding A&P Common Stock. Pursuant to the Tengelmann
Voting Agreement, Tengelmann has agreed, among other things, to vote such shares in favor of the issuance of A&P Common Stock in
connection with the Merger Agreement and the amendment of certain preemptive rights provisions in A&Ps charter, and,
subject to certain exceptions, not to dispose of any such shares prior to consummation of the Merger Agreement. The Tengelmann
Voting Agreement will terminate if the Merger Agreement is terminated. In connection with the execution
of the Merger Agreement, Yucaipa also entered into a stockholder voting agreement (the Yucaipa Voting Agreement) with
A&P. As of February 26, 2007, Yucaipa beneficially owned 20,000,100 shares of Common Stock (excluding shares of Common Stock
issuable upon the exercise of the Yucaipa warrants), representing approximately 38.3% of the outstanding Common Stock. Pursuant to
the Yucaipa Voting Agreement, Yucaipa has agreed, among other things, to vote shares of Common Stock representing up to 33% of the
outstanding Common Stock in favor of the Merger Agreement, the Merger and the other transactions contemplated thereby, and, subject
to certain exceptions, not to dispose of any of its shares prior to consummation of the Merger. The Yucaipa Voting Agreement will
terminate if the Merger Agreement is terminated.    64  Report of Independent Registered Public Accounting Firm   To the Board of Directors and Shareholders of Pathmark Stores, Inc. Carteret, New Jersey We have audited the accompanying consolidated balance sheets of Pathmark Stores, Inc. and subsidiaries (the Company) as of February 3, 2007 and January 28, 2006, and the related consolidated statements of income, stockholders equity, and cash flows for the 53 week period ended February 3, 2007 and each of the 52 week periods ended January 28, 2006 and January 29, 2005.  These financial statements are the responsibility of the Companys management.  Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of Pathmark Stores, Inc. and subsidiaries as of February 3, 2007 and January 28, 2006, and the results of their consolidated operations and their consolidated cash flows for the 53 week period ended February 3, 2007 and for each of the 52 week periods ended January 28, 2006 and January 29, 2005, in conformity with accounting principles generally accepted in the United States of America. As discussed in Note 1 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 123(R), Share-Based Payment, as revised, effective January 29, 2006, and SFAS No. 158 Employers Accounting for Defined Benefit Pension and Other Postretirement Plans  an amendment of SFAS No. 87, 88, 106 and 132(R) effective February 3, 2007. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Companys internal control over financial reporting as of February 3, 2007, based on the criteria established inInternal ControlIntegrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 19, 2007 expressed an unqualified opinion on managements assessment of the effectiveness of the Companys internal control over financial reporting and an unqualified opinion on the effectiveness of the Companys internal control over financial reporting. /s/ Deloitte & Touche LLP  New York, New York April 19, 2007   65  Pathmark Stores, Inc. Managements Annual Report on Internal Control Over Financial Reporting  The management of Pathmark Stores, Inc. (the Company or Pathmark) is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) under the Securities Exchange Act of 1934.  Pathmarks internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.  The Companys internal control over financial reporting includes those policies and procedures that:  (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of Pathmark; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of Pathmark are being made only in accordance with authorization of management and directors of Pathmark; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of Pathmarks assets that could have a material effect on the financial statements.  Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluations of effectiveness to future periods are subject to the risk that controls may become inadequate because of the changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. With the participation of the Companys Chief Executive Officer and the Chief Financial Officer, management assessed the effectiveness of the Companys internal control over financial reporting as of February 3, 2007.  In making this assessment, management used criteria established in Internal Control  Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  As a result, management determined that the Companys internal control over financial reporting was effective as of February 3, 2007 based on the criteria established in COSOs Internal Control  Integrated Framework. The Companys independent auditor, Deloitte & Touche LLP, a registered public accounting firm, has issued an audit report on our managements assessment of our internal control over financial reporting.  Their report follows.   /s/ John T. Standley
        
        /s/ Frank G. VitranoJohn T. Standley
        
        Frank G. VitranoChief Executive Officer
        
        President and Chief Financial OfficerApril 19, 2007
        
        April 19, 2007
   66  Report of Independent Registered Public Accounting Firm   To the Board of Directors and Shareholders of Pathmark Stores, Inc. Carteret, New Jersey  We have audited managements assessment, included in the accompanying Managements Annual Report on Internal Control Over Financial Reporting, that Pathmark Stores, Inc. and subsidiaries (the Company) maintained effective internal control over financial reporting as of February 3, 2007, based on criteria established inInternal ControlIntegrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission.  The Companys management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting.  Our responsibility is to express an opinion on managements assessment and an opinion on the effectiveness of the Companys internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.  Our audit included obtaining an understanding of internal control over financial reporting, evaluating managements assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances.  We believe that our audit provides a reasonable basis for our opinions. A companys internal control over financial reporting is a process designed by, or under the supervision of, the companys principal executive and principal financial officers, or persons performing similar functions, and effected by the companys board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  A companys internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements. Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis.  Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, managements assessment that the Company maintained effective internal control over financial reporting as of February 3, 2007, is fairly stated, in all material respects, based on the criteria established inInternal ControlIntegrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission.  Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of February 3, 2007, based on the criteria established inInternal ControlIntegrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission. We have also audited, in accordance with the
standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the
year ended February 3, 2007 of the Company and our report dated April 19, 2007 expressed an unqualified opinion on those financial
statements and included an explanatory paragraph regarding the Companys adoption of Statement of Financial Accounting
Standards No. 123(R), Share-Based Payment, as revised, and SFAS No. 158 Employers Accounting for Defined
Benefit Pension and Other Postretirement Plans  an amendment of SFAS No. 87, 88, 106 and 132(R).  /s/ Deloitte & Touche LLP  New York, New York April 19, 2007  67  Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. Item 9A. 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 February 3, 2007.  Based on that evaluation, the Companys Chief Executive Officer and Chief Financial Officer have concluded that the Companys disclosure controls and procedures were effective as of February 3, 2007. There has been no change during the Companys fiscal quarter ended February 3, 2007 in the Companys internal control 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 control over financial reporting. Managements Annual Report and the Report of Independent Registered Public Accounting firm are incorporated by reference from Item 8 to this Form 10-K.  Item 9B. Other Information. None.  Part III Item 10. Directors and Executive Officers of the Registrant. Information required by this item
will be included in the registrants 2007 Proxy Statement which will be filed with the SEC within 120 days after February 3,
2007, and is incorporated herein by reference, except that information concerning the Executive Officers of the Registrant is
contained in Part I of this Annual Report on Form 10-K. Item 11. Executive Compensation Information required by this item
will be included in the registrants 2007 Proxy Statement which will be filed with the SEC within 120 days after February 3,
2007, and is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management Information required by this item will be included in the registrants 2007 Proxy Statement which will be filed with the SEC within 120 days after February 3, 2007, and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions Information required by this item will be included in the registrants 2007 Proxy Statement which will be filed with the SEC within 120 days after February 3, 2007, and is incorporated herein by reference.  68   Part IV Item 14. Principal Accounting Fees and Services Information required by this item will be included in the registrants 2007 Proxy Statement which will be filed with the SEC within 120 days after February 3, 2007, and is incorporated herein by reference. Item 15. Exhibits and Financial Statement Schedules. (e)

Exhibits  Incorporated
herein by reference is a list of exhibits in the Exhibit Index on pages 71 to 75 of this
report.  (f)

Financial
Statement Schedules  None required.  Signatures Pursuant to the requirements of
Section 13 or 15(d) 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. Date:  April 19, 2007
        Pathmark Stores, Inc.By
        /s/ Frank G. Vitrano(Frank G. Vitrano)President and Chief Financial OfficerBy
        /s/ Kevin R. Darrington(Kevin R. Darrington)SeniorVice President, Controllerand Chief Accounting Officer
   69  Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities and on
the dates indicated. Signature
        
        Title
        Date/s/ John T. Standley
        
        Director and Chief Executive Officer
        April 19, 2007(John T. Standley)
        
        (Principal Executive Officer)/s/ Frank G. Vitrano
        
        President and Chief Financial Officer
        April 19, 2007(Frank G. Vitrano)
        
        (Principal Financial Officer)/s/Kevin R. Darrington
        
        Senior Vice President, Controller and
        April 19, 2007(Kevin R. Darrington)
        
        Chief Accounting Officer(Principal Accounting Officer)/s/ Michael R. Duckworth
        
        Director *
        April 19, 2007(Michael R. Duckworth)/s/ Daniel H. Fitzgerald
        
        Director *
        April 19, 2007(Daniel H. Fitzgerald)/s/ Bruce L. Hartman
        
        Director *
        April 19, 2007(Bruce L. Hartman)/s/ David R. Jessick
        
        Director *
        April 19, 2007(David R. Jessick)/s/ Larry R. Katzen
        
        Director *
        April 19, 2007(Larry R. Katzen)/s/ Gregory Mays
        
        Director *
        April 19, 2007(Gregory Mays)/s/ Sarah E. Nash
        
        Director
        April 19, 2007(Sarah E. Nash)/s/ Ira Tochner
        
        Director *
        April 19, 2007(Ira Tochner)/s/ John J. Zillmer
        
        Director *
        April 19, 2007(John J. Zillmer)
  *By:
        Marc A. Strassler(Marc A. Strassler)Attorney-in-Fact
  70   Exhibit Index  Exhibit Number
        Document Name2.1
        Agreement and Plan of Merger among the Company, the Great Atlantic & Pacific Tea Company, Inc. and Sand Merger Corp., dated March 4, 2007 (incorporated by reference from the Companys Current Report on Form 8-K as filed with the SEC on March 4, 2007 (the March 2007 Form 8-K)).3.1
        Amended and Restated Certificate of Incorporation of the Company (incorporated by reference from the Companys Registration Statement on Form S-1 as filed with the SEC on October 19, 2000, File No. 333-46882 (the 2000 Registration Statement)).3.2
        Amended and Restated Bylaws of the Company (incorporated by reference from the Companys Current Report on Form 8-K as filed with the SEC on December 6, 2005 (the December 6, 2005 Form 8-K)).4.1
        Registration Rights Agreement (incorporated by reference from the 2000 Registration Statement).4.2
        Warrant Agreement (incorporated by reference from the 2000 Registration Statement).4.3
        Indenture, dated as of January 29, 2002, among the Company, the subsidiary guarantors named therein and Wells Fargo Bank Minnesota, National Associate, Trustee (incorporated by reference from the Companys Registration Statement as filed with the SEC on March 11, 2002, File No. 333-84102 (the 2002 Form S-4)).4.4
        First Supplemental Indenture, dated as of January 30, 2002 (incorporated by reference from the 2002 Form S-4).4.5
        Warrant Agreement among the Company and certain investors named therein (incorporated by reference from the Companys Current Report on Form 8-K as filed with the SEC on June 15, 2005 (the June 2005 Form 8-K)).4.6
        Registration Rights Agreement among the Company and certain investors named therein (incorporated by reference from the June 2005 Form 8-K).10.1
        Pension Plan as amended through December 30, 2005 (incorporated by reference from the Companys Annual Report on Form 10-K for the fiscal year ended January 28, 2006 (the 2005 Annual Report)).10.2
        Excess Benefit Plan, dated March 9, 1987 (incorporated by reference from the 2005 Annual Report).10.3
        Savings Plan as amended through March 28, 2005 (incorporated by reference from the 2005 Annual Report).10.4
        First Amended and Restated Supply Agreement among the Company, Plainbridge and C&S, dated as of January 29, 1998 (incorporated by reference from the Companys Annual Report on Form 10-K for the fiscal year ended January 31, 1998).10.5
        Employment agreement between the Company and John T. Standley (incorporated by reference from the Companys Current Report on Form 8-K as filed with the SEC on August 25, 2005 (the August 2005 Form 8-K).10.6
        Award Agreement (Stock Option) between the Company and John T. Standley (incorporated by reference from the August 2005 Form 8-K).10.7
        Award Agreement (Restricted Stock) between the Company and John T. Standley (incorporated by reference from the August 2005 Form 8-K).
   71  Exhibit Index  (Continued)   Exhibit
Number
        Document Name10.8
        Amendment to John T. Standleys Employment Agreement, dated October 11, 2006 (incorporated by reference from the Companys Quarterly Report on Form 10-Q for the fiscal quarter ended October 26, 2006).10.9
        Amended and Restated Employment Agreement, dated as of November 20, 2002, between the Company and Frank G. Vitrano (incorporated by reference from the Companys Quarterly Report on Form 10-Q for the fiscal quarter ended November 2, 2002).10.10
        First Amendment to the Amended and Restated Employment Agreement between the Company and Frank G. Vitrano (incorporated by reference from the Companys Current Report on Form 8-K as filed with the SEC on December 23, 2005 (the December 23, 2005 Form 8-K)).10.11
        Award Agreement (Stock Option) between the Company and Frank G. Vitrano (incorporated by reference from the December 23, 2005 Form 8-K).10.12
        Award Agreement (Restricted Stock) between the Company and Frank G. Vitrano (incorporated by reference from the December 23, 2005 Form 8-K).10.13
        Supplemental Retirement Agreement dated March 1, 2000 between the Company and Frank G. Vitrano (incorporated by reference from the Companys Annual Report on Form 10-K for the fiscal year ended January 29, 2000 (the 1999 Annual Report)).10.14
        Amendment Number 1, dated as of March 29, 2004, to the Supplemental Retirement Agreement, dated as of March 1, 2000, between the Company and Frank G. Vitrano (incorporated by reference from the Companys Quarterly Report on Form 10-Q for the fiscal quarter ended May 1, 2004 (the May 2004 Form 10-Q)).10.15
        Employment Agreement between the Company and Kenneth Martindale (incorporated by reference from the Companys Current Report on Form 8-K as filed with the SEC on December 19, 2005 (the December 19, 2005 Form 8-K)).10.16
        Award Agreement (Stock Option) between the Company and Kenneth Martindale (incorporated by reference from the December 19, 2005 Form 8-K).10.17
        Award Agreement (Restricted Stock) between the Company and Kenneth Martindale (incorporated by reference from the December 19, 2005 Form 8-K).*10.18
        Amendment to Employment Agreement between the Company and Kenneth Martindale dated as of November 28, 2006.10.19
        Employment Agreement between the Company and Robert Joyce, dated as of February 1, 1999 (incorporated by reference from the Solicitation/Recommendation Statement of Holdings on Form 14D-9 filed with the SEC on March 16, 1999).10.20
        Sale and Retention Bonus Agreement, dated as of February 1, 2000, between the Company and Robert Joyce (incorporated be reference from the 1999 Annual Report).10.21
        Side Letter to the Sale and Retention Bonus Agreement, the Stock Award Agreement and the Employment Agreement, dated as of July 1, 2000, between the Company and Robert Joyce (incorporated by reference from the 2000 Registration Statement).  *  Filed herewith.   72  Exhibit Index  (Continued)   ExhibitNumber
        Document Name10.22
        Supplemental Retirement Agreement, dated as of June 1, 1994, between the Company and Robert Joyce (incorporated by reference from the Companys Annual Report on Form 10-K for the fiscal year ended January 28, 1995 (the 1994 Annual Report)).10.23
        Letter Agreement re:  Transaction Bonus, between the Company and Robert J. Joyce, dated March 4, 2007 (incorporated by reference from the March 2007 Form 8-K).*10.24
        Employment Agreement, dated as of February 1, 1999, between the Company and Marc Strassler.*10.25
        Sale and Retention Bonus Agreement, dated as of February 1, 2000, between the Company and Marc Strassler.*10.26
        Side Letter to the Sale and Retention Bonus Agreement, the Employment Agreement and Certain Additional Understandings, dated as of July 1, 2000, between the Company and Marc Strassler.*10.27
        Supplemental Retirement Agreement, dated as of June 1, 1994, between the Company and Marc Strassler.*10.28
        Amendment Number 1 to Supplemental Retirement Agreement, dated as of March 25, 1994, between the Company and Marc Strassler.10.29
        Supplemental Retirement Agreement, dated as of March 1, 2000, between the Company and Eileen Scott (incorporated by reference from the 1999 Annual Report).10.30
        Amendment Number 1, dated as of March 29, 2004, to the Supplemental Retirement Agreement, dated as of March 1, 2000, between the Company and Eileen Scott (incorporated by reference from the May 2004 Form 10Q).10.31
        Separation Agreement between the Company and Eileen Scott (incorporated by reference from the Companys Current Report on Form 8-K as filed with the SEC on November 4, 2005).10.32
        Separation Agreement between the Company and Herbert Whitney (incorporated by reference from the Companys Current Report on Form 8-K as filed with the SEC on December 22, 2005).10.33
        Employment Agreement, dated as of April 1, 2004, between the Company and Mark Kramer (incorporated by reference from the 2005 Annual Report).10.34
        Supplemental Retirement Agreement, dated as of March 25, 2004, between the Company and Mark Kramer (incorporated by reference from the 2005 Annual Report).10.35
        2000 Employee Equity Plan (the Employee Plan) as amended and restated as of November 30, 2005 (incorporated by reference from the Companys Proxy Statement as filed with the SEC on November 2, 2005 (the 2006 Proxy Statement)).10.36
        Form of Award Agreement (Stock Option) pursuant to the Employee Plan (incorporated by reference from the 2006 Proxy Statement).
  *  Filed herewith.   73  Exhibit Index  (Continued)   ExhibitNumber
        Document Name10.38
        2000 Non-Employee Directors Equity Plan (the Directors Plan) as amended and restated as of November 30, 2005 (incorporated by reference from the 2006 Proxy Statement).10.39
        Form of Award Agreement (Stock Option) pursuant to the Directors Plan (incorporated by reference from the Companys Quarterly Report on Form 10-Q for the fiscal quarter ended October 30, 2004).10.40
        2006 Executive Incentive Plan for Executive Officers, effective June 8, 2006 (incorporated by reference from the Companys Proxy Statement as filed with the SEC on May 8, 2006).10.41
        Credit Agreement, dated as of October 1, 2004, among the Company, Lenders party thereto and Fleet Retail Group, a Bank of America company, as Administrative Agent (incorporated by reference from the Companys Current Report on Form 8-K as filed with the SEC on October 5, 2004).10.42
        First Amendment to the Credit Agreement (incorporated by reference from the Companys Current Report on Form 8-K as filed with the SEC on June 15, 2005.10.43
        Second Amendment to the Credit Agreement (incorporated by reference from the Companys Quarterly Report on Form 10-Q for the fiscal quarter ended October 29, 2005).10.44
        Third Amendment to the Credit Agreement, dated December 13, 2005 (incorporated by reference from the 2005 Annual Report).10.45
        Fourth Amendment to the Credit Agreement, dated March 24, 2006 (incorporated by reference from the 2005 Annual Report).10.46
        Fifth Amendment to the Credit Agreement, dated December 15, 2006 (incorporated by reference from the Companys Current Report on Form 8-K as filed with the SEC on December 15, 2006).10.47
        Securities Purchase Agreement, dated as of March 23, 2005, among the Company and Yucaipa Corporation Initiatives Funds I, L.P., Yucaipa American Alliance Fund I, L.P., Yucaipa American Alliance (Parallel) Fund I, L.P. and The Yucaipa Companies LLC (as the Investors representative) (incorporated by reference from the Companys Current Report on Form 8-K as filed with the SEC on March 28, 2005 (the March 2005 Form 8-K)).10.48
        Management Services Agreement, dated as of March 23, 2005, by and between the Company and The Yucaipa Companies LLC (incorporated by reference from the March 2005 Form 8-K).10.49
        Amended and Restated Stockholders Agreement among the Company and certain investors named therein (incorporated by reference from the December 6, 2005 Form 8-K).10.50
        Retirement Incentive Program  Program Offering from December 9, 2005 to January 23, 2006 (incorporated by reference from the 2005 Annual Report).10.51
        Stockholder Voting Agreement between the Company and Tenglemann Warenhandelsgesellschaft KG, dated March 4, 2007 (incorporated by reference from the March 2007 Form 8-K).10.52
        Deferred Compensation Plan, effective as of August 25, 2006 (incorporated by reference from the Companys Current Report on Form 8-K as filed with the SEC on September 27, 2006).
   74  Exhibit Index  (Continued)   ExhibitNumber
        Document Name*10.53
        Employment Agreement, dated as of October 25, 2000, between the Company and John Derderian.*10.54
        Supplemental Retirement Agreement, dated as of March 25, 2004, between the Company and John Derderian.10.55
        Employment Agreement, dated as of May 1, 2006, between the Company and Kevin Darrington (incorporated by reference from the Companys Quarterly Report on Form 10-Q for the fiscal quarter ended July 29, 2006).*12.1
        Computation of Ratio of Earnings to Fixed Charges.*21.1
        List of Subsidiaries.*23.1
        Consent of Deloitte & Touche LLP.*31.1
        Form of CEO Certification.*31.2
        Form of CFO Certification.*32.1
        Certification of John T. Standley, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*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.   75