<PAGE>

                        SECURITIES AND EXCHANGE COMMISSION 
                              Washington, D.C. 20549 

                                   FORM 10-K 

                 (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) 
                        OF THE SECURITIES EXCHANGE ACT OF 1934
                      For the fiscal year ended February 1, 1997 
                                             OR 
               ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) 
                        OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from___________to___________

Commission file number 1-9930 
                                 THE PENN TRAFFIC COMPANY 
                  (Exact name of Registrant as specified in its charter) 

             DELAWARE                                 25-0716800
     --------------------------------          --------------------------
    (State or other jurisdiction                   (I.R.S. Employer
    of incorporation or organization)              Identification No.)

          1200 State Fair Boulevard, Syracuse, New York 13221-4737
         -----------------------------------------------------------
          (Address of principal executive offices)       (Zip Code) 

       Registrant's telephone number, including area code: (315) 453-7284

Securities registered pursuant to Section 12(b) of the Act: 

                                                           Name of each exchange
     Title of each class                                    on which registered
 ------------------------------                          ----------------------
 Common Stock, $1.25 par value                           New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: NONE
 
    Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past ninety (90) days.
 
                               YES X    NO
 
    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. [ X ]
 
    The aggregate market value of voting stock held by non-affiliates of the
Registrant was $54,230,614 as of April 24, 1997.
 
Common Stock $1.25 par value Shares outstanding--10,867,941 as of April 24, 1997
 
    DOCUMENTS INCORPORATED BY REFERENCE 

     Portions of the Proxy Statement dated May 1, 1997 provided to 
Registrant's stockholders in connection with the annual meeting of 
stockholders scheduled for June 3, 1997 are incorporated by reference in Part 
III of this Form 10-K.
 

<PAGE>
                                FORM 10-K INDEX
 
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
PART I                                                                                   PAGE
-----------------------------------------------------------------------------------------------
<S>                                                                                 <C>
Item 1.   Business                                                                           3
Item 2.   Properties                                                                        13
Item 3.   Legal Proceedings                                                                 13
Item 4.   Submission of Matters to a Vote of Security Holders                               13
Supplemental Item. Executive Officers of Registrant                                         14
-----------------------------------------------------------------------------------------------
PART II
-----------------------------------------------------------------------------------------------

Item 5.   Market for Registrant's Common Equity and Related
          Stockholder Matters                                                               17
Item 6.   Selected Financial Data                                                           17
Item 7.   Management's Discussion and Analysis of Financial
          Condition and Results of Operations                                               17
Item 8.   Financial Statements and Supplementary Data                                       17
Item 9.   Changes in and Disagreements with Accountants on
          Accounting and Financial Disclosure                                               18
-----------------------------------------------------------------------------------------------
PART III
-----------------------------------------------------------------------------------------------
Item 10.  Directors and Executive Officers of Registrant                                58
Item 11.  Executive Compensation                                                            58
Item 12.  Security Ownership of Certain Beneficial Owners
          and Management                                                                    58
Item 13.  Certain Relationships and Related Transactions                                    58
-----------------------------------------------------------------------------------------------
PART IV
-----------------------------------------------------------------------------------------------
Item 14.  Exhibits, Financial Statement Schedules and
          Reports on Form 8-K                                                               59

</TABLE>

                                       2

<PAGE>

                                     PART I
 
ITEM 1. BUSINESS (AS OF FEBRUARY 1, 1997 UNLESS OTHERWISE NOTED)
 
GENERAL
 
    The Penn Traffic Company ("Penn Traffic" or the "Company") is one of the
leading food retailers in the eastern United States. Penn Traffic operates 265
supermarkets in Pennsylvania, upstate New York, Ohio and northern West Virginia
under the names "Big Bear" and "Big Bear Plus" (78 stores), "Bi-Lo Foods" (40
stores), "Insalaco's" (29 stores), "P&C" (66 "P&C" stores and one "Big M"
store), "Quality Markets" (42 stores) and "Riverside" (9 stores). Penn Traffic
also operates a wholesale food distribution business which serves 114 licensed
franchisees and 99 independent operators. Total revenues for the fiscal year
ended February 1, 1997 ("Fiscal 1997") aggregated approximately $3.3 billion.

    Approximately 65% of Penn Traffic's retail supermarket revenues are in
smaller communities where Penn Traffic believes it virtually always holds the
number one or number two market position. The balance of Penn Traffic's retail
supermarket revenues are in Columbus, Ohio, Buffalo and Syracuse, New York and
Scranton/Wilkes-Barre, Pennsylvania.
 
    Penn Traffic's retail and wholesale operations stretch from Ohio to upstate
New York. The Company operates in communities with diverse economies based
primarily on manufacturing, natural resources, retailing, health care services,
education and government services. No supermarket company competes against Penn
Traffic supermarkets representing 25% or more of the Company's retail
supermarket revenues, with the exception of The Kroger Co. and Wegmans Food
Markets, Inc., which compete against supermarkets representing approximately 35%
and 25% of Penn Traffic's retail supermarket revenues, respectively.
 
    In addition, Penn Traffic operates a full-service dairy business in
Johnstown, Pennsylvania under the name "Sani-Dairy" and a bakery business in
Syracuse, New York under the name "Penny Curtiss".
 
    Penn Traffic pursues a capital program that seeks to match store size and
format to local demographics and competitive conditions. During the five fiscal
years ended February 1, 1997, Penn Traffic opened or remodeled approximately 60%
of its retail supermarket square footage. These larger, more modern facilities
strengthen Penn Traffic's competitive position and enable it to offer its
customers a broader variety of specialty departments, including pharmacies,
bakeries, delicatessens, floral products, greeting cards and other general
merchandise.
 
    The principal executive offices of Penn Traffic are located at 1200 State
Fair Boulevard, Syracuse, New York 13221-4737. The Company's telephone number is
(315) 453-7284.

                                   3

<PAGE>
 
    Certain statements included in this Part I, Item 1, "Business", and
elsewhere in this Annual Report on Form 10-K which are not statements of
historical fact are intended to be, and are hereby identified as,
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Without limiting the foregoing, the words
"believe", "anticipate", "plan", "expect", "estimate", "intend" and other
similar expressions are intended to identify forward-looking statements. The
Company cautions readers that forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause the actual
results, performance or achievements of the Company to be materially different
from any future results, performance or achievement expressed or implied by such
forward-looking statements. Such factors include, among others, the following:
general economic and business conditions; competition; the success or failure of
the Company in implementing its current business strategy; changes in the
Company's business strategy; availability, location and terms of sites for store
development; availability, terms of development of capital; labor relations; and
labor and employee benefit costs.
 
RETAIL FOOD DISTRIBUTION BUSINESS
 
    Penn Traffic is one of the leading supermarket retailers in its primary
operating areas which include New York, Pennsylvania and Ohio. Penn Traffic's
supermarkets are primarily located in towns and small cities.
 
    Penn Traffic's store sizes and formats vary widely, depending upon the
demographic and competitive conditions in each location. For example,
"conventional" store formats are generally more appropriate in areas of low
population density, while larger areas are better served by full-service
supermarkets of up to 65,000 square feet, which contain numerous specialty
service departments such as bakeries, delicatessens, floral departments and
fresh seafood departments. Penn Traffic's "Plus" format stores range in size
from 65,000 to 140,000 square feet. These full service supermarkets carry an
expanded variety of nonfood merchandise.
 
    Penn Traffic's supermarkets offer a broad selection of grocery, meat, 
poultry, seafood, dairy, fresh produce, delicatessen, bakery and frozen food 
products. The stores also offer nonfood products and services such as health 
and beauty products, housewares, general merchandise, floral items, video 
rental departments and banking services. In general, Penn Traffic's larger 
stores carry broader selections of merchandise and feature a larger variety 
of service departments. Most of the Company's supermarkets are located in 
shopping centers.

                                      4

<PAGE>

    Selected statistics on Penn Traffic's retail food stores are presented
below.
<TABLE>
<CAPTION>
                                                               FISCAL YEAR ENDED
                                     ---------------------------------------------------------------------------------
                                          FEBRUARY 1,      FEBRUARY 3,    JANUARY 28,    JANUARY 29,    JANUARY 30,
                                             1997             1996           1995           1994           1993
                                       -----------------  -------------  -------------  -------------  -------------
                                                           (53 WEEKS)(1)
<S>                                    <C>                <C>            <C>            <C>            <C>
Average annual revenues per store....  $      10,598,000  $  10,900,000  $  11,648,000  $  11,428,000  $  11,441,000
Total store area in square feet......         10,737,891     10,424,538      9,927,633      8,803,297      7,868,411
Total store selling area in square
  feet...............................          7,780,811      7,527,665      7,140,390      6,333,023      5,684,179
Average total square feet per
  store..............................             40,520         39,338         37,182         37,945         36,260
Average square feet of selling area
  per store..........................             29,362         28,406         26,743         27,298         26,194
Annual revenues per square foot of
  selling area.......................  $          367.52  $      397.13  $      423.43  $      427.72  $      453.00
Number of stores: Remodels/
  expansions (over $100,000).........                  7             15              9             39             12
New stores opened....................                  5             11             12             12             10
Stores acquired......................                  2              2             31(2)          19(3)          29(4)
Stores closed........................                  7             15              8             16             11
Size of stores (total store area):

Up to 19,999 square feet.............                 37             37             39             29             33
20,000--29,999
square feet......                                     52             56             67             60             63
30,000--44,999
square feet......                                     93             95             96             86             73
45,000--60,000
square feet......                                     55             53             48             43             36
Greater than 60,000 square feet......                 28             24             17             14             12
Total stores open at fiscal year-
  end................................                265            265            267            232            217
</TABLE>
 
------------------------
 
(1) Average annual revenues per store and annual revenues per square foot of
    selling area are calculated on a 52-week basis.
 
(2) Includes the addition of 30 of the 45 former Acme stores acquired by the
    Company in January 1995 which the Company initially expected to operate.
 
(3) Includes the addition of 12 Insalaco's stores acquired by the Company in
    September 1993 which the Company initially operated.
 
(4) Includes the addition of 23 stores acquired from the Peter J. Schmitt Co.,
    Inc. in January 1993 which the Company initially operated.
 
                                       5
<PAGE>

WHOLESALE FOOD DISTRIBUTION BUSINESS
 
    Penn Traffic licenses the use of its "Riverside", "Bi-Lo Foods" and "Big M"
names to 114 independently-owned supermarkets that are required to maintain
certain quality and other standards and 99 independent operators. The majority
of these independent stores use Penn Traffic as their primary wholesaler and
also receive advertising, accounting, merchandising, consulting and retail
counseling services from Penn Traffic. Penn Traffic receives rent from 63 of the
licensed independent operators which lease or sublease the supermarket
buildings.
 
    In Fiscal 1997, Penn Traffic's wholesale operations accounted for $401.9
million or 12.2% of total revenues. The incremental volume provided by wholesale
operations enhances Penn Traffic's purchasing power and the efficiency of its
distribution system.
 
    At February 1, 1997, Penn Traffic had guaranteed obligations of $0.5 million
of indebtedness of certain of such licensed independent operators.
 
FOOD PROCESSING OPERATIONS
 
    The Company owns and operates Johnstown Sanitary Dairy ("Sani-Dairy"), a
dairy processing plant in Johnstown, Pennsylvania, which is one of the largest
dairies in Pennsylvania. Sani-Dairy sells its products to certain Penn
Traffic-owned and licensed supermarkets and to other retail outlets located in
Pennsylvania and adjoining states.
 
    Penn Traffic owns and operates Penny Curtiss Bakery ("Penny Curtiss"), a
bakery processing plant in Syracuse, New York. This operation primarily supplies
certain of the Company's stores and its affiliated accounts with private label
fresh and frozen bakery products. In addition, Penny Curtiss supplies several
other companies unrelated to Penn Traffic with bakery products.
 
MASS MERCHANDISING BUSINESS
 
    During the second quarter of Fiscal 1996, Penn Traffic decided to close 11
of its 15 remaining stand-alone general merchandise stores (Harts) in Ohio.
During Fiscal 1997, one of the four remaining Harts stores was converted to a
Big Bear Plus store. The other three former Harts stores are now operated under
the Company's "Plus" trade name.

                                     6

<PAGE>

PURCHASING AND DISTRIBUTION
 
    Penn Traffic is a large volume purchaser of products. Penn Traffic's
purchases are of sufficient volume to qualify for minimum price brackets for
most items. Penn Traffic purchases brand name grocery merchandise directly from
national manufacturers. The Company purchases private label products and
certain other grocery items from TOPCO Associates, Inc., a national products
purchasing cooperative comprising 30 regional supermarket chains. In Fiscal
1997, purchases from TOPCO Associates accounted for approximately 17% of
product purchases.
 
    Penn Traffic's principal Pennsylvania distribution facilities are a
Company-owned 390,000-square foot distribution center in DuBois, Pennsylvania
and a Company-owned 248,000-square foot distribution center in Scranton,
Pennsylvania. Penn Traffic also operates 196,000-square foot and 86,000-square
foot distribution centers for perishable products in DuBois and Scranton,
Pennsylvania, respectively. In addition, Penn Traffic leases a 70,000-square
foot warehouse in DuBois, Pennsylvania, in which Penn Traffic houses grocery
products, certain store supplies and aerosol products.
 
    The principal New York distribution facilities are a Company-owned
498,000-square foot distribution center in Syracuse, New York and a
Company-owned 267,000-square foot distribution center in Jamestown, New York.
The Company also owns a 217,000-square foot distribution center for perishable
products in Syracuse, New York.
 
    The primary Ohio distribution center is a leased 484,000-square foot dry
grocery facility in Columbus, Ohio. Penn Traffic also owns a 208,000-square foot
distribution facility for perishable goods in Columbus, Ohio. The Company also
leases three additional warehouses totaling 603,000-square feet, in Columbus,
Ohio for distribution of general merchandise and health and beauty care items to
all Penn Traffic stores.
 
    Approximately 75% of the merchandise offered in Penn Traffic's retail stores
is distributed from its warehouses by its fleet of 343 tractors, 439
refrigerated trailers and 520 dry trailers. Merchandise not delivered from Penn
Traffic's warehouses is delivered directly to the stores by manufacturers,
distributors, vendor drivers and sales representatives for such products as
beverages, snack foods and bakery items.
                                       7
<PAGE>

COMPETITION
 
    The food retailing business is highly competitive and may be affected by
general economic conditions. The number of competitors and the degree of
competition experienced by Penn Traffic's supermarkets vary by location. Penn
Traffic competes with several multi-regional, regional and local supermarket
chains, convenience stores, stores owned and operated and otherwise affiliated
with large food wholesalers, unaffiliated independent food stores, warehouse
clubs, discount drug store chains, discount general merchandise chains and
"supercenters" (combination supermarket and general merchandise stores). No
supermarket company competes against Penn Traffic supermarkets representing 25%
or more of the Company's retail supermarket revenues, with the exception of The
Kroger Co. and Wegmans Food Markets, Inc., which compete against supermarkets
representing approximately 35% and 25% of Penn Traffic's retail supermarket
revenues, respectively.

                                       8

<PAGE>
 
EMPLOYEES
 
    Labor costs and their impact on product prices are important competitive
factors in the supermarket industry. At February 1, 1997, Penn Traffic had
approximately 25,500 hourly employees and 1,800 salaried employees.
 
    Approximately 55% of Penn Traffic's hourly employees belong to the United
Food and Commercial Workers Union. An additional 6% of Penn Traffic's hourly
employees (principally employed in the distribution function and in the
Company's dairy and bakery plants) belong to five other unions. The Company
competes with certain independently-owned and chain-owned supermarkets, discount
drug stores, warehouse clubs, general merchandise stores, convenience stores and
supercenters, whose employees are not union affiliated.
 
    The Company experienced a work stoppage at its Sani-Dairy division from
August 1, 1996 through September 22, 1996 affecting approximately 200 employees.
On September 16, 1996, a new five-year contract covering these employees was
ratified.
 
    While management believes that the Company's relations with its employees
are good, a prolonged labor dispute could have an adverse effect on the Company.
 
GOVERNMENT REGULATION
 
    The United States Department of Agriculture and the Pennsylvania Milk
Marketing Board each regulate and inspect all aspects of fluid milk and dairy
product production, enforcing strict standards of sanitation, product
composition, packaging and labeling, as well as regulating milk and dairy
product pricing. All dairy goods producers and distributors must comply with
substantially similar standards. Compliance by Penn Traffic with these standards
has not had and is not expected to have a significant effect on its earnings or
competitive position.
 
SEASONALITY, CUSTOMERS AND SUPPLIERS
 
    The supermarket business of Penn Traffic is generally not seasonal in
nature. During the past three fiscal years, no single customer or group of
customers under common control accounted for 10% or more of Penn Traffic's
consolidated revenues. Groceries, general merchandise and raw materials are
available from many different sources. During the past three fiscal years, no
single supplier accounted for 10% or more of Penn Traffic's cost of sales except
TOPCO Associates, Inc. which accounted for approximately 17% of product
purchases in Fiscal 1997.
                                       9
<PAGE>
 
HISTORY
 
    Penn Traffic is the successor to a retail business which dates back to 1854.
Penn Traffic, then a publicly held corporation, was acquired in March 1987 by
Riverside Acquisition Company, Limited Partnership ("RAC"), a Delaware limited
partnership and an affiliate of Miller Tabak Hirsch + Co. ("MTH"). At the time
of the acquisition, Penn Traffic was the largest retail and wholesale food
distribution company in its principal operating area, comprising 19 counties in
central and northwestern Pennsylvania and southwestern New York. In 1988, Penn
Traffic again became a publicly held corporation and stated that it intended to
acquire retail and wholesale food distribution companies contiguous to its
operating area.
 
    In August 1988, Penn Traffic acquired P&C Food Markets, Inc. ("P&C"), which
operates in a contiguous market to the east of Penn Traffic's historical
marketplace. In October 1991, P&C became a wholly-owned subsidiary of the
Company, and in April 1993, P&C was merged into the Company. P&C currently
operates as a division of the Company. P&C is headquartered in Syracuse, New
York and operates 66 "P&C" stores and one "Big M" store, franchises 64 "Big M"
stores and provides wholesaling services to 70 independent supermarkets.
 
    In April 1989, Penn Traffic acquired Big Bear Stores Company ("Big Bear"), a
leading food retailer in Columbus and eastern Ohio, which is to the west of Penn
Traffic's traditional market area. In April 1993, Big Bear was merged into the
Company. Big Bear currently operates as a division of the Company. Big Bear is
headquartered in Columbus, Ohio and operates 78 retail supermarkets under the
names "Big Bear" and "Big Bear Plus".
 
    In January 1993, Penn Traffic acquired 28 supermarkets located in western
New York and northwestern Pennsylvania from Peter J. Schmitt Co., Inc. Seventeen
of the stores are currently being operated by Penn Traffic.
 
    In September 1993, Penn Traffic acquired the operating assets of Insalaco
Supermarkets, Inc. ("Insalaco's"), which consisted of 12 supermarkets in
northeastern Pennsylvania.
 
    In January 1995, Penn Traffic acquired 45 supermarkets owned by American
Stores Company which had operated under the Acme trade name. Eighteen of these
acquired stores have been closed or sold. The Company is operating the remaining
27 stores under the Bi-Lo Foods, Insalaco's and P&C trade names.

                                10

<PAGE>

RELATIONSHIP WITH GRAND UNION
 
    In April 1989, Penn Traffic acquired an indirect ownership interest in the
common stock of the parent company of The Grand Union Company ("Grand Union"),
which is engaged in the food retailing business. As of February 2, 1991, Penn
Traffic had recorded losses which reduced the carrying value of its investment
to zero. Penn Traffic's equity interest in Grand Union's parent company became
worthless as the result of Grand Union's filing of a voluntary petition for
reorganization under Chapter 11 of the United States Bankruptcy Code in January
1995.
 
    In July 1990, P&C (then a subsidiary and now a division of Penn Traffic) 
and Grand Union entered into an operating agreement (the "New England 
Operating Agreement") whereby Grand Union acquired the right to operate 13 
P&C stores located in New England under the Grand Union name until July 2000. 
Pursuant to the New England Operating Agreement, Grand Union agreed to pay 
Penn Traffic (as the successor to P&C, which was merged into the Company in 
April 1993) a minimum annual fee averaging $10.7 million per year during the 
10-year term and, beginning with the year commencing July 31, 1992, to pay 
Penn Traffic additional contingent fees of up to $700,000 per year based upon 
sales performance of the stores operated by Grand Union. Pursuant to the 
terms of the New England Operating Agreement, a $15 million prepayment of the 
operating fee was made by Grand Union to Penn Traffic in July 1992. This 
prepayment reduced the future payments that Grand Union will make to Penn 
Traffic pursuant to the terms of the New England Operating Agreement by 
approximately $3.2 million per year.
 
    At the expiration of the 10-year term of the New England Operating
Agreement, Grand Union has the right to extend the term of the New England
Operating Agreement for an additional five years. In the event of such extension
of the lease term, Grand Union will pay to Penn Traffic an annual fee of $13.6
million in the first year of the extended term, $14.0 million in the second
year, $14.4 million in the third year, $14.9 million in the fourth year and
$15.3 million in the fifth year, plus contingent fees based upon the sales
performance of the stores of up to $700,000 in each year.

                                       11
<PAGE>
 
    Penn Traffic also granted Grand Union an option (the "Purchase Option") to
purchase the stores operated by Grand Union under the New England Operating
Agreement. Grand Union paid Penn Traffic $7.5 million for the Purchase Option,
which provides that (i) prior to July 30, 1998, Grand Union may purchase the
stores operated under the New England Operating Agreement from Penn Traffic for
a purchase price equal to $95 million and (ii) from July 30, 1998 and until the
expiration of the term (or the extended term) of the New England Operating
Agreement, Grand Union may purchase the stores operated under the New England
Operating Agreement from Penn Traffic for a purchase price equal to the greater
of $55 million or the amount produced under a formula based upon the stores'
cash flow, provided that the purchase price shall not exceed $95 million.
 
    If Grand Union does not extend the initial term of the New England Operating
Agreement at its expiration in July 2000, or does not exercise the Purchase
Option prior to the expiration of the term (or the extended term), or in the
event of a default by Grand Union in the performance of its obligations pursuant
to the New England Operating Agreement, the stores operated by Grand Union
pursuant to the New England Operating Agreement will be returned to operation by
Penn Traffic.

                                      12

<PAGE>
 
ITEM 2. PROPERTIES
 
    Penn Traffic follows the general industry practice of leasing the majority
of its retail supermarket locations. Penn Traffic presently owns 43 and leases
222 of the supermarkets that it operates. The owned supermarkets range in size
from 4,300 to 123,000-square feet. The leased supermarkets range in size from
8,100 to 140,000-square feet and are held under leases expiring from 1997 to
2016, excluding option periods. Penn Traffic also owns one supermarket and
leases 62 supermarkets which are leased or subleased to independent operators.
 
    Penn Traffic also owns 10 shopping centers, eight of which contain one of
the Company-owned or licensed supermarkets. Penn Traffic also operates major
distribution centers in DuBois and Scranton, Pennsylvania; Syracuse and
Jamestown, New York; and Columbus, Ohio; a dairy plant in Johnstown,
Pennsylvania; and a bakery plant in Syracuse, New York. Penn Traffic also owns a
fleet of trucks and trailers, fixtures and equipment utilized in its business
and other miscellaneous real estate.
 
    Penn Traffic believes that all of its properties, fixtures and equipment are
well maintained and in good condition.
 
ITEM 3. LEGAL PROCEEDINGS
 
    The Company and its subsidiaries are involved in several lawsuits, claims
and inquiries, most of which are routine to the nature of the business.
Estimates of future liability are based on an evaluation of
currently available facts regarding each matter. Liabilities are recorded when
it is probable that costs will be incurred and can be reasonably estimated.
Based on management's evaluation, the resolution of these matters will not
materially affect the financial position, results of operations or liquidity of
the Company.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
    No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year ended February 1, 1997.
 
                                       13

<PAGE>

SUPPLEMENTAL ITEM. EXECUTIVE OFFICERS OF REGISTRANT
 
    Certain information regarding the executive officers of Penn Traffic is set
forth as follows:
 
<TABLE>
<CAPTION>
NAME                                                       AGE                   POSITION WITH PENN TRAFFIC
-----------------------------------------------------      ---      -----------------------------------------------------
<S>                                                    <C>          <C>
Gary D. Hirsch                                                 47   Chairman and Director

Martin A. Fox                                                  43   Director, Vice Chairman--Finance and Assistant
                                                                    Secretary
Phillip E. Hawkins                                             45   Director, President and Chief Executive Officer

Stephen V. Breech                                              55   Senior Vice President and President of Big Bear
                                                                    Division
Nick Campbell                                                  38   Senior Vice President--Marketing

Roy M. Flood                                                   56   Senior Vice President and President of P&C Foods
                                                                    Division
Eugene R. Sunderhaft                                           49   Senior Vice President--Finance and Secretary (Chief
                                                                    Financial Officer)
David A. Adamsen                                               45   Vice President--Manufacturing

Larry B. Ammons                                                45   Vice President and President of Riverside Markets
                                                                    Division
Michael T. Del Viscio                                          48   Vice President--Nonfood Merchandising

Bradley W. Melvin                                              47   Vice President--Operations Support

Francis D. Price, Jr.                                          47   Vice President, General Counsel and Assistant
                                                                    Secretary
Randall J. Sweeney                                             45   Vice President and General Manager of Quality Markets
                                                                    Division
H. Phillip Williams                                            48   Vice President, Construction and Engineering
</TABLE>
 
    Each of the executive officers is a citizen of the United States.

                              14

<PAGE>

    Mr. Hirsch has been a Director and Chairman of Penn Traffic since 1987. Mr.
Hirsch has been a general partner and the managing partner of MTH
(broker-dealer) since March 1982 and a Managing Director of MTH Holdings, Inc.
("MTH Holdings") since November 1983. He is Chairman, President and a Director
of RAC Partners, Inc. ("RAC Partners"), the sole general partner of Riverside
Acquisition Company, Limited Partnership ("RAC"). Mr. Hirsch was Chairman and a
Director of Grand Union Holdings Corporation ("Grand Union Holdings") (food
distribution holding company) between 1989 and March 1996 and of certain of its
subsidiaries for certain periods between 1992 and March 1996.
 
    Mr. Fox has been Director and Vice Chairman--Finance since February 1993.
Mr. Fox was a Vice President of the Company from 1989 until February 1993. Mr.
Fox has been Assistant Secretary of Penn Traffic since 1989. Mr. Fox has been
Executive Vice President of MTH since 1988. Mr. Fox was a Vice President of
Grand Union Holdings between 1989 and March 1996, a Director of Grand Union
Holdings between 1992 and March 1996 and a Director and Vice President of
certain of its subsidiaries for certain periods between 1989 and March 1996.
 
    Mr. Hawkins has been a Director and the President and Chief Executive
Officer of the Company since April 1, 1997. Prior to joining Penn Traffic, Mr.
Hawkins spent twenty-nine years at Vons Companies, where he held various
management positions including Senior Vice President, Stores (from 1994 until
March 1997), Group Vice President, Perishables (from 1992 until 1994), Vice
President and General Manager, Pavilions Operations (from 1991 until 1992), and
Vice President, Sales and Marketing (from 1989 until 1991).
 
    Mr. Breech has been Senior Vice President of Penn Traffic and President 
of the Big Bear division since September 1995. Mr. Breech was Senior Vice 
President of Store Operations of Big Bear until September 1995. He was Vice 
President of Construction and Real Estate of Big Bear from 1989 until 1995. 
Mr. Breech served in various other positions at Big Bear between 1958 and 
1989.
 
    Mr. Campbell has been Senior Vice President of Marketing of Penn Traffic
since April 15, 1997. Mr. Campbell was Vice President of Sales and Merchandising
of the P&C division from 1995 until April 1997. Mr. Campbell served in various
other positions at Big Bear between 1976 and 1995.
 
    Mr. Flood has been Senior Vice President of Penn Traffic and President of
the P&C division since January 1995. Mr. Flood was Executive Vice President of
Merchandising of the Big Bear division from 1990 until January 1995. He was Vice
President of Sales and Merchandising of P&C from 1986 until 1990 and served in
various other positions at P&C between 1977 and 1986.
 
    Mr. Sunderhaft has been Senior Vice President--Finance of Penn Traffic since
January 1995 and has been Chief Financial Officer and Secretary of Penn Traffic
since May 1993. Mr. Sunderhaft had been a Vice President of Penn Traffic from
May 1993 until January 1995 and was Treasurer of Penn Traffic from May 1993
until April 1995. He became Vice President -Finance and Chief Financial Officer
of the P&C division in 1989 and served in various other positions at P&C between
1972 and 1989.
 
    Mr. Adamsen has been Vice President of Manufacturing of Penn Traffic since
September 1994 and President of Penny Curtiss since 1986. Mr. Adamsen served in
various other positions at Penny Curtiss between 1974 and 1986.

                               15

<PAGE>

    Mr. Ammons has been Vice President of Penn Traffic and President of the
Riverside division since April 1996. Mr. Ammons was Executive Vice President of
Riverside from 1990 until April 1996. Mr. Ammons served in various other
positions at Penn Traffic divisions between 1966 and 1990.
 
    Mr. Del Viscio has been Vice President of Nonfood Merchandising of Penn
Traffic since July 1995. Mr. Del Viscio was Senior Vice President of General
Merchandise for Montgomery Ward from September 1994 until July 1995. From June
1991 until September 1994, Mr. Del Viscio was Senior Vice President and General
Merchandise Manager for Hess Department Stores.
 
    Mr. Melvin has been Vice President--Operations Support since April 21, 1997.
Mr. Melvin was Director of Operations Support of Vons Companies from 1992 until
April 1997. Mr. Melvin served in various other positions at Vons between 1970
and 1992.
 
    Mr. Price has been Vice President and General Counsel and Assistant
Secretary of Penn Traffic since February 1993. He was Vice President and General
Counsel of the P&C division from 1985 until April 1993 and Secretary of P&C from
1991 until April 1993. Mr. Price served in various other positions at P&C
between 1978 and 1985.
 
    Mr. Sweeney has been Vice President of Penn Traffic since January 1995 and
General Manager of the Quality Markets division since 1993. Mr. Sweeney served
in various other positions at Quality between 1974 and 1993.
 
    Mr. Williams has been Vice President, Construction and Engineering of Penn
Traffic since April 1996. He was Vice President, Construction and Engineering of
the Big Bear division from October 1995 until April 1996. Mr. Williams served in
various other positions at Big Bear between 1970 and 1995.
 
    In January 1995, Grand Union filed a voluntary petition for 
reorganization under Chapter 11 of the United States Bankruptcy Code with the 
United States Bankruptcy Court, District of Delaware (the "Bankruptcy 
Court"). Grand Union emerged from Chapter 11 reorganization in June 1995. In 
February 1995, an involuntary Chapter 11 petition was filed in the Bankruptcy 
Court against Grand Union Capital Corporation ("Grand Union Capital"), of 
which Grand Union was a wholly-owned subsidiary. Grand Union Capital 
consented to the entry of an order for relief on the involuntary Chapter 11 
petition and, in February 1995, Grand Union Holdings filed a voluntary 
Chapter 11 petition in the Bankruptcy Court. Grand Union Capital's and Grand 
Union Holdings' Bankruptcy Court proceedings were completed in March 1996. 
Following completion of these proceedings, Grand Union Capital and Grand 
Union Holdings were dissolved. At the time the Chapter 11 petitions were 
filed, Messrs. Hirsch and Fox were directors and executive officers of Grand 
Union, Grand Union Capital and Grand Union Holdings. Messrs. Hirsch and Fox 
resigned as directors and officers of Grand Union in June 1995, and ceased to 
be directors and executive officers of Grand Union Capital and Grand Union 
Holdings upon the dissolutions of these companies in March 1996.
 
    There are no family relationships between the executive officers of Penn
Traffic. The term of office of executive officers is for a one-year period
beginning on the date of the annual meeting of stockholders, which is normally
held in June of each year.

                                    16

<PAGE>

                                   PART II
 
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
             MATTERS
 
    Penn Traffic's common stock is listed on the New York Stock Exchange and was
held by approximately 491 stockholders of record on February 1, 1997.
 
    Common stock information is provided on Page 18 of this Form 10-K.
 
ITEM 6. SELECTED FINANCIAL DATA
 
    The comparative summary of selected financial data of Penn Traffic for the
five years ended February 1, 1997 appears on Pages 19 through 21 of this Form
10-K.
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS
 
    Management's Discussion and Analysis of Financial Condition and Results of
Operations appears on Pages 22 through 29 of this Form 10-K.
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
<TABLE>
<CAPTION>
                                                                                               PAGE
                                                                                               -----
<S>                                                                                          <C>
Report of Independent Accountants......................................................          30
Consolidated Financial Statements:
Statement of Operations for each of the three fiscal years ended February 1, 1997......          31
Balance Sheet as of February 1, 1997 and February 3, 1996..............................          32
Statement of Stockholders' Equity for each of the three fiscal years ended February 1,
  1997.................................................................................          34
Statement of Cash Flows for each of the three fiscal years ended February 1, 1997......          35
Notes to Consolidated Financial Statements.............................................          37
Financial Statement Schedule for the three years ended February 1, 1997:
Schedule VIII--Valuation and Qualifying Accounts.......................................          68
</TABLE>
 
                                       17
<PAGE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
                              FINANCIAL DISCLOSURE
 
NONE
 
    Quarterly Financial Data (Unaudited)
 
    Summarized below is quarterly financial data for the fiscal years ended
February 1, 1997 and February 3, 1996.

<TABLE>
<CAPTION>
                                              FISCAL 1997                                     FISCAL 1996
                             ----------------------------------------------  ----------------------------------------------
                                1ST         2ND         3RD         4TH         1ST         2ND         3RD         4TH
                                                                                                                 (14 WEEKS)
                             ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------
                                                    (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
<S>                          <C>         <C>         <C>         <C>         <C>         <C>         <C>         <C>       
Total revenues.............  $  827,658  $  842,764  $  811,125  $  814,915  $  860,028  $  884,229  $  844,619  $  947,766
Gross margin...............  $  191,662  $  194,181  $  180,682  $  198,556  $  197,579  $  198,372  $  192,647  $  223,405
Net (loss) income
  applicable to common
  stock (1) (2)............  $   (9,029) $  (10,149) $  (15,924) $   (6,328) $      129  $  (51,704) $     (350) $  (27,700)
Per common share data:
Net (loss) income..........  $    (0.83) $    (0.93) $    (1.46) $    (0.58) $     0.01  $    (4.76) $    (0.03) $    (2.55)

 
    No dividends on common stock were paid during Fiscal 1997 and Fiscal 1996.

Other data:
Depreciation and
  amortization................  $  22,822  $  22,980  $  23,397  $  23,506  $  23,145  $  22,607  $  22,347  $  24,380
LIFO provision (benefit)......  $   1,000  $     825  $     825  $    (275)            $     858  $     859  $  (2,389)
Market value per common share:
High..........................  $  16 7/8  $  13 3/4  $  12 5/8  $   5 3/8  $  37 3/4  $  35 1/2  $  23 1/4  $  17 3/8
Low...........................  $      13  $   7 1/2  $   4 7/8  $   2 3/8  $  30 1/2  $  22 1/2  $  11 1/8  $  10 7/8
</TABLE>
 
------------------------
 
(1) During the second quarter of Fiscal 1996, the Company recorded certain
    expenses totaling $65.2 million ($51.9 million net of tax benefit)
    associated with the closure of the stand-alone general merchandise business
    (Harts), a write-down of assets that the Company will no longer utilize in
    its business and the Company's expense reduction program.
 
(2) As of the beginning of the fourth quarter of Fiscal 1996, the Company
    adopted Statement of Financial Accounting Standards No. 121, "Accounting for
    the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
    Of", which resulted in a noncash charge of $46.8 million ($27.7 million net
    of tax benefit) primarily related to the write-down of a portion of the
    recorded asset values (including allocable goodwill) of 18 of the Company's
    supermarkets.

                                      18

<PAGE>

CONSOLIDATED FIVE-YEAR FINANCIAL SUMMARY
 
    Set forth below is selected historical consolidated financial data of Penn
Traffic for the five fiscal years ended February 1, 1997. Due to the adoption of
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
during the fiscal year ended February 3, 1996 ("Fiscal 1996"), and the adoption
of Statement of Financial Accounting Standards No. 112, "Employers' Accounting
for Postemployment Benefits" at the beginning of the fiscal year ended January
28, 1995, comparisons of the consolidated financial results among years are not
necessarily meaningful.
 
    The selected historical consolidated financial data for the five fiscal 
years ended February 1, 1997 are derived from the consolidated financial 
statements of Penn Traffic which have been audited by Price Waterhouse LLP, 
independent accountants. The selected historical consolidated financial data 
should be read in conjunction with the Penn Traffic consolidated financial 
statements and related notes included elsewhere herein.
 
STATEMENT OF OPERATIONS
 
<TABLE>
<CAPTION>
                                                               AS OF AND FOR THE FISCAL YEAR ENDED
                                               --------------------------------------------------------------------
                                                             FEBRUARY 3,
          (IN THOUSANDS OF DOLLARS,            FEBRUARY 1,       1996      JANUARY 28,   JANUARY 29,   JANUARY 30,
           EXCEPT PER SHARE DATA)                  1997       (53 WEEKS)       1995          1994          1993
---------------------------------------------  ------------  ------------  ------------  ------------  ------------
<S>                                            <C>           <C>           <C>           <C>           <C>      

Total revenues...............................  $  3,296,462  $  3,536,642  $  3,333,225  $  3,171,600  $  2,832,949
Cost of sales................................     2,531,381     2,724,639     2,570,708     2,464,853     2,230,493
Selling and administrative expenses..........       684,558       670,387       606,782       559,729       475,839
Unusual item (1).............................                      65,237                       6,400
Write-down of long-lived assets (2)..........                      46,847
                                               ------------     ---------    ----------    ----------     ---------
Operating income.............................        80,523        29,532       155,735       140,618       126,617
Interest expense.............................       144,854       136,359       117,859       117,423       115,814
                                               ------------     ---------    ----------    ----------     ---------
(Loss) income before income taxes,
  extraordinary item and cumulative effect of
  change in accounting principle.............       (64,331)     (106,827)       37,876        23,195        10,803
(Benefit) provision for income taxes.........       (22,901)      (27,202)       15,851        15,019         6,812
                                               ------------     ---------    ----------    ----------     ---------
(Loss) income before extra-ordinary item and
  cumulative effect of change in accounting
  principle..................................       (41,430)      (79,625)       22,025         8,176         3,991
Extraordinary item (net of tax benefit)(3)...                                    (3,025)      (25,843)      (10,823)
                                               ------------     ---------    ----------    ----------     ---------
(Loss) income before cumulative effect of
  change in accounting principle.............       (41,430)      (79,625)       19,000       (17,667)       (6,832)
Cumulative effect of change in accounting
  principle (net of tax benefit) (4).........                                    (5,790)
                                               ------------     ---------    ----------    ----------     ---------
Net (loss) income............................       (41,430)      (79,625)       13,210       (17,667)       (6,832)
Preferred dividends..........................                                                    (159)         (968)
                                               ------------     ---------    ----------    ----------     ---------
Net (loss) income applicable to common
  stock......................................  $    (41,430) $    (79,625) $     13,210  $    (17,826) $     (7,800)
                                               ------------     ---------    ----------    ----------     ---------
                                               ------------     ---------    ----------    ----------     ---------

                                      19

<PAGE>

Per Share Data:
(Loss) income before extra-ordinary item and
  cumulative effect of change in accounting
  principle (after preferred dividends)......  $      (3.81) $      (7.32) $       1.97  $       0.76  $       0.37
Extraordinary item...........................                                     (0.27)        (2.45)        (1.31)
Cumulative effect of change in accounting
  principle..................................                                     (0.52)
                                                ------------     ---------    ----------    ----------     ---------
Net (loss) income (5)........................  $      (3.81) $      (7.32) $       1.18  $      (1.69) $      (0.94)
                                                ------------     ---------    ----------    ----------     ---------
                                                ------------     ---------    ----------    ----------     ---------

    No dividends on common stock have been paid during the past five fiscal
years.

Balance Sheet Data:
 Total assets.......................              $1,704,119    $1,760,146    $1,793,966    $1,632,901    $1,417,230
 Total funded indebtedness..........               1,398,991     1,341,657     1,277,276     1,166,025     1,005,136
 Redeemable preferred stock.........                                                                          11,477
 Stockholders' equity...............                 (96,755)      (53,271)       32,927        14,982       (40,488)

Other Data:
 Depreciation and amortization......                  92,705        92,479        87,811        82,869        72,787
 LIFO provision (benefit)...........                   2,375          (672)        2,792           103           479
 Capital expenditures, including
  capital leases and
  acquisitions.....................                   69,785       136,139       202,357       182,730       144,718
 Cash interest expense.............                  140,289       132,062       113,664       113,270       111,478
</TABLE>


                                      20

<PAGE>

Footnotes:
 
(1) During Fiscal 1996, the Company recorded an unusual item of $65.2 million,
    which was related primarily to the closure of its stand-alone general
    merchandise business (Harts), a write-down of assets that the Company will
    no longer utilize in its business and the Company's expense reduction
    program. 

    During the fiscal year ended January 29, 1994 ("Fiscal 1994"), the
    Company recorded certain expenses totaling $6.4 million classified as an
    unusual item. This unusual item was comprised of $4.0 million related to a
    voluntary employee separation program at the Company's P&C division and $2.4
    million related to the realignment of certain operations.
 
(2) As of the beginning of the fourth quarter of Fiscal 1996, the Company
    adopted Statement of Financial Accounting Standards No. 121, "Accounting for
    the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
    Of." Accordingly, the Company recorded a noncash charge of $46.8 million
    related primarily to the write-down of a portion of the recorded asset
    values (including allocable goodwill) of 18 of the Company's supermarkets.
 
(3) The extraordinary items (net of income tax benefit) resulted from the early
    retirement of debt.
 
(4) Effective January 30, 1994, the Company adopted Statement of Financial
    Accounting Standards No. 112, "Employers' Accounting for Postemployment
    Benefits" ("SFAS 112"). SFAS 112 requires employers to recognize the
    obligation to provide postemployment benefits on an accrual basis if certain
    conditions are met. The cumulative effect of the change in accounting
    principle determined as of January 30, 1994 reduced net income by $5.8
    million, net of a $4.1 million income tax benefit, for the 52-week period
    ended January 28, 1995.
 
(5) Net (loss) income per share of common stock is based on the average number
    of shares and equivalents, as applicable, of common stock outstanding during
    each period. Fully diluted (loss) income per share is not presented for each
    of the periods since conversion of the Company's shares under option would
    be anti-dilutive or the reduction from primary (loss) income per share is
    less than three percent.
 
                                       21


<PAGE>
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
    Certain statements included in this Part II, Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
elsewhere in this Annual Report on Form 10-K which are not statements of
historical fact are intended to be, and are hereby identified as,
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Without limiting the foregoing, the words
"believe", "anticipate", "plan", "expect", "estimate", "intend" and other
similar expressions are intended to identify forward-looking statements. The
Company cautions readers that forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause the actual
results, performance or achievements of the Company to be materially different
from any future results, performance or achievement expressed or implied by such
forward-looking statements. Such factors include, among others, the following:
general economic and business conditions; competition; the success or failure of
the Company in implementing its current business strategy; changes in the
Company's business strategy; availability, location and terms of sites for store
development; availability, terms and development of capital; labor relations;
and labor and employee benefit costs.
 
RESULTS OF OPERATIONS
 
    Fiscal Year Ended February 1, 1997 ("Fiscal 1997") Compared to Fiscal Year
Ended February 3, 1996 ("Fiscal 1996")
 
    Fiscal 1997 was a 52-week year and Fiscal 1996 was a 53-week year.
 
    The following table sets forth Statement of Operations components expressed
as percentages of total revenues for Fiscal 1997 and Fiscal 1996:
 
<TABLE>
<CAPTION>
                                                                               PERCENTAGE OF TOTAL
                                                                                     REVENUES
                                                                                   FISCAL YEAR
                                                                               --------------------
                                                                                 1997       1996
                                                                               ---------  ---------
<S>                                                                            <C>        <C>
Total revenues...............................................................      100.0%     100.0%
Gross profit (1).............................................................       23.2       23.0
Selling and administrative expenses..........................................       20.8       19.0
Unusual item.................................................................                   1.9
Write-down of long-lived assets..............................................                   1.3
Operating income.............................................................        2.4        0.8
Interest expense.............................................................        4.4        3.8
(Loss) before income taxes...................................................       (2.0)      (3.0)
</TABLE>
 
------------------------
 
(1) Total revenues less cost of goods sold.

                                     22

<PAGE>

    Total revenues for Fiscal 1997 decreased 6.8% to $3.30 billion (52 weeks)
from $3.54 billion in Fiscal 1996 (53 weeks). Same store sales for Fiscal 1997
decreased by 3.4% from Fiscal 1996 (calculated on a comparable week basis).
 
    The decrease in total revenues was primarily the result of the closure of
the stand-alone general merchandise business (Harts), a decline in same store
sales, a decline in wholesale revenues and the fact that Fiscal 1997 was a
52-week year while Fiscal 1996 was a 53-week year.
 
    Fiscal 1996 revenues included $44.4 million generated by 11 of the Company's
former general merchandise stores (Harts) and two former Acme stores, which were
closed during Fiscal 1996. Excluding these closed stores, revenues for Fiscal
1997 decreased 5.6% from Fiscal 1996. Wholesale supermarket revenues decreased
in Fiscal 1997 to $401.9 million from $429.4 million in Fiscal 1996.
 
    In Fiscal 1997, gross profit as a percentage of total revenues was 23.2%
compared to 23.0% in Fiscal 1996. The increase in gross profit as a percentage
of total revenues primarily resulted from the positive impact of the Company's
merchandising initiatives implemented during Fiscal 1997 and the classification
of certain expenses (approximately $9.7 million) as selling and administrative
expenses in Fiscal 1997 which had been recorded in cost of goods sold in Fiscal
1996. These factors were partially offset by an increase in certain buying and
occupancy costs as a percentage of revenues during a period of low price
inflation and a decline in same store sales.
 
    Selling and administrative expenses as a percentage of total revenues
increased to 20.8% for Fiscal 1997 from 19.0% in Fiscal 1996. The increase in
selling and administrative expenses as a percentage of total revenues in Fiscal
1997 primarily resulted from (1) increased payroll related to the Company's
repositioning program which emphasizes increased levels of customer service and
enhanced perishables departments in stores, (2) an increase in fixed and
semi-fixed expenses as a percentage of total revenues during a period of low
price inflation and a decrease in same store sales and (3) the classification of
certain expenses (approximately $9.7 million) as selling and administrative
expenses in Fiscal 1997 which had been recorded in cost of goods sold in Fiscal
1996.
 
    During the second quarter of Fiscal 1996, the Company recorded certain
expenses totaling $65.2 million ($51.9 million net of tax benefit) classified as
an unusual item. The unusual item was related to the closure of the stand-alone
general merchandise business (Harts), the write-off of equipment which the
Company determined would no longer utilize in its business, costs incurred in
connection with the Company's expense reduction program and an increase in the
Company's closed store reserve (Note 6).

                                    23

<PAGE>

    As of the beginning of the fourth quarter of Fiscal 1996, the Company
adopted Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
("SFAS 121"). As a result of this adoption, the Company recorded a noncash
charge of $46.8 million. This charge primarily related to the write-down of a
portion of the recorded asset values (including allocable goodwill) of 18 of the
Company's 265 supermarkets. No assets were written down in Fiscal 1997 (Note 7).
 
    Depreciation and amortization expense of $92.7 million in Fiscal 1997 and
$92.5 million in Fiscal 1996 represented 2.8% and 2.6% of total revenues,
respectively.
 
    The Company experienced a work stoppage at its Sani-Dairy division from
August 1, 1996 through September 22, 1996. Operating income was reduced by
approximately $2.5 million for Fiscal 1997 as a result of this work stoppage.
 
    Operating income for Fiscal 1997 was $80.5 million or 2.4% of total revenues
compared to $29.5 million or 0.8% of total revenues in Fiscal 1996. Excluding
the effect of the unusual item and the write-down of certain impaired long-lived
assets, operating income for Fiscal 1996 was $141.6 million or 4.0% of total
revenues. The decrease in operating income (excluding the effect of the unusual
item and the write-down of certain impaired long-lived assets in Fiscal 1996) as
a percentage of total revenues in Fiscal 1997 was the result of an increase in
selling and administrative expenses as a percentage of total revenues partially
offset by an increase in gross profit as a percentage of total revenues.
 
    Interest expense for Fiscal 1997 and Fiscal 1996 was $144.9 million and
$136.4 million, respectively. The increase in interest expense primarily
resulted from the higher debt levels outstanding during Fiscal 1997.
 
    Loss before income taxes was $64.3 million for Fiscal 1997 compared to a
loss of $106.8 million for Fiscal 1996. Excluding the effect of the unusual item
and the write-down of certain impaired long-lived assets, income before income
taxes was $5.3 million in Fiscal 1996. The reason for the increase in loss
before income taxes in Fiscal 1997 (excluding the effect of the unusual item and
the write-down of certain impaired long-lived assets in Fiscal 1996) was the
decrease in operating income in Fiscal 1997 combined with an increase in
interest expense.
 
    The income tax benefit for Fiscal 1997 was $22.9 million compared to a
benefit of $27.2 million in Fiscal 1996. The income tax benefit for Fiscal 1996
included a $32.4 million benefit associated with the unusual item and the
write-down of certain impaired long-lived assets. The effective tax rates vary
from the statutory rates due to differences between income for financial
reporting and tax reporting purposes that result primarily from the amortization
of nondeductible goodwill (Note 4).

                                       24
<PAGE>

    Fiscal Year Ended February 3, 1996 ("Fiscal 1996") Compared to Fiscal Year
Ended January 28, 1995 ("Fiscal 1995")
 
    Fiscal 1996 was a 53-week year and Fiscal 1995 was a 52-week year.
 
    The following table sets forth Statement of Operations components expressed
as percentages of total revenues for Fiscal 1996 and Fiscal 1995:
 
<TABLE>
<CAPTION>
                                                                               PERCENTAGE OF TOTAL
                                                                                     REVENUES
                                                                                   FISCAL YEAR
                                                                               --------------------
                                                                                 1996       1995
                                                                               ---------  ---------
<S>                                                                            <C>        <C>
Total revenues...............................................................      100.0%     100.0%
Gross profit (1).............................................................       23.0       22.9
Selling and administrative expenses..........................................       19.0       18.2
Unusual item.................................................................        1.9
Write-down of long-lived assets..............................................        1.3
Operating income.............................................................        0.8        4.7
Interest expense.............................................................        3.8        3.6
(Loss) income before income taxes, extraordinary item and cumulative effect
  of change in accounting principle..........................................       (3.0)       1.1
</TABLE>
 
------------------------
 
(1) Total revenues less cost of goods sold.
 
    Total revenues for Fiscal 1996 increased 6.1% to $3.54 billion (53 weeks)
from $3.33 billion in Fiscal 1995 (52 weeks). The change in total revenues is
the result of the increase in retail supermarket sales resulting from the
acquisition of 45 former Acme stores (29 of which the Company is currently
operating) in January 1995 and the fact that Fiscal 1996 was a 53-week year.
Wholesale revenues decreased in Fiscal 1996 to $429.4 million from Fiscal 1995
revenues of $442.6 million. Same store sales for Fiscal 1996 decreased by 1.8%
from Fiscal 1995 (calculated on a comparable week basis). The Company's total
revenues and same store sales results for Fiscal 1996 were adversely affected by
weak consumer spending and competitive promotional activity.

                                    25

<PAGE>

    In Fiscal 1996, gross profit as a percentage of total revenues was 23.0%
compared to 22.9% in Fiscal 1995. The increase in gross profit as a percentage
of total revenues resulted from a reduced LIFO provision and the relative
increase in retail revenues compared to wholesale revenues, which were partially
offset by the cost of the Company's response to increased competitor promotional
and price initiatives.
 
    Selling and administrative expenses as a percentage of total revenues
increased to 19.0% for Fiscal 1996 from 18.2% in Fiscal 1995. The increase in
selling and administrative expenses as a percentage of total revenues resulted
primarily from the relative increase in retail revenues compared to wholesale
revenues, increased promotional expenses and increases in fixed and
semi-variable expenses as a percentage of total revenues during a period with
low food price inflation and a decline in same store sales.
 
    During the second quarter of Fiscal 1996, the Company recorded an unusual 
item (charge) of $65.2 million. This unusual item was comprised of $50.6 
million related to the closure of the stand-alone general merchandise 
business (Harts) and $14.6 million related to the noncash write-off of 
certain fixed assets which the Company determined during the second quarter 
that it will no longer utilize in its business, costs incurred in connection 
with the Company's expense reduction programs and an increase in the 
Company's closed store reserve (Note 6).
 
    As of the beginning of the fourth quarter of Fiscal 1996, the Company
adopted Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
("SFAS 121"). As a result of this adoption, the Company recorded a noncash
charge of $46.8 million. This charge primarily related to the write-down of a
portion of the recorded asset values (including allocable goodwill) of 18 of the
Company's 265 supermarkets. The adoption of SFAS 121 will result in reduced
depreciation and amortization expense in future years (Note 7).
 
    Depreciation and amortization expense of $92.5 million in Fiscal 1996 and
$87.8 million in Fiscal 1995 represented 2.6% of total revenues in both years.
The increase in depreciation and amortization expense is the result of the
Company's capital investment program and the acquisition of 45 former Acme
stores.

                                    26

<PAGE>

    Operating income for Fiscal 1996 was $29.5 million or 0.8% of total revenues
compared to $155.7 million or 4.7% of total revenues in Fiscal 1995. Excluding
the effect of the unusual item and write-down of long-lived assets, operating
income for Fiscal 1996 was $141.6 million or 4.0% of total revenues, compared to
$155.7 million or 4.7% of total revenues in Fiscal 1995. The decrease in
operating income (excluding the effect of the unusual item and the write-down of
certain impaired long-lived assets) as a percentage of total revenues in Fiscal
1996 was the result of increased selling and administrative expenses as a
percentage of total revenues, partially offset by increased gross profit as a
percentage of total revenues.
 
    Interest expense for Fiscal 1996 and Fiscal 1995 was $136.4 million and
$117.9 million, respectively. The increase in interest expense was due to the
higher debt levels outstanding during Fiscal 1996, which were the result of
funding the acquisition of 45 stores from American Stores Company in January
1995 and the Company's capital investment program.
 
    Loss before income taxes, extraordinary item and the cumulative effect of
change in accounting principle was $106.8 million for Fiscal 1996 compared to
income of $37.9 million for Fiscal 1995. The reason for the decline is the
decrease in operating income (excluding the unusual item and the write-down of
certain long-lived assets), the unusual item, the write-down of certain
long-lived assets and the increase in interest expense.
 
    The income tax benefit for Fiscal 1996 was $27.2 million compared to a
provision of $15.9 million in Fiscal 1995. The income tax benefit for Fiscal
1996 included a $32.4 million benefit associated with the unusual item and the
write-down of certain long-lived assets. The effective tax rates vary from the
statutory rates due to differences between income for financial reporting and
tax reporting purposes that result primarily from the amortization of
nondeductible goodwill (Note 4).
 
    The extraordinary item for Fiscal 1995 was a $3.0 million charge (net of
$2.0 million income tax benefit) related to the early retirement of debt.
 
    During the first quarter of Fiscal 1995, the Company adopted Statement of
Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits". The cumulative effect of this change in accounting
principle was a charge of $5.8 million (net of $4.1 million income tax benefit)
(Note 3).

                                   27

<PAGE>
 
LIQUIDITY AND CAPITAL RESOURCES
 
    Payments of interest and principal on the Company's approximately $1.3
billion of long-term debt (excluding capital leases) will restrict funds
available to the Company to finance capital expenditures and working capital.
Principal payments of long-term debt due during Fiscal 1998, 1999 and 2000 total
$3.7 million, $3.0 million and $2.5 million, respectively.
 
    During Fiscal 1997, the Company's internally generated funds from operations
and amounts available under the revolving credit facility described below,
provided sufficient liquidity to meet the Company's operating, capital
expenditure and debt service needs.
 
    The Company has a revolving credit facility (the "Revolving Credit
Facility") which provides for borrowings of up to $250 million, subject to a
borrowing base limitation measured by eligible inventory and accounts receivable
of the Company. The Revolving Credit Facility matures in April 2000 and is
secured by a pledge of the Company's inventory, accounts receivable and related
assets. The interest rate on borrowings as to which the Company elects a
LIBOR-based rate option is LIBOR plus 2.75%, and the interest rate on borrowings
as to which the Company elects a prime-based rate option is prime plus 1.5%. As
of February 1, 1997, additional availability under the Revolving Credit Facility
was $108.3 million.
 
    In April 1996, the Company issued $100 million of 11.50% Senior Notes due
April 15, 2006 (the "11.50% Senior Notes") in an underwritten public offering.
During the first quarter of Fiscal 1997, the Company elected to use the proceeds
of the issuance of the 11.50% Senior Notes to repay indebtedness then
outstanding under the Revolving Credit Facility.
 
    The Company has two interest rate swap agreements outstanding, both of which
expire within the next two years, that effectively convert $75 million of its
fixed rate borrowings into variable rate obligations. Under the terms of these
agreements, the Company makes payments at variable rates which are based on
LIBOR and receives payments at fixed interest rates. The net amount paid or
received is included in interest expense. For Fiscal 1997, the Company recorded
$0.2 million of net interest income related to these agreements and an
additional interest rate swap agreement that expired during Fiscal 1997.
 
    In October 1995, Penn Traffic's Board of Directors authorized the repurchase
by the Company of up to 500,000 shares of its outstanding common stock, of which
45,200 shares were repurchased in Fiscal 1996. No shares of common stock were
repurchased during Fiscal 1997. Penn Traffic's debt agreements contain
limitations on the Company's ability to repurchase its common stock which
currently prohibit it from repurchasing any additional shares of its common
stock.

                                       28
<PAGE>


    Cash flows to meet the Company's requirements for operating, investing and
financing activities during Fiscal 1997 are reported in the Consolidated
Statement of Cash Flows. During the fiscal year ended February 1, 1997, the
Company's net cash used in operating activities was $1.3 million and net cash
used in investing activities was $33.3 million. These amounts were financed by
net cash provided by financing activities of $29.2 million and a decrease in
cash of $5.3 million. During the fiscal year ended February 3, 1996, the
Company's net cash used in investing activities was $121.5 million and the
Company had a $12.1 million increase in cash. These amounts were financed by net
cash provided by operating activities of $80.7 million and net cash provided by
financing activities of $52.9 million. During the fiscal year ended January 28,
1995, the Company's net cash used in investing activities was $194.8 million.
This amount was financed by net cash provided by operating activities of $56.2
million, net cash provided by financing activities of $102.6 million and a
decrease in cash of $35.9 million.
 
    Working capital increased $15.2 million from February 3, 1996 to February 1,
1997.
 
    The Company is in compliance with all terms and restrictive covenants of its
long-term debt agreements for the fiscal year ended and as of February 1, 1997.
 
    The Company's debt agreements provide restrictive covenants on the payment
of dividends to its stockholders. As of February 1, 1997, no dividend payments
to the Company's stockholders could have been made under the most restrictive of
these limitations.
 
    During Fiscal 1997, the Company opened two new stores, acquired two stores,
opened three replacement stores and completed seven remodels. Capital
expenditures (including capitalized leases) were approximately $69.8 million for
Fiscal 1997.

    During the fiscal year ending January 31, 1998, the Company expects to
invest approximately $40 million on capital expenditures (including capital
leases). Penn Traffic expects to finance such capital expenditures (including
capital leases) through cash generated from operations, as well as amounts
available under the Revolving Credit Facility and additional capital lease
obligations. Capital expenditures will be principally for new stores, store
remodels and investments in technology.
 
                                       29


<PAGE>



                             (Price Waterhouse LLP Letterhead)



                                REPORT OF INDEPENDENT ACCOUNTANTS



To the Board of Directors
and Stockholders of
The Penn Traffic Company

In our opinion, the consolidated financial statements listed in the 
accompanying index present fairly, in all material respects, the financial 
position of The Penn Traffic Company and its subsidiaries (the "Company") at 
February 1, 1997 and February 3, 1996, and the results of their operations 
and their cash flows for each of the three years in the period ended February 
1, 1997, in conformity with generally accepted accounting principles.   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 of these statements in accordance 
with generally accepted auditing standards which 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, assessing the accounting principles used and 
significant estimates made by managements, and evaluating the overall 
fianncial statement presentation.  We believe that our audits provide a 
reasonable basis for the opinion expressed above.

As discussed in Note 1 to the consolidated financial statements, the Company 
changed its method for measuring the impairment of long-lived assets to adopt 
the provisions of Statement of Financial Accounting Standards No. 121, 
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets 
to Be Disposed Of, effective October 29, 1995 and as discussed in Note 3 to 
the consolidated financial statements, the Company changed its method of 
accounting for postemployment benefits to adopt the provisions of Statement 
of Financial Accounting Standards No. 112, Employers' Accounting for 
Postemployment Benefits, effective January 30, 1994.




/s/  Price Waterhouse LLP
-------------------------
PRICE WATERHOUSE LLP
Syracuse, New York
March 4, 1997



                                 30
<PAGE>
                            THE PENN TRAFFIC COMPANY
 
                      CONSOLIDATED STATEMENT OF OPERATIONS
 
<TABLE>
<CAPTION>
                                                               52 WEEKS ENDED       53 WEEKS ENDED         52 WEEKS ENDED
                                                                 FEBRUARY 1,          FEBRUARY 3,           JANUARY 28,
                                                                    1997                 1996                  1995
                                                               ---------------      ---------------       ---------------
<S>                                                            <C>                 <C>                    <C>
                                                                 (ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
Total Revenues...............................................   $   3,296,462      $   3,536,642          $   3,333,225
Costs and Operating Expenses:
Cost of sales (including buying and occupancy cost)..........       2,531,381          2,724,639              2,570,708
Selling and administrative expenses..........................         684,558            670,387                606,782
Unusual item (Note 6)........................................                             65,237
Write-down of long-lived assets (Note 7).....................                             46,847
                                                               ---------------    ---------------        ---------------
Operating Income.............................................          80,523             29,532                155,735
Interest expense.............................................         144,854            136,359                117,859
                                                               ---------------    ---------------        ---------------
(Loss) Income Before Income Taxes, Extraordinary Item and
  Cumulative Effect of Change in Accounting Principle........         (64,331)          (106,827)                37,876
(Benefit) provision for income taxes (Note 4)................         (22,901)           (27,202)                15,851
                                                               ---------------    ---------------          ---------------
(Loss) Income Before Extraordinary Item and Cumulative Effect
  of Change in Accounting Principle..........................         (41,430)           (79,625)                22,025
Extraordinary item (net of tax benefit) (Note 12)............                                                    (3,025)
                                                               ---------------    ---------------        ---------------
(Loss) Income Before Cumulative Effect of Change in
  Accounting Principle.......................................         (41,430)           (79,625)                19,000
Cumulative effect of change in accounting principle (net of
  tax benefit) (Note 3)......................................                                                    (5,790)
                                                               ---------------    ---------------        ---------------
Net (Loss) Income............................................   $     (41,430)     $     (79,625)         $      13,210
                                                               ---------------    ---------------        ---------------
                                                               ---------------    ---------------        ---------------
Per Share Data:
(Loss) Income before extraordinary item and cumulative effect
  of change in accounting principle..........................   $       (3.81)     $       (7.32)         $        1.97
Extraordinary item...........................................                                                     (0.27)
Cumulative effect of change in accounting principle..........                                                     (0.52)
                                                               ---------------    ---------------       ---------------
Net (loss) income............................................   $       (3.81)     $       (7.32)         $        1.18
                                                               ---------------    ---------------       ---------------
                                                               ---------------    ---------------       ---------------
Average number of common shares and equivalents
  outstanding................................................      10,864,916         10,870,418             11,169,337
                                                               ---------------    ---------------       ---------------
                                                               ---------------    ---------------       ---------------
</TABLE>
 
        The accompanying notes are an integral part of these statements.
 
                                       31

<PAGE>
                            THE PENN TRAFFIC COMPANY
 
                           CONSOLIDATED BALANCE SHEET
 
<TABLE>
<CAPTION>


                                                             FEBRUARY 1,   FEBRUARY 3,
                                                                1997         1996
                                                            ------------  ------------
<S>                                                         <C>           <C>
                                                             (IN THOUSANDS OF DOLLARS)
                           ASSETS

Current Assets:
Cash and short-term investments (Note 1)...                 $   53,240    $     58,585
Accounts and notes receivable (less       
  allowance for doubtful accounts of $2,867
  and $1,483, respectively)................                     71,874          83,519
Inventories (Note 1).......................                    340,009         356,309
Prepaid expenses and other current           
  assets...................................                     17,266          15,717
                                                           ------------     ----------
                                                               482,389         514,130
                                                           ------------     ----------
Facilities Under Capital Leases (Note 5):
Capital leases.............................                    201,154         183,654
Less: Accumulated amortization.............                    (69,083)        (61,125)
                                                           ------------     ----------
                                                               132,071         122,529
                                                           ------------     ----------
Fixed Assets (Note 1):
Land.......................................                     24,602          29,306
Buildings..................................                    204,755         195,042
Furniture and fixtures.....................                    483,799         448,206
Vehicles...................................                     17,775          18,262
Leaseholds and improvements................                    210,171         222,133
                                                           ------------     ----------
                                                               941,102         912,949
Less: Accumulated depreciation.............                   (369,796)       (310,509)
                                                           ------------     ----------
                                                               571,306         602,440
                                                           ------------     ----------
Other Assets:
Goodwill, net (Note 1).....................                    422,816         431,394
Other assets and deferred charges, net.....                     95,537          89,653
                                                           ------------     ----------
                                                               518,353         521,047
                                                           ------------     ----------
Total Assets...............................                 $1,704,119    $  1,760,146
                                                           ------------     ----------
                                                           ------------     ----------
</TABLE>
 
        The accompanying notes are an integral part of these statements.
 
                                       32

<PAGE>
                            THE PENN TRAFFIC COMPANY
 
                           CONSOLIDATED BALANCE SHEET
 
<TABLE>
<CAPTION>

                                                              FEBRUARY 1,    FEBRUARY 3,
                                                                 1997          1996
                                                             ------------   ------------
<S>                                                          <C>            <C>
                                                              (IN THOUSANDS OF DOLLARS)
                        LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Current portion of obligations under capital  
  leases (Note 5)...........................                 $   13,541     $     11,735
Current maturities of long-term debt (Note    
  2)........................................                      3,736            2,728
Trade accounts and drafts payable...........                    159,579          208,880
Payroll and other accrued liabilities.......                     82,654           82,154
Accrued interest expense....................                     35,664           33,812
Payroll taxes and other taxes payable.......                     13,476           16,880
Deferred income taxes (Note 4)..............                     31,029           30,385
                                                             ------------    ------------
                                                                339,679          386,574
                                                             ------------    ------------
Noncurrent Liabilities:
Obligations under capital leases (Note 5)...                    134,976          126,197
Long-term debt (Note 2).....................                  1,246,738        1,200,997
Deferred income taxes (Note 4)..............                     23,876           38,789
Other noncurrent liabilities................                     55,605           60,860
                                                             ------------    ------------
                                                              1,461,195        1,426,843
                                                             ------------    ------------
Total Liabilities...........................                  1,800,874        1,813,417
                                                             ------------    ------------
Stockholders' Equity (Note 8):
Preferred stock--authorized 10,000,000       
  shares, $1.00 par value; none issued   
Common stock--authorized 30,000,000
  shares, $1.25 par value; 10,869,441 shares
  and 10,840,849 shares issued and outstanding,
  respectively..............................                     13,641           13,606
Capital in excess of par value..............                    180,412          180,029
Retained deficit............................                   (280,668)        (235,223)
Minimum pension liability adjustment (Note    
  3)........................................                     (8,730)          (6,606)
Unearned compensation (Note 8)..............                       (785)          (4,452)
Treasury stock, at cost (Note 8)............                       (625)            (625)
                                                             ------------     ------------
Total Stockholders' Equity..................                    (96,755)         (53,271)
                                                             ------------     ------------
Total Liabilities and Stockholders'          
  Equity....................................                 $1,704,119     $  1,760,146
                                                             ------------    ------------
                                                             ------------    ------------
</TABLE>
 
        The accompanying notes are an integral part of these statements.
 
                                       33

<PAGE>
                            THE PENN TRAFFIC COMPANY
 
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
 
<TABLE>
<CAPTION>
                                                                          MINIMUM
                                               CAPITAL IN                 PENSION                                 TOTAL
                                     COMMON    EXCESS OF    RETAINED     LIABILITY     UNEARNED     TREASURY   STOCKHOLDERS'
                                      STOCK    PAR VALUE     DEFICIT    ADJUSTMENT   COMPENSATION     STOCK       EQUITY
                                    ---------  ----------  -----------  -----------  -------------  ---------  ------------
<S>                                 <C>        <C>         <C>          <C>          <C>            <C>        <C>
                                                                   (IN THOUSANDS OF DOLLARS)
January 29, 1994..................  $  13,550  $  179,087  $  (162,924)  $  (4,963)    $  (9,768)               $   14,982
Net income........................                              13,210                                              13,210
Exercise of 7,550 common stock
  option shares (Note 8)..........          9         119                                                              128
Cancellation of 1,000 restricted
  stock shares (Note 8)...........         (1)        (41)          42
Minimum pension liability
  adjustment (Note 3).............                                           4,607                                   4,607
Unearned compensation adjustment
  (Note 8)........................                                  (9)                        9
                                    ---------  ----------  -----------  -----------  -------------  ---------  ------------
January 28, 1995..................     13,558     179,165     (149,681)       (356)       (9,759)                   32,927
Net loss..........................                             (79,625)                                            (79,625)
Exercise of 24,348 common stock
  option shares (Note 8)..........         31         271                                                              302
Issuance of 23,500 restricted
  stock shares (Note 8)...........         29         849                                   (878)
Cancellation of 9,500 restricted
  stock shares (Note 8)...........        (12)       (256)         268
Minimum pension liability
  adjustment (Note 3).............                                          (6,250)                                 (6,250)
Unearned compensation adjustment
  (Note 8)........................                              (6,185)                    6,185
Treasury stock, at cost (Note
  8)..............................                                                                  $    (625)        (625)
                                    ---------  ----------  -----------  -----------  -------------  ---------  ------------
February 3, 1996..................     13,606     180,029     (235,223)     (6,606)       (4,452)        (625)     (53,271)
Net loss..........................                             (41,430)                                            (41,430)
Exercise of 5,592 common stock
  option shares (Note 8)..........          7          63                                                               70
Issuance of 23,500 restricted
  stock shares (Note 8)...........         29         323                                   (352)
Cancellation of 500 restricted
  stock shares (Note 8)...........         (1)         (3)           4
Minimum pension liability
  adjustment (Note 3).............                                          (2,124)                                 (2,124)
Unearned compensation adjustment
  (Note 8)........................                              (4,019)                    4,019
                                    ---------  ----------  -----------  -----------  -------------  ---------  ------------

February 1, 1997..................  $  13,641  $  180,412  $  (280,668)  $  (8,730)    $    (785)   $    (625)  $  (96,755)
                                    ---------  ----------  -----------  -----------  -------------  ---------  ------------
                                    ---------  ----------  -----------  -----------  -------------  ---------  ------------

</TABLE>

        The accompanying notes are an integral part of these statements.

                                       34

<PAGE>
                            THE PENN TRAFFIC COMPANY
 
                      CONSOLIDATED STATEMENT OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                               52 WEEKS ENDED   53 WEEKS ENDED   52 WEEKS ENDED
                                                                 FEBRUARY 1,      FEBRUARY 3,      JANUARY 28,
                                                                    1997             1996             1995
                                                               ---------------  ---------------  ---------------
<S>                                                            <C>              <C>              <C>
                                                                           (IN THOUSANDS OF DOLLARS)
Operating Activities:
Net (loss) income............................................    $   (41,430)     $   (79,625)     $    13,210
Adjustments to reconcile net (loss) income to net cash
  provided by operating activities:
Cumulative effect of change in accounting principle..........                                            5,790
Depreciation and amortization................................         76,328           75,375           72,853
Amortization of intangibles..................................         16,377           17,104           14,958
(Decrease) increase in deferred taxes........................        (12,792)         (31,808)           3,902
Write-off of fixed assets....................................                          16,416
Write-off of intangible assets...............................                          32,809
Write-down of long-lived assets..............................                          46,847
Other--net...................................................         (9,468)         (13,888)          (8,147)
Net change in assets and liabilities:
Accounts receivable and prepaid expenses.....................          7,872           (3,894)         (24,031)
Inventories..................................................         16,568           29,659          (37,513)
Accounts payable and accrued expenses........................        (50,388)          (6,653)          11,637
Deferred charges and other assets............................         (4,361)          (1,649)           3,577
                                                               ---------------  ---------------  ---------------
Net Cash (Used in) Provided by Operating Activities..........         (1,294)          80,693           56,236
                                                               ---------------  ---------------  ---------------
Investing Activities:
Capital expenditures.........................................        (67,828)        (124,963)        (121,324)
Proceeds from sale-and-leaseback transactions................         22,151
Proceeds from sale of assets.................................         12,297            3,423            2,020
Acquisition of Acme stores...................................                                          (75,500)
Other--net...................................................             96                                (2)
                                                               ---------------  ---------------  ---------------

Net Cash (Used in) Investing Activities......................        (33,284)        (121,540)        (194,806)
                                                               ---------------  ---------------  ---------------

                                                          (continued)
</TABLE>
                                       35
<PAGE>

<TABLE>
<CAPTION>
                                                               52 WEEKS ENDED   53 WEEKS ENDED   52 WEEKS ENDED
                                                                 FEBRUARY 1,      FEBRUARY 3,      JANUARY 28,
                                                                    1997             1996             1995
                                                               ---------------  ---------------  ---------------
<S>                                                            <C>              <C>              <C>
                                                                           (IN THOUSANDS OF DOLLARS)

Financing Activities:
Increase in long-term debt...................................        106,840                           100,000
Payments to settle long-term debt............................         (3,258)          (4,095)         (62,384)
Borrowing of revolver debt...................................        430,200          588,300          476,000
Repayment of revolver debt...................................       (487,500)        (520,900)        (399,300)
Reduction of capital lease obligations.......................        (13,523)          (9,889)          (8,598)
Payment of debt issuance costs...............................         (3,596)            (225)          (3,224)
Purchase of treasury stock...................................                            (625)
Other--net...................................................             70              347              128
                                                               ---------------  ---------------  ---------------
Net Cash Provided by Financing Activities....................         29,233           52,913          102,622
                                                               ---------------  ---------------  ---------------
(Decrease) Increase in Cash and Cash Equivalents.............         (5,345)          12,066          (35,948)
                                                               ---------------  ---------------  ---------------
Cash and cash equivalents at beginning of year...............         58,585           46,519           82,467
                                                               ---------------  ---------------  ---------------
Cash and Cash Equivalents at End of Year.....................    $    53,240      $    58,585      $    46,519
                                                               ---------------  ---------------  ---------------
                                                               ---------------  ---------------  ---------------
</TABLE>
 
        The accompanying notes are an integral part of these statements.

                                       36


<PAGE>
                            THE PENN TRAFFIC COMPANY
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
    Note 1--Business Description and Summary of Significant Accounting 
Policies:
 
    The Penn Traffic Company ("Penn Traffic" or the "Company") is primarily 
engaged in retail and wholesale food distribution. As of February 1, 1997, 
the Company operated 265 supermarkets in Pennsylvania, New York, Ohio and 
West Virginia and supplied 114 franchise supermarkets and 99 independent 
wholesale accounts. The Company also operated 13 modern distribution centers 
with approximately 3.3 million square feet of combined space, a bakery and a 
dairy.
 
    Basis of Presentation All significant intercompany transactions and 
accounts have been eliminated in consolidation.
 
    The Company is principally involved in the distribution and retail sale 
of food and related products, which constitutes a single significant business 
segment.
 
    Certain prior year amounts have been reclassified on the Consolidated
Statement of Cash Flows for comparative purposes.
 
    Fiscal Year The fiscal year of the Company ends on the Saturday nearest 
to January 31.
 
    Cash and Short-term Investments Short-term investments are classified as 
cash and are stated at cost, which approximates market value. For the purpose 
of the Consolidated Statement of Cash Flows, the Company considers all highly 
liquid debt instruments purchased with a maturity of three months or less to 
be cash equivalents.
 
    INVENTORIES Inventories are valued at the lower of cost or market. The 
Company's inventories, representing grocery and certain general merchandise 
and manufactured inventories, are stated at cost using the last-in, first-out 
(LIFO) method of valuation. Inventories stated on the LIFO basis were 
$20,223,000 and $17,848,000 below replacement cost at February 1, 1997 and 
February 3, 1996, respectively.
 
    During Fiscal 1997 and Fiscal 1996, inventory quantities were reduced, 
which resulted in a liquidation of certain LIFO inventory layers carried at 
lower costs which prevailed in prior years. The effect for Fiscal 1997 was to 
decrease cost of goods sold by $745,000 and to decrease net loss by $440,000 
or $0.04 per share. The effect for Fiscal 1996 was to decrease cost of goods 
sold by $1,474,000 and to decrease net loss by $869,000, or $.08 per share.

                                      37

<PAGE>

    Fixed Assets and Capital Leases Major renewals and betterments are 
capitalized, whereas maintenance and repairs are charged to operations as 
incurred. Depreciation and amortization for financial accounting purposes are 
provided on the straight-line method. For income tax purposes, the Company 
principally uses accelerated methods. For financial accounting purposes, 
depreciation and amortization are provided over the following useful lives or 
lease term:
 
<TABLE>
<S>                                                  <C>
Buildings ......................................     16 to 40 years
Furniture and fixtures..........................      4 to 15 years 
Vehicles........................................      3 to 8 years
Leaseholds and improvements.....................      5 to 30 years
Capital leases..................................      lease term
</TABLE>
 
    INTANGIBLES The excess of the costs over the amounts attributed to the 
fair value of net assets acquired (goodwill) is being amortized primarily over
40 years using the straight-line method. In addition, certain other
nonfinancing costs resulting from acquisitions have been capitalized as other
assets and deferred charges. For Fiscal 1997, 1996 and 1995, amortization of
intangibles was $16,377,000, $17,104,000 and $14,958,000, respectively.
 
    IMPAIRMENT OF LONG-LIVED ASSETS As of the beginning of the fourth quarter 
of Fiscal 1996, the Company adopted Statement of Financial Accounting 
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and 
for Long-Lived Assets to Be Disposed Of." Accordingly, commencing with the 
fourth quarter of Fiscal 1996, assets are generally evaluated on a 
market-by-market basis in making a determination as to whether such assets 
are impaired. At each year-end, the Company reviews its long-lived assets 
(including goodwill) for impairment based on estimated future nondiscounted 
cash flows attributable to the assets. In the event such cash flows are not 
expected to be sufficient to recover the recorded value of the assets, the 
assets are written down to their estimated fair values. Previously, this 
evaluation was based on cash flows and assets aggregated principally by the 
operating divisions of the Company (Note 7).
 
    INVESTMENT IN AFFILIATED COMPANY Until March 1995, the Company had a 
minority interest investment in The Grand Union Company which was carried on 
the equity basis (Note 9).
 
    DEFERRED CHARGES Deferred charges consist of debt issuance costs, prepaid 
pension expense and the value of leasehold interests that were recorded in 
conjunction with acquisitions. These deferred charges are being amortized 
primarily on a straight-line basis over the life of the related debt, the 
remaining service lives of employees and the lives of the related leases, 
respectively.

                                       38
 
<PAGE>

    Store Pre-opening Costs Store pre-opening costs are generally charged to 
expense as incurred.
 
    USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS The 
preparation of financial statements in conformity with generally accepted 
accounting principles requires management to make estimates and assumptions 
that affect the reported amounts of assets and liabilities and disclosure 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.
 
    INCOME TAXES Income taxes are provided based on the liability method of 
accounting pursuant to Statement of Financial Accounting Standards No. 109, 
"Accounting for Income Taxes" ("SFAS 109").
 
    Deferred income taxes are recorded to reflect the tax consequences on 
future years of temporary differences between the tax basis of assets and 
liabilities and their financial reporting amounts at each year end.
 
    NET INCOME (LOSS) PER SHARE Net income (loss) per share of common stock 
is based on the average number of shares and equivalents, as applicable, of 
common stock outstanding during each period. Fully diluted income (loss) per 
share is not presented for each of the periods since conversion of the 
Company's shares under option would be anti-dilutive or the reduction from 
primary income (loss) per share is less than three percent.
 
                                       39
<PAGE>
 
NOTE 2--LONG-TERM DEBT:
 
    The long-term debt of Penn Traffic consists of the obligations described 
below:
 
<TABLE>
<CAPTION>
                                                      FEBRUARY 1,    FEBRUARY 3,
                                                          1997           1996
                                                     --------------  ------------
<S>                                                  <C>             <C>
                                                      (IN THOUSANDS OF DOLLARS)
 Secured Revolving Credit Facility.................     $  86,800      $  144,100
 Other Secured Debt................................        31,434          27,385
 11 1/2% Senior Notes due October 15, 2001.........       107,240         107,240
 10 1/4% Senior Notes due February 15, 2002........       125,000         125,000
  8 5/8% Senior Notes due December 15, 2003........       200,000         200,000
 10 3/8% Senior Notes due October 1, 2004..........       100,000         100,000
 10.65%  Senior Notes due November 1, 2004.........       100,000         100,000
 11 1/2% Senior Notes due April 15, 2006...........       100,000
  9 5/8% Senior Subordinated Notes due 
          April 15, 2005...........................       400,000         400,000
                                                     ---------------- -------------
 TOTAL DEBT .......................................     1,250,474       1,203,725
  Less: Amounts due within one year ...............         3,736           2,728
                                                     ---------------- -------------
 TOTAL LONG-TERM DEBT .............................    $1,246,738      $1,200,997
                                                     ---------------- -------------
                                                     ---------------- -------------

</TABLE>
 
    Amounts maturing during each of the next five fiscal years are: 
$3,736,000 (Fiscal 1998), $2,962,000 (Fiscal 1999), $2,512,000 (Fiscal 2000), 
$94,309,000 (includes $86,800,000 outstanding as of February 1, 1997 under 
the Company's secured revolving credit facility which matures in April 
2000)(Fiscal 2001), and $108,078,000 (Fiscal 2002). The Company incurred 
interest expense of $144,854,000, $136,359,000 and $117,859,000, including 
noncash amortization of deferred financing costs of $4,565,000, $4,297,000 
and $4,195,000, for Fiscal 1997, Fiscal 1996 and Fiscal 1995, respectively. 
Interest paid amounted to $138,437,000, $128,936,000 and $111,669,000 for 
Fiscal 1997, Fiscal 1996 and Fiscal 1995, respectively.
 
    The estimated fair value of the Company's long-term debt, including 
current maturities, was $820 million at February 1, 1997 and $1.11 billion at 
February 3, 1996. The estimated fair value of the Company's long-term debt 
has been determined by the Company using market information provided by an 
investment banking firm as to the market value of such debt amounts. The 
estimated fair market value of the Company's long-term debt does not 
necessarily reflect the amount at which the debt would be settled.
 
    The Company's secured revolving credit facility (the "Revolving Credit 
Facility") provides for borrowings of up to $250 million, subject to a 
borrowing base limitation measured by eligible inventory and accounts 
receivable of the Company. The Revolving Credit Facility matures in April 
2000 and is secured by a pledge of the Company's inventory, accounts 
receivable and related assets. Additional availability under the Revolving 
Credit Facility was $108.3 million at February 1, 1997. The interest rate on 
borrowings as to which the Company elects a LIBOR-based rate option is LIBOR 
plus 2.75%, and the interest rate on borrowings as to which the Company 
elects a prime-based rate option is prime plus 1.5%. At February 1, 1997, the 
weighted average rate of interest on the Revolving Credit Facility was 8.3%.

                                      40

<PAGE>


    The 11 1/2% Senior Notes due 2001, the 10 1/4% Senior Notes due 2002, the 
8 5/8% Senior Notes due 2003, the 10 3/8% Senior Notes due 2004, the 10.65% 
Senior Notes due 2004 and the 11 1/2% Senior Notes due 2006 (collectively, 
the "Senior Notes") are unsecured obligations of Penn Traffic which rank PARI 
PASSU with each other and with indebtedness under the Revolving Credit 
Facility. However, indebtedness under the Revolving Credit Facility is 
secured by certain assets of the Company. The 9 5/8% Senior Subordinated 
Notes due 2005 (the "Senior Subordinated Notes") are subordinated to all 
existing and future senior indebtedness.
 
    The Senior Notes, the Senior Subordinated Notes and the Revolving Credit
Facility each contain certain covenants, including restrictions on incurrence of
indebtedness by Penn Traffic and limitations on the payment of dividends to Penn
Traffic's common stockholders. The Company is in compliance with all terms and
covenants of its long-term debt agreements as of and for the fiscal year ended
February 1, 1997.
 
    The Company has two interest rate swap agreements outstanding, each of which
expires within the next two years, that effectively convert $75 million of its
fixed rate borrowings into variable rate obligations. Under the terms of these
agreements, the Company makes payments at variable rates which are based on
LIBOR and receives payments at fixed interest rates. The net amount paid or
received is included in interest expense. The estimated fair value of the
Company's interest rate swap agreements at February 1, 1997 was a $0.4 million
liability and at February 3, 1996 was a $1.2 million asset, neither of which has
been recorded on the books of the Company. The estimated fair value of these
interest rate agreements has been determined by the Company using market
information available to the Company, based on information provided by the
counterparty to each interest rate agreement.

                                        41

<PAGE>

 
NOTE 3--EMPLOYEE BENEFIT PLANS:
 
    Substantially all of the Company's employees are covered by either 
defined benefit plans or defined contribution plans.

    The following sets forth the net pension expense recognized for the 
defined benefit pension plans and the status of the Company's defined benefit 
plans:

<TABLE>
<CAPTION>                                                       
                                                FISCAL YEAR ENDED             
                                       ------------------------------------------
                                        FEBRUARY 1,  FEBRUARY 3,  JANUARY 28,                          
                                            1997         1996         1995     
                                       -------------  -----------  ------------
                                               (IN THOUSANDS OF DOLLARS)
<S>                                    <C>          <C>          <C>
Service cost--benefits earned during
 the period .........................   $  5,841    $   4,572    $   4,617
Interest cost on projected benefit 
 obligation..........................     10,639        9,671        9,207
Actual return on plan assets.........    (15,777)     (22,634)      (2,117)
Net amortization and deferral........         42        9,990       (9,365)
                                       -----------  ----------  -------------
Net pension expense .................   $    745    $   1,599    $   2,342
                                       -----------  ----------  -------------
                                       -----------  ----------  -------------

</TABLE>

<TABLE>
<CAPTION>
                                                                    FEBRUARY 1, 1997          FEBRUARY 3, 1996
                                                                     PLANS IN WHICH            PLANS IN WHICH
                                                                ------------------------  ------------------------
                                                                  ASSETS      ACCUMULATED   ASSETS     ACCUMULATED
                                                                  EXCEED      BENEFITS      EXCEED      BENEFITS
                                                                ACCUMULATED    EXCEED     ACCUMULATED    EXCEED
                                                                 BENEFITS      ASSETS      BENEFITS      ASSETS
                                                                ----------  ------------  ----------  ------------
                                                                              (IN THOUSANDS OF DOLLARS)
<S>                                                             <C>         <C>           <C>         <C>
Actuarial present value of vested benefit obligation........    $  (56,417)  $  (77,826)  $  (54,802)  $  (73,562)
                                                                ----------  ------------  ----------  ------------
Accumulated benefit obligation .............................    $  (63,729)  $  (83,781)  $  (58,104)  $  (78,762)
                                                                ----------  ------------  ----------  ------------
Projected benefit obligation ...............................    $  (73,099)  $  (88,153)  $  (68,799)  $  (83,840)
Plan assets at fair value...................................        98,507       70,633       81,001       66,344
                                                                ----------  ------------  ----------  ------------
Plan assets in excess of (less than) projected benefit
  obligation................................................        25,408      (17,520)      12,202      (17,496)
Unrecognized net transition (asset) liability ..............        (1,535)          97       (1,654)         108
Unrecognized net (gain) loss ...............................        (9,661)      18,910          239       16,280
Unrecognized prior service cost.............................         1,584       11,330        1,632        9,783
Minimum liability...........................................                    (25,965)                  (21,093)
                                                                ----------  ------------  ----------  ------------
Net pension asset (liability)...............................    $   15,796   $  (13,148)  $   12,419   $  (12,418)
                                                                ----------  ------------  ----------  ------------
                                                                ----------  ------------  ----------  ------------
</TABLE>
 
    In calculating benefit obligations and plan assets for Fiscal 1997, the 
Company assumed a weighted average discount rate of 7.75%, compensation 
increase rates ranging from 3.0% to 3.5% and an expected long-term rate of 
return on plan assets of 10.5%. During Fiscal 1997, the discount rate used to 
measure pension expense was increased to 8.5% from 7.5% to reflect current 
market conditions. This change in the discount rate assumption reduced net 
pension expense by approximately $2.7 million in Fiscal 1997. For Fiscal 
1996, the Company assumed a weighted average discount rate of 7.5%, 
compensation increase rates ranging from 2.0% to 3.5% and expected long-term 
rates of return on plan assets ranging from 10.5% to 10.75%.


                                       42

<PAGE>

    The Company's defined benefit plans generally provide a retirement benefit
to employees based on specified percentages applied to final average
compensation, as defined, coupled with years of service earned to the date of
retirement. All pension plans comply with the provisions of the Employee
Retirement Income Security Act of 1974 ("ERISA"). Penn Traffic's defined benefit
plans' assets are maintained in separate trusts and are managed by independent
investment managers. The assets are invested primarily in equity, debt and
short-term cash securities.
 
    The Company also contributes to multi-employer pension funds, which cover
certain union employees under collective bargaining agreements. Such
contributions aggregated $3,933,000, $4,521,000 and $4,297,000 in Fiscal 1997,
1996 and 1995, respectively. The applicable portion of the total plan benefits
and net assets of these plans is not separately identifiable.
 
    The Company contributes to profit-sharing plans for certain union employees.
There was no expense for these profit-sharing plans for Fiscal 1997, Fiscal 1996
and Fiscal 1995. In addition, the Company sponsors a deferred profit-sharing
plan for certain salaried employees. Contributions and costs totaled $750,000,
$998,000 and $845,000 in Fiscal 1997, Fiscal 1996 and Fiscal 1995, respectively.
 
    Pursuant to the provisions of Statement of Financial Accounting Standards
No. 87, "Employers' Accounting for Pensions" ("SFAS 87"), the Company recorded
in other noncurrent liabilities an additional minimum pension liability
adjustment of $25,965,000 as of February 1, 1997, $21,093,000 as of February 3,
1996 and $7,023,000 as of January 28, 1995, representing the amount by which the
accumulated benefit obligation exceeded the fair value of plan assets plus
accrued amounts previously recorded. The additional liability has been offset by
an intangible asset to the extent of previously unrecognized prior service cost.
The amount in excess of previously unrecognized prior service cost (after tax)
is recorded as a reduction of stockholders' equity in the amount of $8,730,000
as of February 1, 1997, $6,606,000 as of February 3, 1996 and $356,000 as of
January 28, 1995.
 
    Effective January 30, 1994, the Company adopted Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits" ("SFAS 112"). SFAS 112 requires employers to recognize the obligation
to provide postemployment benefits on an accrual basis if certain conditions are
met. The cumulative effect of the change in accounting principle determined as
of January 30, 1994 reduced net income $5.8 million (net of a $4.1 million
income tax benefit) for the fiscal year ended January 28, 1995.
 

                                       43

<PAGE>

NOTE 4--INCOME TAXES:
 
    The provision for income taxes charged to continuing operations was 
provided as follows:
 
<TABLE>
<CAPTION>
                                                                                    FISCAL YEAR ENDED
                                                                    ------------------------------------------------
                                                                       FEBRUARY 1,      FEBRUARY 3,     JANUARY 28,
                                                                           1997             1996          1995
                                                                      --------------  ---------------- ------------
                                                                               (IN THOUSANDS OF DOLLARS)
<S>                                                                   <C>             <C>               <C>
Current Tax (Benefit) Expense:
Federal income                                                        $(8,177)         $   (2,126)       $  10,330
State income                                                              233                                2,682
                                                                      --------------  ---------------- ------------
                                                                       (7,944)             (2,126)          13,012
                                                                      --------------  ---------------- ------------
Deferred Tax (Benefit) Expense:
Federal income                                                        (9,697)             (18,922)           2,895
State income                                                          (5,260)              (6,154)             (56)
                                                                      --------------  ---------------- ------------
                                                                      (14,957)            (25,076)           2,839
                                                                      --------------  ---------------- ------------
(Benefit) provision for income taxes                                 $(22,901)         $  (27,202)       $  15,851
                                                                      --------------  ---------------- ------------
                                                                      --------------  ---------------- ------------

</TABLE>
 
    The differences between income taxes computed using the statutory federal
income tax rate and those shown in the Consolidated Statement of Operations are
summarized as follows:
 
<TABLE>
<CAPTION>
                                                                                    FISCAL YEAR ENDED
                                                                    ------------------------------------------------
                                                                       FEBRUARY 1,      FEBRUARY 3,     JANUARY 28,
                                                                           1997             1996          1995
                                                                      --------------  ---------------- ------------
                                                                              (IN THOUSANDS OF DOLLARS)
<S>                                                                   <C>              <C>             <C>      
Federal (benefit) tax at statutory rates..........................      $ (22,516)     $  (37,389)       $13,254
State income taxes net of federal income tax effect...............         (3,268)         (3,850)         2,722
Nondeductible goodwill amortization and write-off.................          2,926          14,724          3,343
Capital loss carryforward.........................................                                          (992)
Miscellaneous items...............................................             27             331            639
                                                                           
Decrease in deferred income taxes due to changes in state income        
 tax rates .......................................................                           (232)          (997)
                                                                                            
State net operating loss carryforwards............................                                          (726)
Tax credits.......................................................            (70)           (786)        (1,392)
                                                                     --------------    ----------------  ------------
(Benefit) provision for income taxes..............................      $ (22,901)     $  (27,202)     $  15,851
                                                                     --------------    ----------------  ------------
                                                                     --------------    ----------------  ------------

</TABLE>

                                       44

<PAGE>
 
    Components of deferred income taxes at February 1, 1997 and February 3, 1996
were as follows:
 
<TABLE>
<CAPTION>
                                                                      FEBRUARY 1,  FEBRUARY 3,
                                                                         1997         1996
                                                                      -----------  -----------
                                                                          (IN THOUSANDS OF DOLLARS)
<S>                                                                   <C>          <C>
Deferred Tax Liabilities:
Fixed assets........................................................   $  87,502    $  85,038
Inventory...........................................................      30,394       30,132
Prepaid expenses and other current assets...........................         960          668
Goodwill amortization...............................................       4,382        2,539
Pensions............................................................       4,952        4,202
Deferred charges and other assets...................................      10,139        9,228
                                                                      -----------  -----------
                                                                       $ 138,329    $ 131,807
                                                                      -----------  -----------
                                                                      -----------  -----------
Deferred Tax Assets:
 Nondeductible accruals.............................................   $  14,837    $  15,784
 Prepaid operating fee..............................................       4,160        4,160
 Capital leases.....................................................       5,531        4,887
 Net operating loss carryforwards...................................      39,804        5,553
 Capital loss carryforward..........................................       5,375        7,074
 Tax credit carryforwards...........................................      16,015       30,749
 Valuation allowance--capital loss carryforward.....................      (2,298)      (5,574)
                                                                      -----------  -----------
                                                                       $  83,424    $  62,633
                                                                      -----------  -----------
                                                                      -----------  -----------
Net Deferred Tax Liability..........................................   $  54,905    $  69,174
                                                                      -----------  -----------
                                                                      -----------  -----------
</TABLE>
 
    At February 1, 1997, Penn Traffic had deferred tax assets of 
approximately $31,818,000 due to federal net operating loss carryforwards 
which begin to expire in 2011, and various state net operating loss 
carryforwards, tax-effected for federal income tax purposes, of approximately 
$7,986,000, which begin to expire in 2004. In addition, the Company has 
alternative minimum tax credit carryforwards of $10,820,000, general business 
tax credit carryforwards of $3,754,000 and various state tax credits, 
tax-effected for federal income tax purposes, of $1,441,000 available to 
offset the Company's regular income tax liability in future years. The 
general business tax credit carryforwards begin to expire in 2004 and the 
alternative minimum tax credit carryforwards have no expiration date.


                                       45
<PAGE>

NOTE 5--LEASES:
 
    The following is a schedule by year of future gross minimum rental 
payments for all leases with terms greater than one year reconciled to the 
present value of net minimum capital lease payments as of February 1, 1997:
 
<TABLE>
<CAPTION>
FISCAL YEARS ENDING IN                                                            TOTAL     OPERATING    CAPITAL
--------------------------                                                      ----------  ----------  ----------
                                                                                    (IN THOUSANDS OF DOLLARS)
<S>                                                                             <C>         <C>         <C>
1998 .............................................................              $   72,249  $   43,344  $   28,905
1999 .............................................................                  67,927      40,241      27,686
2000 .............................................................                  63,716      37,834      25,882
2001 .............................................................                  59,343      35,723      23,620
2002 .............................................................                  54,666      33,689      20,977
Later years.......................................................                 429,914     292,010     137,904
                                                                                ----------  -----------  ----------
Total minimum lease payments                                                    $  747,815  $  482,841     264,974
                                                                                ----------- -----------
                                                                                ----------- -----------
Less: Executory costs                                                                                         (885)
                                                                                                          ----------
Net minimum capital lease payments                                                                         264,089
Less: Estimated amount representing interest                                                              (115,572)
                                                                                                          ----------
Present value of net minimum capital lease payments                                                        148,517
Less: Current portion                                                                                      (13,541)
                                                                                                        -------------
Long-term obligations under capital lease at February 1, 1997                                           $  134,976
                                                                                                        --------------
                                                                                                        --------------
</TABLE>
 
    The Company principally operates in leased store facilities with terms of 
up to 20 years and renewable options for additional periods. The Company 
follows the provisions of Statement of Financial Accounting Standards No. 13, 
"Accounting for Leases" ("SFAS 13"), in determining the criteria for capital 
leases. Leases that do not meet such criteria are classified as operating 
leases and related rentals are charged to expense in the year incurred. 
During Fiscal 1997, 1996 and 1995, the Company incurred capital lease 
obligations of $24,109,000, $11,176,000 and $5,533,000, respectively, in 
connection with lease agreements for buildings and equipment. For Fiscal 
1997, 1996 and 1995, capital lease amortization expense was $14,463,000, 
$12,485,000 and $11,887,000, respectively.
 
    Future minimum rentals have not been reduced by minimum sublease rentals 
of $49,781,000 due in the future under noncancelable subleases. In addition 
to minimum rentals, some leases provide for the Company to pay real estate 
taxes and other expenses and, in many cases, contingent rentals based on 
sales.

                                       46

<PAGE>

    Minimum rental payments and related executory costs for operating leases
were as follows:
<TABLE>
<CAPTION>
                                                         FISCAL YEAR ENDED
                                             -------------------------------------
                                             FEBRUARY 1,  FEBRUARY 3,  JANUARY 28,
                                               1997         1996         1995
                                             -----------  -----------  -----------
                                                     (IN THOUSANDS OF DOLLARS)
<S>                                           <C>          <C>          <C>
Minimum rentals and executory costs........    $  45,067    $  40,806    $  35,863
Contingent rentals.........................        2,760        2,264        1,874
Less: Sublease payments....................      (10,086)      (9,946)      (9,607)
                                             ------------  ------------  ----------
Net rental payments........................    $  37,741    $  33,124    $  28,130
                                             ------------  ------------  -----------
                                             ------------  ------------  -----------
</TABLE>
 

                                       47

<PAGE>

NOTE 6--UNUSUAL ITEM:
 
    During Fiscal 1996, the Company recorded an unusual item (charge) of 
$65.2 million. The Company also recorded a tax benefit of $13.3 million in 
connection with this charge.
 
    During the second quarter of Fiscal 1996, the Company decided to close 11 
of its 15 remaining stand-alone general merchandise stores (Harts) in Ohio 
and convert the other four stores to the Company's "Plus" format. During 
Fiscal 1996 and Fiscal 1995, these 11 stores generated 1.1% and 1.8%, 
respectively, of the total revenues of the Company. The impact of these 
stores on the operating income of the Company was immaterial in Fiscal 1996 
and Fiscal 1995. As a result of the decision to close the 11 Harts stores and 
convert the remaining four stores during the second quarter of Fiscal 1996, 
the Company recorded an unusual item (charge) of $50.6 million. This charge 
specifically relates to the write-off of goodwill ($32.8 million), the 
write-off of fixed assets ($8.4 million) and store closing costs consisting 
principally of inventory markdowns ($9.4 million).
 
    The unusual item also included $14.6 million in connection with the 
noncash write-off of certain fixed assets which the Company determined during 
the second quarter of Fiscal 1996 it would no longer utilize in its business 
($8.0 million), costs incurred in connection with the implementation of the 
Company's expense reduction programs ($4.0 million), and an increase in the 
Company's closed store reserve ($2.6 million).
 
    The noncash portion of the unusual item was approximately $57.5 million 
and the cash portion was approximately $7.7 million. All costs related to the 
unusual item were incurred during Fiscal 1996 with the exception of certain 
facility carrying costs (primarily lease payments) for stores that have been 
closed, inventory markdowns and the write-down of fixed assets for the 
remaining four stores to be converted to the Company's "Plus" format. The 
last scheduled lease payment will occur in 2001. The accrued liability 
related to the unusual item was $8.9 million at February 1, 1997 and $10.5 
million at February 3, 1996.


                                       48

<PAGE>
NOTE 7--ACCOUNTING FOR CERTAIN LONG-LIVED ASSETS:
 
    As of the beginning of the fourth quarter of Fiscal 1996, the Company 
adopted Statement of Financial Accounting Standards No. 121, "Accounting for 
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed 
Of" ("SFAS 121"). Accordingly, the Company periodically reviews the recorded 
value of its stores and other assets to determine if the future 
nondiscontinued cash flows from these properties are expected to be 
sufficient to recover the remaining recorded asset values. Based upon a 
comprehensive review of the Company's long-lived assets, the Company recorded 
a noncash charge of $46.8 million in Fiscal 1996. This charge primarily 
related to the write-down of a portion of the recorded asset values 
(including allocable goodwill) of 18 of the Company's 265 retail supermarkets 
that were in operation as of February 3, 1996. These 18 supermarkets were 
located throughout the Company's trading area and generated approximately 5% 
of the Company's total revenues in Fiscal 1996. As of February 1, 1997, the 
Company has not closed any of these stores. The write-down of these assets 
resulted in reduced depreciation and amortization expense in Fiscal 1997 of 
approximately $2.7 million and will reduce depreciation and amortization 
expense in future years.
 
    The Company performed a comprehensive review of its long-lived assets as of
the end of Fiscal 1997. Based on this review, no additional assets were deemed
to be impaired.


                                       49


<PAGE>

NOTE 8--STOCKHOLDERS' EQUITY:
 
    The Company has a Long-term Incentive Plan (the "1993 Plan") which 
provides for long-term incentives based upon objective, quantifiable measures 
of the Company's performance over time through the payment of incentive 
compensation of the types commonly known as stock options, restricted stock, 
performance shares, other forms of stock-based incentives such as phantom 
stock and cash awards. The 1993 Plan was adopted in Fiscal 1994 as the 
successor to the Company's 1988 Stock Option Plan (the "1988 Plan"). A 
maximum of 350,000 shares of common stock may be paid to participants under 
the 1993 Plan and/or purchased pursuant to stock options granted under the 
1993 Plan subject to antidilution and other adjustments specified in the 1993 
Plan.
 
    As of February 1, 1997, a total of 299,100 shares of restricted stock and 
3,000 options (with an exercise price of $18.19 per option share of which 
1,200 are exercisable) to purchase shares of the Company's common stock are 
outstanding under the Company's 1993 Plan. A total of 72 current and former 
directors, officers and employees own the restricted stock and options as of 
February 1, 1997. At February 1, 1997, an additional 36,900 shares of common 
stock were reserved for future grants under the 1993 Plan. For all awards of 
restricted stock made prior to January 29, 1995, vesting of the shares 
granted pursuant to such awards is contingent upon attainment, subsequent to 
the date of grant, of EBITDA (as defined) levels of $265 million in any four 
consecutive fiscal quarter period, or $500 million in any eight consecutive 
fiscal quarter period. Such shares will be forfeited if such levels are not 
achieved by the quarter ending May 2, 1998. Vesting of awards of restricted 
stock that have been made subsequent to the end of Fiscal 1995 is also 
conditioned upon the recipient's remaining in the employ of the Company for 
an additional two years following the last fiscal quarter in which the 
required EBITDA performance level was attained. To encourage retention of 
such shares by the participants, upon vesting of the restricted stock the 
Company will make a cash payment to each participant equal to the amount of 
income tax payable by such participant in respect of the award and the cash 
payment, if such participant agrees not to sell his shares for at least two 
years beyond vesting and to refund the payment if he resigns within such 
two-year period. As of February 1, 1997, unearned compensation was debited in 
the amount of $785,000 to reflect the impact of the outstanding restricted 
shares. Unearned compensation, which is shown as a separate component of 
stockholders' equity, will be expensed as the compensation is earned.


                                       50

<PAGE>

    The Company also has a stock option plan for directors (the "Directors' 
Plan") pursuant to which each director of the Company who is not an employee 
of the Company receives as of the date of appointment to the Board of 
Directors, and thereafter annually, as of the first business day after the 
conclusion of each Annual Meeting of Stockholders of the Company, an option 
to purchase 1,500 shares of common stock (subject to antidilution 
adjustments) at a price equal to the fair market value (as defined in
the Directors' Plan) of such shares on the date of grant. At February 1, 1997,
an additional 44,000 shares of common stock are reserved for issuance under the
Directors' Plan.
 
    Under each of the plans, option prices are 100% of the "fair market 
value" of the shares on the date granted and expire ten years after the date 
of grant. Under terms of the Directors' Plan, the options are immediately 
exercisable. The 1988 and 1993 Plan options generally vest 20% on the date of 
grant and 20% on each of the next four anniversary dates.
 
    A summary of the status of the Company's 1988 Plan as of January 28, 
1995, February 3, 1996 and February 1, 1997, and changes during the years 
ending on those dates is presented below:
 
<TABLE>
<CAPTION>
                                                              FISCAL 1995             FISCAL 1996             FISCAL 1997
                                                         ----------------------  ----------------------  ----------------------
                                                                     WEIGHTED-               WEIGHTED-               WEIGHTED-
                                                                      AVERAGE                 AVERAGE                 AVERAGE
                                                                     EXERCISE                EXERCISE                EXERCISE
1988 PLAN OPTIONS                                         SHARES       PRICE      SHARES       PRICE      SHARES       PRICE
-------------------                                      ---------  -----------  ---------  -----------  ---------  -----------
<S>                                                      <C>        <C>          <C>        <C>          <C>        <C>
Outstanding at beginning of year.......................    252,252   $   18.98     244,442   $   19.06     223,094   $   19.59
Granted................................................          0                       0                       0
Exercised..............................................     (7,550)      16.54     (21,348)      13.56      (5,592)      12.50
Forfeited..............................................       (260)      12.50           0                  (9,519)      17.14
                                                           ---------               ---------               ---------  
Outstanding at end of year.............................    244,442   $   19.06     223,094   $   19.59     207,983   $   19.89
                                                           ---------               ---------               ---------  
                                                           ---------               ---------               ---------  
Options exercisable at year-end........................    227,542   $   18.56     222,094   $   19.55     207,983   $   19.89
                                                           ---------               ---------               ---------  
                                                           ---------               ---------               ---------  

</TABLE>
 
    As of February 1, 1997, the 207,983 options outstanding under the 1988 
Plan have exercise prices between $12.50 and $28.13 and a weighted-average 
remaining contractual life of 3.1 years.

                                       51

<PAGE>

    A summary of the status of the Company's Directors' Plan as of January 
28, 1995, February 3, 1996 and February 1, 1997, and changes during the years 
ending on those dates is presented below:
 
<TABLE>
<CAPTION>
                                                                  FISCAL 1995             FISCAL 1996             FISCAL 1997
                                                             ----------------------  ----------------------  ----------------------
                                                                         WEIGHTED-               WEIGHTED-               WEIGHTED-
                                                                          AVERAGE                 AVERAGE                 AVERAGE
DIRECTORS' PLAN                                                          EXERCISE                 EXERCISE               EXERCISE
 OPTIONS                                                    SHARES       PRICE       SHARES       PRICE      SHARES      PRICE
----------------------                                      ---------  -----------  ---------  -----------  ---------  -----------
<S>                                                         <C>        <C>          <C>        <C>          <C>        <C>        
Outstanding at beginning of year ..................             31,500   $   28.12      39,000   $   29.65      42,000   $   30.97
Granted............................................              7,500       36.06       6,000       33.81       6,000       10.63
Exercised..........................................                  0                  (3,000)      19.47           0
Forfeited..........................................                  0                       0                       0
                                                             ---------              ----------              ----------
Outstanding at end of year.........................             39,000   $   29.65      42,000   $   30.97      48,000   $   28.43
                                                             ---------              ----------              ----------
                                                             ---------              ----------              ----------
Options exercisable at year-end....................             39,000   $   29.65      42,000   $   30.97      48,000   $   28.43
                                                             ---------              ----------              ----------
                                                             ---------              ----------              ----------
Weighted-average fair value of options granted during
 the year..........................................                      $   36.06               $   33.81               $   10.63
                                                                         ---------              ----------              ----------
                                                                         ---------              ----------              ----------
</TABLE>
 
    As of February 1, 1997, the 48,000 options outstanding under the 
Directors' Plan have exercise prices between $10.63 and $42.00 and a 
weighted-average remaining contractual life of 6.2 years.

                                       52
<PAGE>

    At February 1, 1997, certain persons affiliated with Miller Tabak Hirsch 
+ Co. ("MTH") held warrants to purchase 289,000 shares at $14.00 per share. 
These warrants were issued in June 1988 and were exercisable on the date of 
grant. None of these option shares have been exercised or forfeited since the 
date of grant.
 
    In November 1996, the Board of Directors of the Company adopted a new 
stock-based incentive compensation plan (the "Performance Incentive Plan") 
which will replace the 1993 Plan. As of February 1, 1997, no awards have been 
made under the Performance Incentive Plan.
 
    The Company applies Accounting Principles Board Opinion No. 25, 
"Accounting for Stock Issued to Employees" ("APB 25") and related 
interpretations in accounting for its stock-based compensation plans. 
Accordingly, no compensation cost has been recognized for these plans. Had 
the Company applied the applicable provisions of Statement of Financial 
Accounting Standards No. 123, "Accounting and Disclosure of Stock-Based 
Compensation" ("SFAS 123") for the fiscal years ended February 1, 1997 and 
February 3, 1996, the impact on the Company's net income and earnings per 
share for each of these fiscal years would have been immaterial.
 
    In October 1995, the Company's Board of Directors authorized the 
repurchase by the Company of up to 500,000 shares of its outstanding common 
stock, either in the open market or in private transactions. Shares which are 
repurchased will be available for issuance upon exercise of outstanding 
options which have been granted under the Company's equity incentive programs 
as well as for other corporate purposes. The Company did not purchase any 
shares during Fiscal 1997. During Fiscal 1996, the Company purchased 45,200 
shares at a cost of $625,000, which shares are being held in treasury. Penn 
Traffic's debt agreements contain limitations which currently prohibit it 
from repurchasing any additional shares of its common stock.
 
NOTE 9--EQUITY INVESTMENT:
 
    In July 1989, Penn Traffic acquired an indirect ownership interest in the 
common stock of Grand Union Holdings Corporation ("Grand Union Holdings"), 
which was the corporate parent of The Grand Union Company ("Grand Union"). 
The Company accounted for its investment in Grand Union under the equity 
method. The investment was recorded originally at a cost of $18,250,000. The 
carrying value of the investment was reduced to zero as of February 2, 1991.


                                       53

<PAGE>

    On January 25, 1995, Grand Union filed a voluntary petition for 
reorganization under Chapter 11 of the United States Bankruptcy Code with the 
United States Bankruptcy Court, District of Delaware (the "Bankruptcy 
Court"). On February 16, 1995, Grand Union Holdings filed a voluntary Chapter 
11 petition with the Bankruptcy Court. As a result of these bankruptcy 
proceedings, Penn Traffic's equity ownership interest in Grand Union 
Holdings, which as of the dates of filing of the Chapter 11 petitions was 
approximately 17.8% on a fully diluted basis, became worthless.
 
    See Note 10--Related Parties for a description of certain relationships 
between Penn Traffic and Grand Union.
 
NOTE 10--RELATED PARTIES:
 
    During Fiscal 1997, the Company had an agreement for financial consulting 
and business management services to be provided by MTH pursuant to which the 
Company paid MTH fees of $1,405,600. The fee payable to MTH for Fiscal 1998 
will be approximately $1,437,000.
 
    During Fiscal 1996 and Fiscal 1995, the amounts of the annual fees paid 
to MTH under the financial consulting and business management services 
agreement were $1,395,100 and $1,357,100, respectively. During Fiscal 1995, 
the Company paid MTH an additional fee of $500,000 for its services in 
connection with assisting the Company with the acquisition of 45 former Acme 
stores and the public offering of $100 million in principal amount of Penn 
Traffic 10.65% Senior Notes due 2004.
 
    On July 30, 1990, P&C (then a subsidiary and now a division of Penn 
Traffic) and Grand Union entered into an agreement (the "New England 
Operating Agreement") whereby Grand Union acquired the right to operate 13 
P&C stores located in New England under the Grand Union name until July 2000. 
Pursuant to the New England Operating Agreement, Grand Union agreed to pay 
Penn Traffic (as the successor of P&C, which was merged into the Company in 
April 1993) a minimum annual fee averaging $10.7 million per year during the 
10-year term and, beginning with the year commencing July 31, 1992, to pay 
Penn Traffic additional contingent fees of up to $700,000 per year based on 
sales performance of the stores operated by Grand Union. As a result of the 
recapitalization of Grand Union in July 1992, Penn Traffic received a $15 
million prepayment of an operating fee from Grand Union pursuant to the terms 
of the New England Operating Agreement. This prepayment reduced the future 
payments that Grand Union will make to Penn Traffic pursuant to the terms of 
the New England Operating Agreement by approximately $3.2 million per year. 
The Total Revenues line of the Consolidated Statement of Operations includes 
pretax operating fees of $11.2 million for the fiscal year ended February 1, 
1997, $11.4 million for the fiscal year ended February 3, 1996 and $11.2 
million for the fiscal year ended January 28, 1995.

                                       54

<PAGE>

    At the expiration of the 10-year term of the New England Operating 
Agreement, Grand Union has the right to extend the term of the New England 
Operating Agreement for an additional five years. In the event of such 
extension of the lease term, Grand Union would pay Penn Traffic an annual fee 
of $13.6 million in the first year of the extended term, $14.0 million in the 
second year, $14.4 million in the third year, $14.9 million in the fourth 
year and $15.3 million in the fifth year, plus contingent fees based on the 
sales performance of the stores of up to $700,000 each year.
 
    Penn Traffic also granted Grand Union an option (the "Purchase Option") 
to purchase the stores operated by Grand Union under the New England 
Operating Agreement. Grand Union paid Penn Traffic $7.5 million for the 
Purchase Option.
 
    If Grand Union does not extend the initial term of the New England 
Operating Agreement at its expiration in July 2000 or does not exercise the 
Purchase Option prior to the expiration of the term (or the extended term), 
or in the event of a default by Grand Union in the performance of its 
obligations pursuant to the New England Operating Agreement, the stores 
operated by Grand Union pursuant to the New England Operating Agreement will 
be returned to operation by Penn Traffic.
 
    From September 1993 until September 1995, Penn Traffic and Grand Union 
participated in a consolidated health and beauty care and general merchandise 
purchasing and distribution program.
 
NOTE 11--COMMITMENTS AND CONTINGENCIES:
 
    The Company enters into various purchase commitments in the normal course 
of business. No losses are expected to result from these purchase commitments.
 
    The Company and its subsidiaries are involved in several lawsuits, claims 
and inquiries, most of which are routine to the nature of the business. 
Estimates of future liability are based on an evaluation of currently 
available facts regarding each matter. Liabilities are recorded when it is 
probable that costs will be incurred and can be reasonably estimated. Based 
on management's evaluation, the resolution of these matters will not 
materially affect the financial position, results of operations or liquidity 
of the Company.
 
NOTE 12--EXTRAORDINARY ITEM:
 
    During Fiscal 1995, the Company had an extraordinary item of $3,025,000 
(net of $2,045,000 income tax benefit) related to the early retirement of 
debt.

                                       55

<PAGE>
 
NOTE 13--ACQUISITIONS:
 
    On January 19, 1995, the Company acquired 45 food stores from American 
Stores Company. The stores are located in north central and northeastern 
Pennsylvania and in south central New York.
 
    The acquisition cost of $91,570,000 was attributed to major categories of 
assets obtained and obligations assumed as follows: inventories $15,502,000; 
property, plant and equipment $9,638,000; other assets (goodwill) 
$81,217,000; cash $566,000 and other noncurrent liabilities $15,353,000.
 
    The unaudited consolidated results of operations on a pro forma basis as 
though the American Stores Company stores had been acquired on January 30, 
1994 are as follows:
 
<TABLE>
<CAPTION>
                                             FOR THE 52 WEEKS ENDED
                                                  JANUARY 28,
                                                      1995
                                            ------------------------
                                                  (UNAUDITED)
                                             (IN THOUSANDS OF DOLLARS,
                                              EXCEPT PER SHARE AMOUNT)

<S>                                          <C>
Total revenues.............................           $  3,599,513
Net income applicable to common stock......           $     13,303
Net income per common share................           $       1.19
</TABLE>
 
    The pro forma financial information is not necessarily indicative of the
results of operations that would have occurred had the purchase been made at the
beginning of the period or of the future results of the combined operations.
 

                                       56

<PAGE>

REPORT OF MANAGEMENT
 
    Penn Traffic's management has prepared the financial statements presented 
in this annual report and is responsible for the integrity of all information 
contained herein. The financial statements presented in this report have been 
audited by the independent accountants appointed by the Board of Directors on 
the recommendation of its Audit Committee and management. The Company 
maintains an effective system of internal accounting controls. The 
independent accountants obtain and maintain an understanding of the Company's 
internal accounting controls and conduct such tests and related procedures as 
they deem necessary to express an opinion on the fairness of the presentation 
of the financial statements. The Audit Committee, composed solely of outside 
directors, meets periodically with management and independent accountants to 
review auditing and financial reporting matters and to ensure that each group 
is properly discharging its responsibilities. We rely on our internal and 
external auditors to assist us in fulfilling our responsibility for the 
fairness of the Company's financial reporting and monitoring the 
effectiveness of our system of internal accounting controls.

 
                                       57

<PAGE>
                                    PART III
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
 
    As permitted by General Instruction G(3), information concerning the
executive officers of Penn Traffic is set forth as a supplemental item included
in Part I of the Form 10-K Report under the caption "Executive Officers of
Registrant." The information required by this item is incorporated herein by
reference to the captions "Election of Directors" and "Section 16(a) Beneficial
Ownership Reporting Compliance" in the Company's Proxy Statement dated May 1,
1997, filed or to be filed in connection with the Company's Annual Meeting of
Stockholders to be held on June 3, 1997.
 
ITEM 11. EXECUTIVE COMPENSATION
 
    The information required by this Item is incorporated herein by reference to
the caption "Executive Compensation" in the Company's Proxy Statement dated May
1, 1997, filed or to be filed in connection with the Company's Annual Meeting of
Stockholders to be held on June 3, 1997. The information set forth in
"Compensation Committee Report" and "Performance Graph" of the Company's Proxy
Statement dated May 1, 1997, filed or to be filed in connection with the
Company's Annual Meeting of Stockholders to be held on June 3, 1997, is not
"filed" as a part hereof.
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT
 
    The information required by this Item is incorporated herein by reference to
the caption "Security Ownership of Certain Beneficial Owners and Management" in
the Company's Proxy Statement dated May 1, 1997, filed or to be filed in
connection with the Company's Annual Meeting of Stockholders to be held on June
3, 1997.
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
    The information required by this Item is incorporated herein by reference to
the captions "Certain Transactions" and "Compensation of Directors" in the
Company's Proxy Statement dated May 1, 1997, filed or to be filed in connection
with the Company's Annual Meeting of Stockholders to be held on June 3, 1997.
 

                                       58

<PAGE>
                                    PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
         FORM 8-K
 
    The index for Financial Statements and Supplementary Data is on page 17
under Item 8 of this Form 10-K.
 
    EXHIBITS:
 
    The following are filed as Exhibits to this Report:
 
<TABLE>
<CAPTION>
EXHIBIT NO.                            DESCRIPTION
-------------  ----------------------------------------------------------------------------
<C>            <S>
 
        2.1    Certificate of Merger for merger of Penn Traffic Acquisition Corporation into Penn Traffic dated
               April 14, 1993 (incorporated by reference to Exhibit No. 2.5 to Penn Traffic's Registration Statement
               on Form S-3 (Reg. No. 33-51213) filed on December 8, 1993 with the Securities and Exchange Commission
               (the "SEC") and referred to herein as the "December 1993 Registration Statement").
 
        2.2    Plan of Merger dated as of February 25, 1993 for the merger of P&C Food Markets, Inc. ("P&C") into
               Penn Traffic (incorporated by reference to Exhibit No. 2.6 to Penn Traffic's Registration Statement
               on Form S-3 (Reg. No. 33-58918) filed on April 7, 1993 with the SEC and referred to herein as the
               "April 1993 Registration Statement").
 
        2.3    Certificates of Merger for merger of P&C into Penn Traffic dated April 14, 1993 (incorporated by
               reference to Exhibit No. 2.7 to the December 1993 Registration Statement).
 
        2.4    Agreement and Plan of Merger dated as of February 25, 1993 by and among Penn Traffic, Penn Traffic
               Acquisition Corporation and Big Bear Stores Company ("Big Bear") (incorporated by reference to
               Exhibit No. 2.8 to the April 1993 Registration Statement).
 
        2.5    Certificate of Merger for merger of Big Bear into Penn Traffic Acquisition Corporation dated April
               14, 1993 (incorporated by reference to Exhibit No. 2.9 to the December 1993 Registration Statement).
 
        2.6    Asset Purchase Agreement dated as of December 9, 1992 between Penn Traffic and Peter J. Schmitt Co.,
               Inc. (the "December 9, 1992 Asset Purchase Agreement") (incorporated by reference to Exhibit No. 2.1
               to Penn Traffic's Current Report on Form 8-K filed on January 18, 1993 with the SEC and referred to
               herein as the "Penn Traffic 1993 8-K").
 
       2.6A    Letter Agreement dated December 31, 1992 with respect to the December 9, 1992 Asset Purchase
               Agreement (incorporated by reference to Exhibit No. 2.1A to the Penn Traffic 1993 8-K).
</TABLE>
 
                                       59
<PAGE>

Exhibits (continued):
 
<TABLE>
<CAPTION>
EXHIBIT NO.                                                 DESCRIPTION
-------------  -----------------------------------------------------------------------------------------------------
<C>            <S>
 
        2.7    Asset Purchase Agreement dated as of December 29, 1992 between Penn Traffic and Peter J. Schmitt Co.,
               Inc. (the "December 29, 1992 Asset Purchase Agreement") (incorporated by reference to Exhibit No. 2.2
               to the Penn Traffic 1993 8-K).
 
       2.7A    Letter Agreement dated December 30, 1992 with respect to the December 29, 1992 Asset Purchase
               Agreement (incorporated by reference to Exhibit No. 2.2A to the Penn Traffic 1993 8-K).
 
        2.8    Agreement of Purchase and Sale, dated as of August 27, 1993, by and between Insalaco Markets, Inc.,
               Insalaco's Old Forge, Inc., Insalaco's Clarks Green, Inc., Insalaco's Supermarkets Warehouse,
               Insalaco Enterprises, Insalaco's Real Estate, Insalaco's Foodliner, Eagle Valley Realty, Tannersville
               Realty Company and Penn Traffic (incorporated by reference to Exhibit No. 10.23 to Penn Traffic's
               Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 1993 and referred to herein as
               the "Penn Traffic July 1993 10-Q").
 
        2.9    Asset Purchase Agreement by and among Acme Markets, Inc., American Stores Properties, Inc., American
               Stores Realty Corp. and The Penn Traffic Company, dated as of September 30, 1994 (incorporated by
               reference to Exhibit 2.13 to Penn Traffic's Report on Form 8-K dated October 12, 1994 and referred to
               herein as the "1994 8-K").
 
        3.1    Certificate of Incorporation of Penn Traffic (incorporated by reference to Exhibit No. 3.1 to Penn
               Traffic's Registration Statement on Form S-3 (Reg. No. 33-51824) filed on October 2, 1992 with the
               SEC and referred to herein as the "October 1992 Registration Statement").
 
        3.2    By-Laws of Penn Traffic as amended through April 2, 1996 (incorporated by reference to Exhibit No.
               3.2 to Penn Traffic's Annual Report on Form 10-K for the fiscal year ended February 3, 1996 and
               referred to herein as the "1996 10-K").
 
        4.1    Certificate of Incorporation of Penn Traffic (filed as Exhibit No. 3.1).
 
        4.2    By-Laws of Penn Traffic (filed as Exhibit No. 3.2).
 
        4.3    Form of Common Stock Certificate (incorporated by reference to Exhibit No. 4.2 to Penn Traffic's
               Annual Report on Form 10-K for the fiscal year ended January 28, 1995 and referred to herein as the
               "1995 10-K").
</TABLE>
 
                                       60
<PAGE>

Exhibits (continued):
 
<TABLE>
<CAPTION>
EXHIBIT NO.                                                 DESCRIPTION
-------------  -----------------------------------------------------------------------------------------------------
<C>            <S>
 
        4.4    Indenture, including form of 11 1/2% Senior Note Due 2001, dated as of October 16, 1991 between P&C
               and Bankers Trust Company ("Bankers Trust"), as Trustee (incorporated by reference to Exhibit No.
               10.25 to P&C's quarterly report on Form 10-Q for the fiscal quarter ended November 2, 1991 and
               referred to herein as the "P&C November 1991 10-Q").
 
       4.4A    First Supplemental Indenture dated as of April 15, 1993 between the Company and Bankers Trust, as
               Trustee, relating to the 11 1/2% Senior Notes Due 2001 (incorporated by reference to Exhibit No.
               4.10A to Penn Traffic's Quarterly Report on Form 10-Q for the fiscal quarter ended May 1, 1993 and
               referred to herein as the "Penn Traffic May 1993 10-Q").
 
        4.5    Indenture, including form of 10 1/4% Senior Note Due February 15, 2002, dated as of February 18, 1992
               between Penn Traffic and Marine Midland Bank, N.A., Trustee (incorporated by reference to Exhibit No.
               4.13 to Penn Traffic's Annual Report on Form 10-K for the fiscal year ended February 1, 1992 and
               referred to herein as the "Penn Traffic 1992 10-K").
 
       4.5A    First Supplemental Indenture dated as of June 10, 1992 to the Indenture dated as of February 18,
               1992, relating to the 10 1/4% Senior Notes Due 2002, between Penn Traffic and Marine Midland Bank,
               N.A., as Trustee (incorporated by reference to Exhibit 4.15A to the October 1992 Registration
               Statement).
 
       4.5B    Second Supplemental Indenture dated as of September 18, 1992 to the Indenture dated as of February
               18, 1992, relating to the 10 1/4% Senior Notes Due 2002, between Penn Traffic and Marine Midland
               Bank, N.A., as Trustee (incorporated by reference to Exhibit 4.15B to the October 1992 Registration
               Statement).
 
        4.6    Indenture, including form of 10 3/8% Senior Note Due October 1, 2004, dated as of October 1, 1992,
               between Penn Traffic and United States Trust Company of New York, as Trustee (incorporated by
               reference to Exhibit No. 4.16 to Penn Traffic's Quarterly Report on Form 10-Q for the fiscal quarter
               ended October 31, 1992).
 
        4.7    Indenture, including form of 9 5/8% Senior Subordinated Note Due April 15, 2005, dated as of April
               15, 1993, between Penn Traffic and First Trust of California, National Association, as Trustee
               (incorporated by reference to Exhibit No. 4.14 to the Penn Traffic May 1993 10-Q).
</TABLE>
 
                                       61

<PAGE>

Exhibits (continued):
 
<TABLE>
<CAPTION>
EXHIBIT NO.                                                 DESCRIPTION
-------------  -----------------------------------------------------------------------------------------------------
<C>            <S>
 
        4.8    Indenture dated as of December 15, 1993, between Penn Traffic and United States Trust Company of New
               York, as Trustee (incorporated by reference to Exhibit No. 4.9 to Penn Traffic's Form 10-K for the
               fiscal year ended January 29, 1994, and referred to herein as the "1994 10-K").
 
       4.8A    Officer's Certificate pursuant to the Indenture filed as Exhibit 4.8, dated December 21, 1993,
               establishing the terms of the 8 5/8% Senior Notes due December 15, 2003 (incorporated by reference to
               Exhibit 4.8A to the 1995 10-K).
 
       4.8B    Officer's Certificate pursuant to the Indenture filed as Exhibit 4.8, dated October 20, 1994,
               establishing the terms of the 10.65% Senior Notes due November 1, 2004 (incorporated by reference to
               Exhibit 4.8B to the 1995 10-K).
 
       4.8C    Officer's Certificate pursuant to the Indenture filed as Exhibit 4.8, dated April 23, 1996,
               establishing the terms of the 11.50% Senior Notes due April 15, 2006 (incorporated by reference to
               Exhibit 4.8C to Penn Traffic's Quarterly Report on Form 10-Q for the fiscal quarter ended May 4, 1996
               (the "May 1996 10-Q")).
 
       10.1    Membership and Licensing Agreement dated April 18, 1982 among TOPCO Associates, Inc. (Cooperative),
               Kingston Marketing Co. and Penn Traffic (incorporated by reference to Exhibit No. 10.2 to Penn
               Traffic's Registration Statement on Form S-1 (Reg. No. 33-12926) filed on March 27, 1987 with the SEC
               and referred to herein as the "1987 Registration Statement").
 
      *10.2    The Penn Traffic Company Incentive Compensation Plan (incorporated by reference to Exhibit No. 10.3
               to the 1987 Registration Statement).
 
      *10.3    The Penn Traffic Company Severance Pay Plan (incorporated by reference to Exhibit No. 10.5 to the
               1987 Registration Statement).
 
      *10.4    Quality Markets, Inc. ("Quality") Profit Sharing Plan (incorporated by reference to Exhibit No. 10.11
               to the 1987 Registration Statement).
 
       10.5    Loan and Security Agreement (the "Loan and Security Agreement") among Penn Traffic, Quality, Dairy
               Dell, Big M Supermarkets, Inc. ("Big M"), Penny Curtiss Baking Company Inc. ("Penny Curtiss"), and
               Hart Stores, Inc. ("Hart"), the lenders party thereto and NatWest USA Credit Corp., as Agent, dated
               March 5, 1993 (incorporated by reference to Exhibit No. 10.2 to the April 1993 Registration
               Statement).
</TABLE>

------------------------

*   Management contract, compensatory plan or arrangement.
 
                                       62
<PAGE>

Exhibits (continued):
 
<TABLE>
<CAPTION>
EXHIBIT NO.                                               DESCRIPTION
-----------  -----------------------------------------------------------------------------------------------------
<C>          <S>
 
     10.5A   Amendment No. 1, dated March 12, 1993, to the Loan and Security Agreement (incorporated by reference
             to Exhibit No. 10.2A to the April 1993 Registration Statement).
 
     10.5B   Amendment No. 2, dated as of March 24, 1993, to the Loan and Security Agreement (incorporated by
             reference to Exhibit No. 10.2B to the April 1993 Registration Statement).
 
     10.5C   Waiver Letter dated as of April 14, 1993, among the lenders under the Loan and Security Agreement,
             Penn Traffic, Quality, Dairy Dell, Big M, Penny Curtiss and Hart (incorporated by reference to
             Exhibit No. 10.22C to the Penn Traffic May 1993 10-Q).
 
     10.5D   Amendment No. 3, dated as of April 15, 1993, to the Loan and Security Agreement (incorporated by
             reference to Exhibit No. 10.22D to the Penn Traffic May 1993 10-Q).
 
     10.5E   Amendment No.4, dated as of August 20, 1993, to the Loan and Security Agreement (incorporated by
             reference to Exhibit No. 10.22E to the Penn Traffic July 1993 10-Q).
 
     10.5F   Amendment No. 5, dated as of August 24, 1994, to the Loan and Security Agreement (incorporated by
             reference to Exhibit 10.9F to Penn Traffic's Report on Form 10-Q for the fiscal quarter ended July
             30, 1994 and referred to herein as the "July 1994 10-Q").
 
     10.5G   Amendment No. 6, dated as of August 24, 1994, to the Loan and Security Agreement (incorporated by
             reference to Exhibit 10.9G to the July 1994 10-Q).
 
     10.5H   Consent and Amendment to the Loan and Security Agreement, dated as of September 29, 1994
             (incorporated by reference to Exhibit 10.9H to the 1994 Form 8-K).
 
     10.5I   Amendment No. 8, dated as of November 4, 1994, to the Loan and Security Agreement (incorporated by
             reference to Exhibit No. 10.9I to Penn Traffic's Quarterly Report on Form 10-Q for the fiscal quarter
             ended April 29, 1995 and referred to herein as the "April 1995 10-Q").
 
     10.5J   Amendment No. 9, dated as of May 10, 1995, to the Loan and Security Agreement (incorporated by
             reference to Exhibit No. 10.9J to the April 1995 10-Q).
 
     10.5K   Amendment No. 10, dated as of August 31, 1995, to the Loan and Security Agreement (incorporated by
             reference to Exhibit No. 10.9K to Penn Traffic's Quarterly Report on Form 10-Q for the fiscal quarter
             ended July 29, 1995).
 
     10.5L   Amendment No. 11, dated as of October 16, 1995, to the Loan and Security Agreement (incorporated by
             reference to Exhibit No. 10.9L to Penn Traffic's Quarterly Report on Form 10-Q for the fiscal quarter
             ended October 28, 1995).
</TABLE>
 
                                       63
<PAGE>

Exhibits (continued):
 
<TABLE>
<CAPTION>
EXHIBIT NO.                                                 DESCRIPTION
-------------  -----------------------------------------------------------------------------------------------------
<C>            <S>
 
      10.5M    Amendment No. 12, dated as of March 7, 1996, to the Loan and Security Agreement (incorporated by
               reference to Exhibit No. 10.5M to the 1996 10-K).
 
      10.5N    Amendment No. 13, dated as of May 31, 1996, to the Loan and Security Agreement (incorporated by
               reference to Exhibit No. 10.5N to the May 1996 10-Q).
 
      10.5O    Amendment No. 14, dated as of October 16, 1996, to the Loan and Security Agreement (incorporated by
               reference to Exhibit No. 10.5O to Penn Traffic's Current Report on Form 8-K dated October 16, 1996).
 
       10.6    Engagement Letter dated as of January 30, 1994 by and among Penn Traffic and Miller Tabak Hirsch +
               Co. (incorporated by reference to Exhibit 10.10 to the 1994 10-K).
 
      *10.7    The Penn Traffic Company Amended and Restated Directors' Stock Option Plan (filed as Exhibit "A" to
               Penn Traffic's Proxy Statement filed with the SEC on May 1, 1996 and incorporated herein by
               reference).
 
       10.8    Agreement and Master Sublease dated as of July 30, 1990, by and between The Grand Union Company and
               P&C (incorporated by reference to Exhibit No. 10.24 to Penn Traffic's Quarterly Report on Form 10-Q
               for the Fiscal Quarter ended August 4, 1990 (Securities and Exchange Commission File No. 1-9930) and
               referred to herein as the "Penn Traffic August 1990 10-Q").
 
       10.9    Interest Rate and Currency Exchange Agreement dated as of October 16, 1991 between Salomon Brothers
               Holding Company, Inc. ("SBHC") and P&C (incorporated by reference to Exhibit No. 10.27 to the P&C
               November 1991 10-Q).
 
     *10.10    Employment Agreement, dated as of February 2, 1992, among Penn Traffic, P & C and Claude J. Incaudo
               (incorporated by reference to Exhibit No. 10.37 to the Penn Traffic 1992 10-K).
 
     *10.11    The Penn Traffic Company's 1993 Long Term Incentive Plan (filed as Exhibit "A" to Penn Traffic's
               Proxy Statement filed with the SEC on May 1, 1993 and incorporated herein by reference).
</TABLE>
 
------------------------
 
*   Management contract, compensatory plan or arrangement.
 
                                       64
<PAGE>

    Exhibits (continued):
 
<TABLE>
<CAPTION>
EXHIBIT NO.                                                 DESCRIPTION
-------------  -----------------------------------------------------------------------------------------------------
<C>            <S>
 
      10.12    First Mortgage, Security Agreement, Financing Statement and Assignment of Leases and Rents dated as
               of October 25, 1993 by and among Penn Traffic and Onondaga County Industrial Development Agency, as
               mortgagor and NatWest USA Credit Corp., as mortgagee (incorporated by reference to Exhibit No. 10.24
               to Penn Traffic's Quarterly Report on Form 10-Q for the fiscal quarter ended October 31, 1993).
 
      10.13    Agreement Containing Consent Order dated January 9, 1995 by and between Penn Traffic and the Federal
               Trade Commission entered into in the matter of The Penn Traffic Company (incorporated by reference to
               Exhibit 10.25 to Penn Traffic's Report on Form 8-K dated January 19, 1995).
 
      10.14    Agreement, dated November 18, 1994, between Penn Traffic and Grand Union relating to the Grand Union
               warehouse in Montgomery, New York (incorporated by reference to Exhibit No. 10.21 to the 1995 10-K).
 
     *10.15    Employment Agreement, dated as of January 29, 1995, between John T. Dixon and Penn Traffic
               (incorporated by reference to Exhibit No. 10.22 to the 1995 10-K).
 
     *10.16    Agreement dated October 5, 1996, between John T. Dixon and Penn Traffic.
 
     *10.17    Employment Agreement, dated as of March 11, 1997, between Phillip E. Hawkins and Penn Traffic.
 
     *10.18    Penn Traffic's 1997 Performance Incentive Plan.
 
     *10.19    Penn Traffic's Supplemental Retirement Income Plan.
 
       21.1    Subsidiaries of Penn Traffic (incorporated by reference to Exhibit 21.1 to Penn Traffic's 1994 10-K).
 
       27.1    Financial Data Schedule.
</TABLE>
 
------------------------
 
*   Management contract, compensatory plan or arrangement.

                                       65

<PAGE>
 
    Copies of the above exhibits will be furnished without charge to any
shareholder by writing to Treasurer, The Penn Traffic Company, 1200 State Fair
Boulevard, Syracuse, New York 13221.
 
REPORTS ON FORM 8-K
 
    No reports on Form 8-K were filed during the fiscal quarter ended February
1, 1997.
 
                                       66

<PAGE>

                                      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.
 
                                             THE PENN TRAFFIC COMPANY
 
    April 30, 1997                           By: /s/ Phillip E. Hawkins 
---------------------------                     --------------------------
       DATE                                     Phillip E. Hawkins,
                                                President, Chief Executive 
                                                Officer and Director
 
    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.

 /s/ Gary D. Hirsch                              /s/ Eugene R. Sunderhaft 
-----------------------                             ----------------------
Gary D. Hirsch,                                      Eugene R. Sunderhaft, 
Chairman of the Board and Director                   Senior Vice President and 
                                                     Secretary (Principal 
                                                     Financial Officer and 
                                                     Principal
April 30, 1997                                       Accounting Officer) 
--------------
 DATE                                                      April 30, 1997
                                                         ------------------
                                                               DATE 

/s/ Eugene A. DePalma                           /s/ Susan E. Engel 
-------------------------                           ------------------------
Eugene A. DePalma, Director                         Susan E. Engel, Director 

April 30, 1997                                         April 30, 1997
---------------                                        ---------------
 DATE                                                       DATE 

/s/ Martin A. Fox                               /s/ Claude J. Incaudo
--------------------                                -------------------------
 Martin A. Fox, Director                            Claude J. Incaudo, Director 

    April 30, 1997                                     April 30, 1997 
---------------------                                 ------------------
       DATE                                                 DATE

/s/ James A. Lash                              /s/ Harold S. Poster
---------------------------                        --------------------------
 James A. Lash, Director                           Harold S. Poster, Director 

April 30, 1997                                              April 30, 1997 
---------------                                            -----------------
  DATE                                                           DATE 

/s/ Richard D. Segal 
----------------------------
Richard D. Segal, Director

 April 30, 1997
-------------------
      DATE
 
                                       67

<PAGE>

                            THE PENN TRAFFIC COMPANY
 
                                 SCHEDULE VIII
 
                       VALUATION AND QUALIFYING ACCOUNTS
 
                            (In thousands of dollars)
 
<TABLE>
<CAPTION>
COLUMN A                                                          COLUMN B        COLUMN C     COLUMN D     COLUMN E
--------------                                                   ------------  -------------  ----------   -----------
                                                                                 ADDITIONS
                                                                   BALANCE        CHARGED     DEDUCTIONS     BALANCE
                                                                 AT BEGINNING    TO COSTS        FROM        AT END
      DESCRIPTION                                                 OF PERIOD    AND EXPENSES    ACCOUNTS     OF PERIOD
--------------------------------------------------------------  -------------  -------------  -----------  -----------
<S>                                                             <C>            <C>            <C>          <C>
Reserve deducted from asset to which it applies:
For the 52 Weeks Ended February 1, 1997
  Provision for doubtful accounts.............................    $   1,483      $   8,414     $ 7,030(a)   $   2,867
                                                                     ------         ------    -----------  -----------
                                                                     ------         ------    -----------  -----------
For the 53 Weeks Ended February 3, 1996 
  Provision for doubtful accounts.............................    $   1,374      $   3,926     $ 3,817(a)   $   1,483
                                                                     ------         ------    -----------  -----------
                                                                     ------         ------    -----------  -----------
For the 52 Weeks Ended January 28, 1995 
  Provision for doubtful accounts.............................    $     740      $   2,782     $ 2,148(a)   $   1,374
                                                                     ------         ------    -----------  -----------
                                                                     ------         ------    -----------  -----------
</TABLE>
 
------------------------
 
(a) Uncollectible receivables written off net of recoveries.
 

                                       68