**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C.  20549**

 

**FORM 10-Q**

 

**x QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(d)**

**OF THESECURITIES EXCHANGE ACT OF 1934**

 

**For thequarterly period ended October 29, 2005**

 

**OR**

 

**o TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d)**

**OF THESECURITIES EXCHANGE ACT OF 1934**

 

**For the Transition Periodfrom                        to                        **

** **

**Commission file number: 0-8858**

 

**THE PENN TRAFFIC COMPANY**

(Exact name of registrant as specified in its charter)

 

| **Delaware**              | ** ** | **25-0716800**                     |
|---------------------------|------------|------------------------------------|
| (State  of incorporation) |       | (IRS  Employer Identification No.) |

 

| **1200  State Fair Blvd., Syracuse, New York 13221-4737** | ** ** | **(315)  453-7284** |
|-----------------------------------------------------------|------------|---------------------|
| (Address of principal executive offices)                  |       | (Telephone Number)  |

 

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

 

| Securities  registered pursuant to Section 12(g) of the Act: |   | **Common  Stock, $.01 par value** |
|------------------------------------------------------------------------|--------|-----------------------------------|

 

Indicateby check mark whether the registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports) and (2) has been subject tosuch filing requirements for the past 90 days. YES  o  NO  x

 

Indicate by check mark whether the registrantis a large accelerated filer, an accelerated filer, a non-accelerated filer, ora smaller reporting company.  See thedefinitions of “large accelerated filer,” “accelerated filer” and “smallerreporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

| Large  accelerated filer o                     |   | Accelerated  filer o         |
|------------------------------------------------|--------|------------------------------|
| Non-accelerated  filer x                       |   | Smaller  reporting company o |
| (Do  not check if a smaller reporting company) |   |                         |

 

Indicatedby check mark whether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act).  YES  o   NO  x

 

Indicateby check mark whether the registrant has filed all documents and reportsrequired to be filed by Sections 12, 13 or 15(d) of the SecuritiesExchange Act of 1934 subsequent to the distribution of securities under a planconfirmed by a court.  YES  o   NO  x

 

CommonStock, par value $.01 per share: 8,336,192 shares outstanding as of April 3,2008

 

 

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| **FORM 10-Q INDEX** |
|--------------------------|

 
| ** **        | ** ** | ** ** | ** **                                                                                  | **PAGE** |
|-------------------|------------|------------|---------------------------------------------------------------------------------------------|----------|
| **PART I.**  | ** ** | ** ** | **FINANCIAL INFORMATION**                                                                   |     |
|              |       |       |                                                                                        |     |
| Item              | 1.         |       | Financial Statements                                                                        | 4        |
|              |       |       |                                                                                        |     |
| Item              | 2.         |       | Management’s  Discussion and Analysis of Financial Conditionand Results  of Operations | 16       |
|              |       |       |                                                                                        |     |
| Item              | 3.         |       | Quantitative and Qualitative Disclosures  About Market Risk                                 | 21       |
|              |       |       |                                                                                        |     |
| Item              | 4.         |       | Controls and  Procedures                                                                    | 21       |
|              |       |       |                                                                                        |     |
| **PART II.** | ** ** | ** ** | **OTHER  INFORMATION**                                                                      |     |
|              |       |       |                                                                                        |     |
| Item              | 1.         |       | Legal Proceedings                                                                           | 22       |
|              |       |       |                                                                                        |     |
| Item              | 1A.        |       | Risk Factors                                                                                | 22       |
|              |       |       |                                                                                        |     |
| Item              | 6.         |       | Exhibits                                                                                    | 23       |

 

2

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**SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS**

 

Certainstatements included in this Form 10-Q, including without limitation,statements included in Item 2 - “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations,” which are not statements ofhistorical fact, are intended to be, and are hereby identified as, “forward-lookingstatements” within the meaning of the Private Securities Litigation Reform Actof 1995, as amended, reflecting management’s current analysis and expectations,based on what management believes to be reasonable assumptions.  These forward-looking statements includestatements relating to our anticipated financial performance and businessprospects.  Statements preceded by,followed by or that include words such as “believe,” “anticipate,” “estimate,” “expect,”“could,” and other similar expressions are to be considered suchforward-looking statements. Forward-looking statements may involve known and unknown risks, uncertaintiesand other factors, which may cause the actual results to differ materially fromthose projected, stated or implied, depending on such factors as: our abilityto improve operating performance and effectuate business plans; our ability tooperate pursuant to the terms of our credit facilities and to comply with theterms of our lending agreements or to amend or modify the terms of suchagreements as may be needed from time to time; our ability to generate cash;our ability to attract and maintain adequate capital; our ability to refinanceour indebtedness; increases in prevailing interest rates; our ability to obtaintrade credit, and shipments and terms with vendors and service providers forcurrent orders; our ability to maintain contracts that are critical to ouroperations; potential adverse developments with respect to our liquidity orresults of operations; general economic and business conditions; competition,including increased capital investment and promotional activity by ourcompetitors; availability, location and terms of sites for store development;the successful implementation of our capital expenditure program; laborrelations; labor and employee benefit costs including increases in health careand pension costs and the level of contributions to our sponsored pensionplans; the result of our pursuit of strategic alternatives; economic andcompetitive uncertainties; our ability to pursue strategic alternatives;economic and competitive uncertainties; changes in strategies; changes in generallyaccepted accounting principles; adverse changes in economic and politicalclimates around the world, including terrorist activities and internationalhostilities; and the outcome of pending, or the commencement of any new, legalproceedings against, or governmental investigations of us, including thepreviously announced SEC and U.S. Attorney’s Office investigations.  We caution that the foregoing list ofimportant factors is not exhaustive. Accordingly, there can be no assurance that we will meet future results,performance or achievements expressed or implied by such forward-lookingstatements, which are generally required to be publicly revised ascircumstances change, and which we do not intend to update.

 

**EXPLANATORY NOTE**

 

This Quarterly Report on Form 10-Qis for the period beginning July 31, 2005 and ending October 29, 2005and, except as expressly indicated otherwise, information in this report speaksas of such date.  As discussed further inthis report, we emerged from Chapter 11 bankruptcy reorganization effective April 13,2005.  Although April 13, 2005 wasthe effective date of the Plan, the Company chose April 16, 2005 asthe effective date for accounting purposes to adopt fresh-start reportingbecause of the proximity of that date to the end of an accounting period.  Applying fresh-start reporting as of April 16, 2005rather than the actual effective date of April 13, 2005 did not have amaterial effect on the financial condition or results of operations of theCompany.

 

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**PART I**

**ITEM 1.          FinancialStatements**

 

The Penn Traffic Company

Condensed Consolidated Balance Sheets

As of October 29, 2005 and April 16, 2005

(In thousands, except share and per share data)

(unaudited)

 
| ** **                                                                                               | ** ** | **October 29,** | ** ** | **April 16,** | ** ** |
|----------------------------------------------------------------------------------------------------------|------------|----------------------|------------|--------------------|------------|
| ** **                                                                                               | ** ** | **2005**             | ** ** | **2005**           | ** ** |
| ** **                                                                                               | ** ** | ** **           | ** ** | **(Note 1)**  | ** ** |
| ** **                                                                                               | ** ** | ** **           | ** ** | ** **         | ** ** |
| **ASSETS**                                                                                               |       |                 |       |               |       |
|                                                                                                     |       |                 |       |               |       |
| **Current Assets:**                                                                                      |       |                 |       |               |       |
| Cash                                                                                                     |       | $                    | 17,183     |               | $          | 29,304 |   |
| Accounts and notes receivable (less allowance for doubtful accounts  of $3,071 and $3,243, respectively) |       | 33,648               |       | 40,416             |       |
| Inventories                                                                                              |       | 120,451              |       | 116,518            |       |
| Prepaid expenses and other current assets                                                                |       | 5,496                |       | 11,433             |       |
|                                                                                                     |       | 176,778              |       | 197,671            |       |
|                                                                                                     |       |                 |       |               |       |
| **Capital Leases, net**                                                                                  |       | 11,318               |       | 12,023             |       |
|                                                                                                     |       |                 |       |               |       |
| **Fixed Assets, net**                                                                                    |       | 99,677               |       | 103,406            |       |
|                                                                                                     |       |                 |       |               |       |
| **Other Assets:**                                                                                        |       |                 |       |               |       |
| Intangible assets                                                                                        |       | 37,259               |       | 39,612             |       |
| Other assets                                                                                             |       | 5,710                |       | 6,845              |       |
|                                                                                                     |       | 42,969               |       | 46,457             |       |
|                                                                                                     |       |                 |       |               |       |
| **Total Assets**                                                                                         |       | $                    | 330,742    |               | $          | 359,557 |   |

 

The accompanying notes are an integral part of these statements.

 

4

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| ** **                                                                                                                 | ** ** | **October 29,** | ** ** | **April 16,** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------|------------|----------------------|------------|--------------------|------------|
| ** **                                                                                                                 | ** ** | **2005**             | ** ** | **2005**           | ** ** |
| ** **                                                                                                                 | ** ** | ** **           | ** ** | **(Note 1)**  | ** ** |
|                                                                                                                       |       |                 |       |               |       |
| **LIABILITIES AND STOCKHOLDERS’  EQUITY**                                                                             |       |                 |       |               |       |
|                                                                                                                       |       |                 |       |               |       |
| **Current Liabilities:**                                                                                                   |       |                 |       |               |       |
| Current portion of obligations under capital leases                                                                        |       | $                    | 1,272      |               | $          | 1,200 |   |
| Current maturities of long-term debt                                                                                       |       | 272                  |       | 254                |       |
| Accounts payable                                                                                                           |       | 39,853               |       | 35,075             |       |
| Other current liabilities                                                                                                  |       | 46,415               |       | 58,576             |       |
| Accrued interest expense                                                                                                   |       | 559                  |       | 554                |       |
| Deferred income taxes                                                                                                      |       | 7,750                |       | 8,857              |       |
| Liabilities subject to compromise (Note 4)                                                                                 |       | 3,139                |       | 8,497              |       |
|                                                                                                                       |       | 99,260               |       | 113,013            |       |
|                                                                                                                       |       |                 |       |               |       |
| **Non-current Liabilities:**                                                                                               |       |                 |       |               |       |
| Obligations under capital leases                                                                                           |       | 12,771               |       | 13,425             |       |
| Long-term debt                                                                                                             |       | 37,307               |       | 37,967             |       |
| Deferred income taxes                                                                                                      |       | 4,040                |       | 5,142              |       |
| Defined benefit pension  plan liability (Note 5)                                                                           |       | 35,962               |       | 39,959             |       |
| Other non-current  liabilities                                                                                             |       | 29,994               |       | 31,473             |       |
|                                                                                                                       |       | 120,074              |       | 127,966            |       |
|                                                                                                                       |       |                 |       |               |       |
| **Total Liabilities**                                                                                                      |       | 219,334              |       | 240,979            |       |
|                                                                                                                       |       |                 |       |               |       |
| **Commitments and Contingencies (Notes 4 and 6)**                                                                          |       |                 |       |               |       |
|                                                                                                                       |       |                 |       |               |       |
| **Stockholders’ Equity:**                                                                                             |       |                 |       |               |       |
| Preferred stock - authorized 1,000,000 shares, $.01 par value; none  issued                                                |       | —               |       | —             |       |
| Common stock - authorized 15,000,000 shares, $.01 par value;  issued and to be issued 8,498,752 shares at  both dates |       | 85                   |       | 85                 |       |
| Capital in excess of par value                                                                                             |       | 118,493              |       | 118,493            |       |
| Deficit                                                                                                                    |       | (7,170               | )          | —             |       |
| **Total  stockholders’ equity**                                                                                       |       | 111,408              |       | 118,578            |       |
|                                                                                                                       |       |                 |       |               |       |
| **Total  Liabilities and Stockholders’ Equity**                                                                       |       | $                    | 330,742    |               | $          | 359,557 |   |

 
| The  accompanying notes are an integral part of these statements. |   |
|-------------------------------------------------------------------|--------|

 

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The Penn Traffic Company

Condensed Consolidated Statement of Operations

For the three months ended October 29, 2005

And the Period from April 17, 2005 to October 29, 2005

(In thousands, except share and per share data)

(unaudited)

 
| ** **                                      | ** ** | **Three**                      | ** ** | **Period from**                 | ** ** |
|-------------------------------------------------|------------|--------------------------------|------------|--------------------------------------|------------|
| ** **                                      | ** ** | **Months Ended**          | ** ** | **April 17, 2005 to** | ** ** |
| ** **                                      | ** ** | **October 29, 2005** | ** ** | **October 29, 2005**       | ** ** |
|                                            |       |                           |       |                                 |       |
| **Revenues**                                    |       | $                              | 315,373    |                                 | $          | 692,767 |   |
|                                            |       |                           |       |                                 |       |
| **Cost and Operating Expenses:**                |       |                           |       |                                 |       |
| Cost of sales                                   |       | 232,822                        |       | 516,139                              |       |
| Selling and administrative expenses             |       | 82,403                         |       | 179,957                              |       |
|                                            |       |                           |       |                                 |       |
| **Operating Income (Loss)**                     |       | 148                            |       | (3,329                               | )          |
|                                            |       |                           |       |                                 |       |
| Interest expense                                |       | 2,103                          |       | 4,908                                |       |
| Reorganization expense                          |       | 703                            |       | 703                                  |       |
|                                            |       |                           |       |                                 |       |
| **Loss Before Income Taxes**                    |       | (2,658                         | )          | (8,940                               | )          |
|                                            |       |                           |       |                                 |       |
| Income tax benefit                              |       | (568                           | )          | (1,770                               | )          |
|                                            |       |                           |       |                                 |       |
| **Net Loss**                                    |       | $                              | (2,090     | )                                    | $          | (7,170 | ) |
|                                            |       |                           |       |                                 |       |
| Shares outstanding and to  be issued            |       | 8,498,752                      |       | 8,498,752                            |       |
|                                            |       |                           |       |                                 |       |
| **Loss Per Share (Basic and Diluted) (Note 3)** |       | $                              | (0.25      | )                                    | $          | (0.84 | ) |

 
| The accompanying  notes are an integral part of these statements. |
|-------------------------------------------------------------------|

 

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The Penn Traffic Company

Condensed Consolidated Statement of Cash Flows

For the Period from April 17, 2005 to October 29, 2005

(In thousands)

(unaudited)

 
| **Operating Activities:**                                                    |   |    |   |
|------------------------------------------------------------------------------|--------|---------|--------|
| Net loss                                                                     |   | $       | (7,170 | ) |
| Adjustments to reconcile net loss to net cash Used in operating  activities: |   |    |   |
| Depreciation and amortization                                                |   | 12,751  |   |
| Deferred income taxes                                                        |   | (2,209  | )      |
| Amortization of deferred financing cost                                      |   | 1,030   |   |
|                                                                         |   |    |   |
| **Net change in operating assets and liabilities:**                          |   |    |   |
| Accounts and notes receivable, net                                           |   | 6,768   |   |
| Prepaid expenses and other current assets                                    |   | 5,937   |   |
| Inventories                                                                  |   | (3,933  | )      |
| Liabilities subject to compromise                                            |   | (5,358  | )      |
| Accounts payable and other current liabilities                               |   | (7,378  | )      |
| Other assets                                                                 |   | 105     |   |
| Defined benefit pension plan                                                 |   | (3,997  | )      |
| Other non-current liabilities                                                |   | (343    | )      |
|                                                                         |   |    |   |
| **Net Cash Used in Operating Activities**                                    |   | (3,797  | )      |
|                                                                         |   |    |   |
| **Investing Activities:**                                                    |   |    |   |
| Capital expenditures                                                         |   | (7,100  | )      |
|                                                                         |   |    |   |
| **Net Cash Used in Investing Activities**                                    |   | (7,100  | )      |
|                                                                         |   |    |   |
| **Financing Activities:**                                                    |   |    |   |
| Payments of mortgages                                                        |   | (142    | )      |
| Net repayments under  revolving credit facility                              |   | (500    | )      |
| Reduction in capital lease  obligations                                      |   | (582    | )      |
|                                                                         |   |    |   |
| **Net Cash  Used In Financing Activities**                                   |   | (1,224  | )      |
|                                                                         |   |    |   |
| **Net decrease  in cash**                                                    |   | (12,121 | )      |
|                                                                         |   |    |   |
| **Cash at the  beginning of period**                                         |   | 29,304  |   |
|                                                                         |   |    |   |
| **Cash at end  of period**                                                   |   | $       | 17,183 |   |

 
| The  accompanying notes are an integral part of these statements. |   |
|-------------------------------------------------------------------|--------|

 

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The Penn Traffic Company

Condensed Consolidated Statement of Stockholders’ Equity

For the Period from April 17, 2005 to October 29, 2005

(In thousands)

(unaudited)

 
| ** **                                                          | ** ** | **Common  Stock** | ** ** | **Capital in  Excess of  Par Value** | ** ** | **Deficit** | ** ** | **Total  Stockholders’  Equity** | ** ** |
|---------------------------------------------------------------------|------------|-------------------|------------|-----------------------------------------------------|------------|-------------|------------|---------------------------------------|------------|
|                                                                |       |              |       |                                                |       |        |       |                                  |       |
| Common stock to be issued in connection with plan of reorganization |       | $                 | 85         |                                                | $          | 118,493     |       | $                                     | 0          |   | $ | 118,578 |   |
|                                                                |       |              |       |                                                |       |        |       |                                  |       |
| Net loss for the period ended October 29, 2005                 |       |              |       |                                                |       | (7,170      | )          | (7,170                                | )          |
|                                                                |       |              |       |                                                |       |        |       |                                  |       |
| Balance at October 29, 2005                                    |       | $                 | 85         |                                                | $          | 118,493     |       | $                                     | (7,170     | ) | $ | 111,408 |   |

 

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ThePenn Traffic Company

Notesto Condensed Consolidated Financial Statements

 

**Note 1 – Basis of Presentation**

 

The accompanying unauditedcondensed consolidated financial statements of The Penn Traffic Company andsubsidiaries (the “Company”) have been prepared in accordance with accountingprinciples generally accepted in the United States of America for interimfinancial information and the instructions to Form 10-Q and Article 10of Regulation S-X.  Accordingly, they donot include all the information and footnotes required by accounting principlesgenerally accepted in the United States of America for complete financialstatements.

 

In the opinion ofmanagement, all adjustments (consisting of normal recurring accruals)considered necessary for a fair presentation have been included.  Operating results for the interim periodended October 29, 2005 are not necessarily an indication of results thatmay be expected for the fiscal year ended January 28, 2006.  For further information, refer to the auditedconsolidated financial statements and footnotes thereto included in the Company’sannual report on Form 10-K for the fiscal year ended January 28,2006.

 

The balance sheet as of April 16,2005 has been derived from the audited consolidated financial statements as ofsuch date, but does not include all of the information and footnotes requiredby accounting principles generally accepted in the United States of America forcomplete financial statements.

 

The Company’s fiscal yearends on the Saturday closest to January 31.  Fiscal year 2006 is the 41-week period from April 17,2005, the commencement of fresh-start reporting (see Note 2), to January 28,2006.  The information presented in thisquarterly report on Form 10-Q is for the period beginning August 1,2005 and ending October 29, 2005.

 

Allsignificant intercompany transactions and accounts have been eliminated inconsolidation.

 

**Note 2 –Voluntary Bankruptcy Filing and Reorganization**

 

OnMay 30, 2003, The Penn Traffic Company and all of its subsidiaries filedvoluntary petitions under Chapter 11 of the United States Bankruptcy Codein the United States Bankruptcy Court for the Southern District of New York.  The filing was made in response to pendingdefaults under the Company’s then-existing loan agreements and a lack ofliquidity to continue operations.  UnderChapter 11, the Company continued to operate its businesses asdebtor-in-possession under court protection from its creditors and claimants,while using the Chapter 11 process to substantially reduce its debt obligationsand implement a plan of reorganization.

 

OnFebruary 2, 2005, the Company filed the First Amended Joint Plan ofReorganization (the “Plan”) with the bankruptcy court.  The Plan was confirmed on March 17, 2005and became effective on April 13, 2005 (the “Effective Date”).

 

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Pursuantto the terms of the Plan, the following transactions occurred on or around theEffective Date:

 

1.         The Company entered into newcredit agreements providing for borrowings of up to $164 million.  Proceeds from these new credit agreementsprovided funds sufficient to repay a debtor-in-possession credit facility andall administrative and priority claims to the extent provided for in the Plan.

 

2.         The Company sold and leasedback its five owned distribution facilities for a sales price of approximately$37 million.

 

3.         All shares of common stockand all stock options and warrants outstanding prior to the confirmation of thePlan were cancelled and the holders of such equity securities received nodistributions under the Plan.

 

4.         The reorganized Company wasauthorized to issue new shares of common stock to unsecured creditors, whichincluded holders of $100 million of senior notes, a claim by the PensionBenefit Guaranty Corporation (“PBGC”) of $60 million and trade claims, allof whom were eligible to receive pro rata distributions of new shares of commonstock and the right to share in potential proceeds from certain causes ofaction.

 

Theaccompanying condensed consolidated financial statements as of April 16,2005 and October 29, 2005, and for the fiscal period from April 17,2005 to October 29, 2005, have been prepared in accordance with theprovisions of Statement of Position 90-7 “Financial Reporting by Entities inReorganization Under the Bankruptcy Code” (“SOP 90-7”) issued by the AmericanInstitute of Certified Public Accountants. Pursuant to the provisions of SOP 90-7, upon emergence from Chapter 11proceedings, the Company adopted fresh-start reporting which resulted in a newreporting entity and a new basis of accounting.

 

AlthoughApril 13, 2005 was the effective date of the Plan, the Company chose April 16, 2005as the effective date for accounting purposes to adopt fresh-start reportingbecause of the proximity of that date to the end of an accounting period.  Applying fresh-start reporting as of April 16, 2005rather than the actual effective date of April 13, 2005 did not have amaterial effect on the financial condition or results of operations of theCompany.

 

Thereorganization value of the Company upon emergence from the Chapter 11proceedings was approximately $195 million.  The reorganization value represents the debtand equity value of the Company as of the effective date.  Such value, which was determined with theassistance of the Company’s financial advisors, was based upon variousvaluation methods, including discounted cash flow methodologies and analysis ofcomparable companies.  The equity valueof the Company upon reorganization amounting to approximately$118 million, was determined after taking into account approximately$77 million of debt, consisting of long-term debt, obligations undercapital leases and defined benefit pension plan liabilities, net of relateddeferred taxes.  In accordance withfresh-start reporting, all assets and liabilities were recorded at theirrespective fair values.  The fair valuesof the Company’s long-lived assets were determined, in part, using informationprovided by third-party appraisers.  Theexcess of the aggregate fair value of the Company’s tangible and identifiableintangible assets less non-interest bearing liabilities over the totalreorganization value of approximately $31.7 million has been recorded as apro rata reduction of non-current assets.

 

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**Note 3 –Per Share Data**

 

Basicand diluted net loss per share is based on the number of common shares issuedand estimated to be issued pursuant to the Plan.  Common shares issued and estimated to beissued in settlement of claims filed in the Company’s Chapter 11 proceeding aretreated as outstanding as of the effective date of the Plan.  At October 29, 2005, 201,055 commonshares are estimated to be issued in connection with the settlement ofremaining claims.

 

**Note 4 –Liabilities Subject to Compromise**

 

Inconnection with the Chapter 11 proceeding, there are two pending mattersinvolving claims for the payment of money or the transfer of property.  In one matter, the Ohio Bureau of Workers’Compensation (“OBWC”) has filed priority and administrative claims aggregating$13.4 million for pre-petition unpaid workers’ compensation premiums andfor reserves to pay future claims arising from existing injuries.  The OBWC has also filed claims aggregating$1.8 million for alleged non-payment of post-petition premiums and forreserves to pay future claims arising from existing injuries.  The Company disputes the amounts of theclaims, and is attempting to negotiate a settlement.

 

Inanother matter, a claimant has filed a priority claim allegedly arising underan agreement for a sale-leaseback transaction seeking either damages of$2.2 million or specific performance of the agreement.  The Company disputes the merits of the claimand is defending against it.

 

Duringthe quarter ended October 29, 2005, the Company paid $0.1 million insettlement of disputed claims.  For yearto date, the Company has paid $5.4 million in settlement of disputedclaims.  The Company has establishedliabilities for the estimated cash payments required to settle the remainingclaims outstanding in the Chapter 11 proceedings.  Estimated shares of common stock to be issuedin settlement of claims have been accounted for as stockholders’ equity.

 

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**Note 5 – Pension Plans**

 

TheCompany has four noncontributory defined benefit pension plans covering certainunion personnel.  The Company’s policy isto fund pension benefits to the extent contributions are deductible for taxpurposes and in compliance with federal laws and regulations.

 

Thecomponents of net periodic benefit cost for the quarter ended October 29,2005 and for the year to date period from April 17, 2005 through October 29,2005, is as follows (in thousands):

 
| ** **                     | ** ** | **Three**                  | ** ** | **Period from**               | ** ** |
|--------------------------------|------------|----------------------------|------------|------------------------------------|------------|
| ** **                     | ** ** | **Months Ended**      | ** ** | **April 17, 2005**       | ** ** |
| ** **                     | ** ** | **October 29,  2005** | ** ** | **to October 29,  2005** | ** ** |
|                           |       |                       |       |                               |       |
| Service cost                   |       | $                          | 466        |                               | $          | 1,002 |   |
| Interest cost                  |       | 1,381                      |       | 2,975                              |       |
| Expected return on plan assets |       | (1,262                     | )          | (2,717                             | )          |
|                           |       |                       |       |                               |       |
|                           |       | $                          | 585        |                               | $          | 1,260 |   |

 

Fromthe period from April 17, 2005 to October 29, 2005, the Companycontributed $5.4 million to the four defined benefit pension plans.

 

**Note 6 –Commitments and Contingencies**

 

TheUnited States Attorney for the Northern District of New York and the Securitiesand Exchange Commission have been conducting investigations relating to theCompany’s promotional allowance practices and policies.  Such investigations began prior to theCompany’s emergence from bankruptcy in April 2005.  The Company has been cooperating with theseinvestigations and has produced documents and made Company employees availablefor interviews as requested.  The Companyunderstands that these investigations are ongoing.

 

OnJune 1, 2006, the Company announced that the Audit Committee of the Boardof Directors had completed its internal investigation of the Company’spromotional allowance practices.  TheAudit Committee hired independent counsel to perform the investigation.  The Audit Committee found that the Companyhad engaged in certain improper practices principally relating to the prematurerecognition of promotional allowances and that these practices had largelyceased by the time of the Company’s Chapter 11 filing in May 2003.  On February 3, 2006, the Companyannounced that the employment of the Company’s Chief Marketing Officer and theCompany’s Vice President, Non-Perishables Marketing had been terminatedfollowing an interim report to the Audit Committee on the findings of theinvestigation.

 

OnSeptember 17, 2007, the SEC filed civil fraud charges against the Company’sformer Chief Marketing Officer and former Vice-President, Non-PerishablesMarketing alleging that such individuals orchestrated a scheme to inflate theCompany’s income and other financial results by prematurely recognizingpromotional allowances received from vendors from approximately the 

 

12

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secondquarter of fiscal year 2001 through at least the fourth quarter of fiscal year2003. The complaint further alleges that the individuals deceived the Company’saccounting personnel to carry out their fraudulent scheme and aided and abettedviolations of the Securities Exchange Act of 1934 and rules thereunder. Inaddition, on the same date, the United States Attorney for the NorthernDistrict of New York announced that a federal grand jury has returned anindictment against the abovementioned individuals on related criminal charges.Both the SEC and the United States Attorney indicated that their investigationsare continuing.

 

Inconnection with these matters, the Company could be subject to damage claims,fines or penalties.  At present, theCompany is unable to estimate the likelihood of an unfavorable outcome or theamount of any damage claims, fines or penalties in the event of an unfavorableoutcome and, accordingly, no liability has been recorded for this contingency.

 

**Note 7 –Segment Information**

 

TheCompany operates in two segments – the retail food business and the wholesalefood distribution business.  The retailfood business consists of supermarkets which the Company operates.  The wholesale food distribution business suppliesindependent supermarkets and other independent wholesale accounts with food,related products, and other services. The Company has allocated warehouse and transportation costs based oneach segment’s percentage of total shipments.

 

Thetable below presents information with respect to operating segments as well asreconciliations to consolidated information (in thousands).

 
| ** **                                                   | ** ** | **For the Period from July 31, 2005 through October 29, 2005** | ** ** |
|--------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------|------------|
| ** **                                                   | ** ** | ** **                                                                                                       | ** ** | **Wholesale  Food** | ** ** | **Reconciling** | ** ** | ** ** | ** ** |
| ** **                                                   | ** ** | **Retail Food**                                                                                             | ** ** | **Distribution** | ** ** | **Items** | ** ** | **Total** | ** ** |
|                                                         |       |                                                                                                             |       |   |   |   |   |   |   |
| Revenues                                                     |       | $                                                                                                                | 255,399    |   | $ | 53,808 |   | $ | 6,166 | (1) | $ | 315,373 |   |
|                                                         |       |                                                                                                             |       |   |   |   |   |   |   |
| Cost of sales                                                |       | (177,943                                                                                                         | )          | (49,179 | ) | (4,555 | )(2) | (231,677 | )(4) |
| Selling and administrative expense                           |       | (66,698                                                                                                          | )          | (2,605 | ) | (8,579 | )(3) | (77,882 | )(4) |
|                                                         |       |                                                                                                             |       |   |   |   |   |   |   |
| Operating income (loss) before depreciation and amortization |       | 10,758                                                                                                           |       | 2,024 |   | (6,968 | ) | 5,814 |   |
|                                                         |       |                                                                                                             |       |   |   |   |   |   |   |
| Depreciation and amortization                                |       | (4,709                                                                                                           | )          | (566 | ) | (391 | ) | (5,666 | ) |
| Operating income (loss)                                      |       | $                                                                                                                | 6,049      |   | $ | 1,458 |   | $ | (7,359 | ) | 148 |   |
| Interest expense                                             |       |                                                                                                             |       |   |   |   |   | (2,103 | ) |
| Reorganization costs                                         |       |                                                                                                             |       |   |   |   |   | (703 | ) |
|                                                         |       |                                                                                                             |       |   |   |   |   |   |   |
| Consolidated loss before income taxes                        |       |                                                                                                             |       |   |   |   |   | $ | (2,658 | ) |
|                                                              |            |                                                                                                                  |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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(1)                      Consistsprincipally of approximately $3.9 million for bakery sales to customersother than those of the retail and wholesale segments and approximately$1.7 million for trucking revenues.

 

13

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| (2)    |   | Consists  principally of approximately $3.8 million for bakery sales and  approximately $0.5 million increase in cost of sales to reconcile  segment inventories on FIFO to consolidated inventories on LIFO.                                                                                                                                                                                                                   |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| (3)    |   | Consists principally of approximately $7.0 million of payroll,  benefits, and payroll taxes associated with the administrative staff,  approximately $0.8 million of contract hauling costs associated with  trucking revenue, and approximately $0.5 million of legal costs  associated with the internal and SEC investigation relating to the Company’s  practices regarding promotional discounts and allowances. |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| (4)    |   | Excludes depreciation and amortization of $1.1 million for cost  of sales and $4.5 million for selling and administrative expenses.                                                                                                                                                                                                                                                                                             |

 

Thetable below presents information with respect to operating segments as well asreconciliations to consolidated information (in thousands) 28-week period endedOctober 29, 2005.

 
| ** **                                                      | ** ** | **For the Period from April 17, 2005 through October 29, 2005** | ** ** |
|-----------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------|------------|
| ** **                                                      | ** ** | ** **                                                                                                        | ** ** | **Wholesale  Food** | ** ** | **Reconciling** | ** ** | ** ** | ** ** |
| ** **                                                      | ** ** | **Retail Food**                                                                                              | ** ** | **Distribution** | ** ** | **Items** | ** ** | **Total** | ** ** |
|                                                            |       |                                                                                                              |       |   |   |   |   |   |   |
| Revenues                                                        |       | $                                                                                                                 | 561,949    |   | $ | 117,606 |   | $ | 13,212 | (1)  | $ | 692,767 |   |
|                                                            |       |                                                                                                              |       |   |   |   |   |   |   |
| Cost of sales                                                   |       | (395,280                                                                                                          | )          | (109,083 | ) | (9,467 | )(2) | (513,830 | )(4) |
| Selling and administrative expense                              |       | (145,073                                                                                                          | )          | (5,362 | ) | (19,080 | )(3) | (169,515 | )(4) |
|                                                            |       |                                                                                                              |       |   |   |   |   |   |   |
| Operating income (loss) before depreciation and amortization    |       | 21,596                                                                                                            |       | 3,161 |   | (15,335 | ) | 9,422 |   |
|                                                            |       |                                                                                                              |       |   |   |   |   |   |   |
| Depreciation and amortization                                   |       | (11,089                                                                                                           | )          | (953 | ) | (709 | ) | (12,751 | ) |
| Operating income (loss)                                         |       | $                                                                                                                 | 10,507     |   | $ | 2,208 |   | $ | (16,044 | ) | (3,329 | ) |
| Interest expense                                                |       |                                                                                                              |       |   |   |   |   | (4,908 | ) |
| Reorganization costs                                            |       |                                                                                                              |       |   |   |   |   | (703 | ) |
|                                                            |       |                                                                                                              |       |   |   |   |   |   |   |
| Consolidated loss before income taxes                           |       |                                                                                                              |       |   |   |   |   | $ | (8,940 | ) |
|                                                            |       |                                                                                                              |       |   |   |   |   |   |   |
| Total assets as of October 29, 2005                        |       | $                                                                                                                 | 291,583    | (5) | $ | 23,855 | (5) | $ | 15,304 | (6)  | $ | 330,742 |   |
|                                                            |       |                                                                                                              |       |   |   |   |   |   |   |
| Capital expenditures for the period ended October 29, 2005 |       | $                                                                                                                 | 5,751      |   | $ | — |   | $ | 1,349 |   | $ | 7,100 |   |

 

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| (1)    |   | Consists principally of approximately $8.3 million for bakery  sales principally to customers other than those of the retail and wholesale  segments and approximately $3.7 million for trucking revenues.   |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                   |
| (2)    |   | Consists principally of approximately $7.7 million for bakery  sales and approximately $1.0 million increase in cost of sales to  reconcile segment inventories on FIFO to consolidated inventories on LIFO. |

 

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| (3)    |   | Consists principally of approximately $14.8 million of payroll,  benefits, and payroll taxes associated with the administrative staff,  approximately $1.8 million of contract hauling costs associated with  trucking revenue, and approximately $0.5 million of legal costs  associated with the internal and SEC investigation relating to the Company’s  practices regarding promotional discounts and allowances. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| (4)    |   | Excludes depreciation and amortization of $2.3 million for cost  of sales and $10.4 million for selling and administrative expenses.                                                                                                                                                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| (5)    |   | The warehouse and transportation assets have been allocated using the  same methodology as that which was used for the warehouse and transportation  costs.                                                                                                                                                                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| (6)    |   | Consists principally of fixed assets and inventory of the bakery  operation and general corporate assets                                                                                                                                                                                                                                                                                                                                   |

 

15

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**ITEM 2.     Management’sDiscussion and Analysis of Financial Condition and Results of Operations**

 

**Overview**

 

Asdiscussed in Note 2 to the accompanying unaudited condensed consolidatedfinancial statements, we emerged from Chapter 11 proceedings on April 13,2005.  For financial reporting purposes,we accounted for the consummation of our plan of reorganization as of the closeof business on April 16, 2005. In accordance with SOP 90-7 we have applied fresh-start reporting as ofthe close of business on April 16, 2005, which has resulted insignificant changes to the valuation of certain of our assets and liabilities,and to stockholders’ equity.  Inconnection with the adoption of fresh-start reporting, a new entity has beendeemed to be created for financial reporting purposes.  The periods ended on or prior to April 16, 2005have been designated “Predecessor Company” and the periods subsequent to April 16, 2005have been designated “Successor Company”. For purposes of the discussion of the unaudited Results of Operations,the activities of the Successor Company have been deemed noncomparable to thoseof the Predecessor Company and, accordingly, no comparison was done with thePredecessor Company.

 

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**Results of Operations**

 

Thefollowing table sets forth certain Consolidated Statement of Operationscomponents expressed as percentages of revenues for the 13-week period ended October 29,2005 and the 28-week period ended October 29, 2005.

 
| ** **                          | ** ** | **Unaudited**                    | ** ** | **Unaudited**              | ** ** |
|-------------------------------------|------------|----------------------------------|------------|----------------------------|------------|
| ** **                          | ** ** | **13-Weeks**                     | ** ** | **28-Weeks**               | ** ** |
| ** **                          | ** ** | **Ended**                        | ** ** | **Ended**                  | ** ** |
| ** **                          | ** ** | **October 29,   2005** | ** ** | **October 29,  2005** | ** ** |
| ** **                          | ** ** | ** **                       | ** ** | ** **                 | ** ** |
| Revenues                            |       | 100.0                            | %          | 100.0                      | %          |
| ** **                          | ** ** | ** **                       | ** ** | ** **                 | ** ** |
| Gross profit (1)                    |       | 26.2                             |       | 25.5                       |       |
| ** **                          | ** ** | ** **                       | ** ** | ** **                 | ** ** |
| Selling and administrative expenses |       | 26.1                             |       | 26.0                       |       |
|                                |       |                             |       |                       |       |
| Operating income (loss)             |       | 0.1                              |       | (0.5                       | )          |
|                                |       |                             |       |                       |       |
| Interest expense                    |       | 0.7                              |       | 0.7                        |       |
|                                |       |                             |       |                       |       |
| Reorganization expense              |       | 0.2                              |       | 0.1                        |       |
|                                |       |                             |       |                       |       |
| Income tax benefit                  |       | (0.2                             | )          | (0.3                       | )          |
|                                |       |                             |       |                       |       |
| Net loss                            |       | (0.6                             | )          | (1.0                       | )          |

 

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(1)                                  Revenues lesscost of sales.

 

17

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**Analysis of the 13 and 28 week period ending October 29, 2005**

 

**Revenues**

 

Revenuesfor the 13-week period ended October 29, 2005 and the 28-week period endedOctober 28, 2005 were $315.4 million and $692.8 million, respectively.

 

Retailfood revenues were $255.4 million for the 13-week period ended October 29,2005 and $561.9 million for the 28-week period ended October 29,2005.

 

Wholesalefood distribution revenues were $53.8 million for the 13-week period ended October 29,2005 and $117.6 million for the 28-week period ended October 29, 2005.

 

**GrossProfit**

 

Grossprofit was $82.6 million, or 26.2% of revenues for the 13-week period ended October 29, 2005and $176.6 million or 25.5% of revenues for the 28-week period ended October 29,2005.

 

**Sellingand Administrative Expenses**

 

Sellingand administrative expenses for the 13-week period ended October 29, 2005were $82.4 million, or 26.1% of revenues and the selling andadministrative expenses for the 28-week period ended October 29, 2005 were$180.0 million, or 26.0% of revenues.

 

**Depreciationand Amortization**

 

Depreciationand amortization expense was $5.7 million, or 1.8% of revenues for the13-week period ended October 29, 2005 and $12.8 million, or 1.8% ofrevenues for the 28-week period ended October 29, 2005.  Depreciation and amortization expense washigher in this period and is expected to be higher in future periods primarilydue to the shortening of asset life for our property, equipment and machinery,an increase in carrying value of favorable leases and the addition of two newintangible assets (Pharmacy Scripts and Software) with the implementation offresh-start reporting.  The increase indepreciation and amortization expense was partially offset by the amortizationof unfavorable leases associated with the implementation of fresh-startreporting.

 

18

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**Operating Income (Loss)**

 

Operating income for the13-week period ended October 29, 2005 was $0.1 million, or 0.1% ofrevenues, and for the 28-week period ended October 29, 2005 operating losswas $3.3 million, or 0.5% of revenues.

 

**InterestExpense**

 

Interest expense for the13-week period ended October 29, 2005 was $2.1 million, or 0.7% ofrevenues, and for the 28-week period ended October 29, 2005 interestexpense was $4.9 million, or 0.7% of revenues.

 

**Reorganization Item**

 

During the 13-week period ended October 29, 2005 we recordedreorganization item expense of $0.7 million, or 0.2% of revenues, and forthe 28-week period ended October 29, 2005 we recorded reorganization itemexpense of $0.7 million, or 0.1% of revenues.

 

**Income TaxBenefit**

 

Income tax benefit for the 13-week period ended October 29, 2005was $0.6 million or 0.2% of revenues. Income tax benefit for the 28-week period ended October 29, 2005was $1.8 million or 0.3% of revenues. Current taxes consist of minimal state taxes and capital/franchise tax.

 

The Company had an effective income tax (benefit) rate of (19.8%) forthe 28-week period ending October 28, 2005.  Differences in the effective income tax ratefrom the statutory federal income tax rate arises primarily from state taxesnet of federal benefits and nondeductible expenses.

 

We believe prior net operating loss carryforwards are entirelyeliminated effective January 29, 2006 principally as a result of cancellationof debt in the Chapter 11 proceedings. We also estimate that the Company lost aportion of the tax basis of its long-lived assets, reducing the amount of taxdepreciation and amortization that the Company will be able to utilize on itsfuture tax returns.

 

**Net Loss**

 

Net loss for the 13-week period ended October 29, 2005 was $2.1million.  Net loss for the 28-week periodended October 29, 2005 was $7.2 million.

 

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**Liquidity and Capital Resources**

 

On April 16, 2005, uponemergence from Chapter 11 proceedings, we entered into a revolving credit andterm loan facility with a group of financial institutions providing for a$130.0 million revolving credit facility and a $6.0 million termloan.  Also on April 16, 2005, weentered into a supplemental real estate credit facility with another group oflenders, providing for term loan borrowings of up to $28.0 million.  Availability under both credit facilities isdependent on levels of accounts receivable, inventory and certain other assets.  Interest rates on borrowings under the revolvingcredit facility vary depending upon the amount of availability.  At October 29, 2005, outstandingborrowings under both facilities aggregated $33 million and outstandingletters of credit under the revolving credit facility amounted to approximately$53 million.  At such date,availability in excess of outstanding borrowings and letters of credit wasapproximately $64 million. Borrowings under the revolving credit and term loan facility are securedby substantially all of our assets, subject to first liens on certainproperties by other lenders.  Borrowingsunder the real estate facility are secured by a first lien on substantially allof our leasehold interests and a second lien on substantially all of our remainingassets.  During the period, we hadstand-by letters of credit of approximately $53 million.  Many of these stand-by letters of credit wererequired upon emergence from bankruptcy and as a result of our inability tofile financial statements.

 

Provisions of both creditfacilities, among other things, require the maintenance of certain financialcovenants (when availability under the credit facilities is less than$35.0 million for four consecutive days or less than $30.0 millionfor any one day), and limit the amount of capital expenditures, our assumptionof additional debt and our payment of dividends.  At no time through January 28, 2006 havewe been subject to compliance with these financial covenants.  However, had such an event occurred, we wouldnot have been in compliance with the financial covenants and would have been indefault under the terms of the loan agreement at October 29, 2005.  Pursuant to our plan of reorganization, weentered into a collateral trust agreement with the collateral trustee inconnection with the secured trade lien program. The secured trade lien program is with certain of our vendors and allowsus to maintain trade terms.

 

On December 26, 2006, August 1,2007 and January 30, 2008, both the revolving credit and term loanfacility and the supplemental real estate credit facility were amended topermit the disposal of assets in connection with the closing of certain stores.

 

We also have $4.6 million ofborrowings under mortgages secured by the related properties as of October 29,2005.

 

20

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**ITEM 3.****                           QUANTITATIVEAND QUALITATIVE DISCLOSURE ABOUT MARKET RISK**

 

Our financial results are subject to riskfrom interest rate changes on debt that has variable interest rates. Totalvariable rate debt outstanding under our loan agreements at October 29,2005 was $33 million with a weighted average interest rate of 9.22%.  A 1% change in interest rates wouldimpact pre-tax income by $0.3 million based on the debt outstanding at October 29,2005.  In addition to the variable ratedebt we had $4.6 million of fixed rate debt outstanding at October 29,2005 with a weighted average interest rate of 7.81%.  We view the fixed rate debt as a partialhedge against interest rate fluctuations which should minimize the potentialimpact on earnings from interest rate changes.

 

**ITEM 4.****                            CONTROLSAND PROCEDURES**

 

Disclosure controls andprocedures under Rule 13a-15(e) of the Securities Exchange Act of1934 (the “Exchange Act”) are those controls and other procedures of a companythat are designed to ensure that information required to be disclosed by thecompany in the reports that it files or submits under the Exchange Act isrecorded, processed, summarized and reported, within the time periods specifiedin the SEC’s rule and forms. Disclosure controls and procedures include, without limitation, controlsand procedures designed to ensure that information required to be disclosed byan issuer in the reports it files or submits under the Exchange Act isaccumulated and communicated to the issuer’s management, including itsprincipal executive and principal financial officers, or persons performingsimilar functions, as appropriate to allow timely decisions regarding requireddisclosure.

 

Pursuant to Rule 13a-15(e) under the Exchange Act, our managementevaluated the effectiveness of the design and operation of our disclosurecontrols and procedures as of October 29, 2005 with the participation ofour principal executive and principal financial officers. Our current Presidentand Chief Executive Officer has been employed by us since July 2006 butdid not become our President and Chief Executive Officer until October 2007.Our Senior Vice President and Chief Financial Officer was not with us duringfiscal year 2006. Based on their observations, combined with observations bymembers of management, members of the audit committee and external counsel,management concluded that our disclosure controls and procedures wereineffective as of October 29, 2005 in providing reasonable assurance thatmaterial information requiring disclosure was brought to management’s attentionon a timely basis and that our financial reporting was reliable.

 

**Change inour Internal Control Over Financial Reporting**

 

Management did not conduct an evaluation ofthe effectiveness of our internal control over financial reporting as of April 16,2005.

 

In May 2007, we hired an outsideconsulting firm to assist management in its evaluation of the effectiveness ofour internal controls over financial reporting, including disclosure controlsand procedures.  We have since determinedthat we will use the framework established in “Internal Control-IntegratedFramework”, issued by the Committee of Sponsoring Organizations of the TreadwayCommission.

 

21

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**PART II – OTHERINFORMATION**

 

**ITEM 1.****                    LEGALPROCEEDINGS**

 

There have been no changes to the legal proceedings disclosed in the Company’s Annual Report on Form 10-K for the year ended February 3, 2007.

 

**ITEM 1A.****                       RISKFACTORS**

 

There have been no changes to the risk factors disclosed in the Company’s Annual Report on Form 10-K for the year ended February 3, 2007.

 

22

## ** **

## **ITEM 6.**                                         EXHIBITS

## ** **

**Exhibits:**

 

The following are filed asExhibits to this Report:

 
| **Exhibit No.** | ** ** | **Description**                                                                                                                                                                                |
|----------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                 |       |                                                                                                                                                                                           |
| 31.1                 |       | Certification of CEO pursuant to  Rule 13a-14(a) under the Securities Exchange Act of 1934, as  amended.                                                                             |
|                 |       |                                                                                                                                                                                           |
| 31.2                 |       | Certification of CFO  pursuant to Rule 13a-14(a) under the Securities Exchange Act of  1934, as amended.                                                                             |
|                 |       |                                                                                                                                                                                           |
| 32.1                 |       | Certification of CEO  pursuant to Rule 13a-14(b) under the Securities Exchange Act of  1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the  United States Code. |
|                 |       |                                                                                                                                                                                           |
| 32.2                 |       | Certification of CFO  pursuant to Rule 13a-14(b) under the Securities Exchange Act of  1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the  United States Code. |

 

23

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** **

**Signatures**

** **

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

 

**THEPENN TRAFFIC COMPANY**

 
| Date:  April 8, 2008 | By:                                                       | /s/  Gregory  J. Young |
|---------------------------|-----------------------------------------------------------|----------------------------------|
|                      | Name:  Gregory J. Young                                   |
|                      | Title: Chief  Executive Officer and President             |
|                      |                                                      |
|                      |                                                      |
| Date: April 8,  2008 | By:                                                       | /s/                              |   Tod A. Nestor |
|                      | Name:                                                     |  Tod A. Nestor              |
|                      | Title:  Senior Vice President and Chief Financial Officer |

 

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