Part I. Financial Information

Item 1. Consolidated Financial Statements

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

See notes to consolidated financial statements (unaudited).

2

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

See notes to consolidated financial statements (unaudited).

3

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

See notes to consolidated financial statements (unaudited).

4

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

Note 1. Significant Accounting Policies

          Business. Pathmark Stores, Inc. (the "Company" or "Pathmark") operated 142 supermarkets as of July 31, 2004, primarily in the New York-New Jersey and Philadelphia metropolitan areas.

          Basis of Presentation. The unaudited consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). In the opinion of management, the consolidated financial statements included herein reflect all adjustments which are of a normal and recurring nature and are necessary to present fairly the results of operations and financial position of the Company. This report should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended January 31, 2004.

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

Note 2. Stock-Based Compensation

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

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

5

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

Note 3. Long-Term Debt

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

          The Company’s credit agreement (the “Credit Agreement”) consists of a term loan and a $175 million revolving working capital facility (including a maximum of $125 million in letters of credit). The Company was in compliance with all Credit Agreement covenants as of July 31, 2004. Based on management’s operating projections for the second half of fiscal 2004, it is probable that at the end of the third quarter we will not be in compliance with certain covenants in the Credit Agreement for the four-fiscal quarters ending October 30, 2004, which would be an Event of Default under the Credit Agreement. However, one of the lenders in our current bank group has agreed to use its best efforts to arrange for commitments for a facility to completely refinance the Credit Agreement on or before October 8, 2004. If we complete our refinancing by the end of the third quarter of fiscal 2004, we believe that cash flows generated from operations, supplemented by the availability of capital lease financing and unused borrowing capacity under a new revolving credit agreement, would be sufficient to provide for our debt service requirements, working capital needs and capital expenditure program for the foreseeable future. There can be no assurance, however, that we will be able to complete our planned refinancing of the Credit Agreement prior to the end of the third quarter or, if we cannot, that our business will be able to generate cash flow above current levels sufficient to meet required covenant levels under the Credit Agreement. Should we be unable to timely complete our planned refinancing, we will initiate discussions with the Credit Agreement lenders to seek relief in connection with our financial covenants.

          The Company has outstanding $350 million aggregate principal amount of 8.75% Senior Subordinated Notes, due 2012 (the “Senior Subordinated Notes”) which pay cash interest semi-annually on February 1 and August 1. The Indenture relating to the Senior Subordinated Notes (the “Indenture”) contains a number of restrictive covenants, including a restriction on our ability to declare cash dividends on our common stock. The Company was in compliance with all related covenants as of July 31, 2004. An Event of Default under the Credit Agreement would not constitute an Event of Default under the Indenture unless and until the Credit Agreement lenders accelerate payment thereunder. There are no credit agency ratings-related triggers in either the Credit Agreement or in the Indenture that would adversely impact the cost of borrowings, annual amortization of principal or related debt maturities.

6

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

Note 4. Interest Expense

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

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

Note 5. Comprehensive Earnings (Loss)

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

Note 6. Guarantees

          In the normal course of business, the Company has assigned to third parties various leases related to former businesses that the Company sold as well as former operating Pathmark supermarkets (the “Assigned Leases”). When the Assigned Leases were assigned, the Company generally remained secondarily liable with respect to these lease obligations. As such, if any of the assignees were to become unable to continue making payments under the Assigned Leases, the Company could be required to assume the lease obligation. As of July 31, 2004, 67 Assigned Leases remain in place. Assuming that each respective assignee became unable to continue to make payments under an Assigned Lease, an event the Company believes to be remote, management estimates its maximum potential obligation with respect to the Assigned Leases to be approximately $117.6 million, which could be partially or totally offset by reassigning or subletting such leases. The Company has recognized a liability on its consolidated balance sheet as of July 31, 2004 of approximately $2.7 million, which represents certain guarantees attributable to the Company’s secondary liability in connection with Assigned Leases assigned after December 31, 2002.

7

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

Note 7. Benefits

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

          Pension Benefits:

          Other Postretirement Benefits:

          In May 2004, the staff of the FASB, issued FASB Staff Position (“FSP”) No. FAS 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003,” which superseded FSP No. FAS 106-1. This FSP provides guidance on the accounting for the effects of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Act”). FSP No. FAS 106-1 allowed companies to either assess the effect of the Act on their retirement-related benefit costs and obligations or to defer accounting for the effects of the Act until authoritative guidance was issued. The Company elected to defer any accounting for the effects of the Act pursuant to FSP No. FAS 106-1 and made that election in its fiscal quarter ended May 1, 2004, the first period in which the plan’s accounting for the effects of the Act normally would have been reflected in the Company’s financial statements. The Company and its actuarial advisors determined that benefits provided by the plan as of the date of enactment were at least actuarially equivalent to Medicare Part D, and, accordingly, the Company will be entitled to the federal subsidy. The Company performed a measurement of the effects of the Act on its accumulated postretirement benefit obligation (“APBO”) as of January 1, 2004, the date that followed the enactment of the Act.

8

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

Note 7. Benefits – (Continued)

          The Company has elected to early adopt the provisions of FSP No. FAS 106-2 for its second quarter ended July 31, 2004, and has incorporated the required disclosure provisions into its financial statements. The Company’s APBO as of the beginning of this fiscal year decreased by $4.5 million as a result of the Act. This change in the APBO due to the Act is considered an actuarial gain. In measuring the $4.5 million APBO impact of the Act, the Company projected that its prescription drug per capita plan costs would, effective on January 1, 2006, decrease by 20% on average for members of one of its collective-bargaining units as a result of the federal subsidy and that the Company would use the federal subsidy to offset plan costs in order to establish retiree contributions, and there would be no change in participation rates. In measuring the impact of the Act, the Company projected that all current and future retirees of one of its collective-bargaining units would receive prescription drug benefits that are at least actuarially equivalent (as defined in the Act) to Medicare Part D. The Company based this on a comparison of the value of the prescription drug plan (net of retiree contribution) compared to Medicare Part D (net of retiree premium), using an actuarial model of prescription drug expenses for employer-sponsored medical plans. The effect of applying FSP No. FAS 106-2 had no cumulative effect on the Company’s retained earnings as of January 31, 2004. Accordingly, in applying the guidance in SFAS No. 3, the Company reported net periodic benefit costs of $350,000 for the first six months of fiscal 2004 representing half of the $0.7 million annual reduction under the Act. Had the effect of FSP No. FAS 106-2 been applied retroactively to the beginning of fiscal 2004, net periodic benefit cost for each of the fiscal quarters ended July 31, 2004 and May 1, 2004 would have been reduced by $0.2 million.

Note 8. Goodwill

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

Note 9. Subsequent Event

          On August 1, 2004, the Company was forced to close its store in Upper Darby, Pennsylvania because of extensive damage to the store when a creek adjacent to the store’s parking lot overflowed and flooded the store during torrential rains. The Company has insurance coverage, which the Company expects will fully reimburse it for all property damage, product loss, incremental expenses and business interruption incurred during the store closure, less the policy’s $100,000 deductible. As such, the Company does not expect the losses resulting from the store closure to have a material impact on third quarter earnings. The store reopened on September 3, 2004.

9

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

Note 10. Consolidating Financial Information

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

10

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

Note 10. Consolidating Financial Information – (Continued)

11

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

Note 10. Consolidating Financial Information – (Continued)

12

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

Note 10. Consolidating Financial Information – (Continued)

13

Pathmark Stores, Inc.

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

Results of Operations

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

          Sales. Sales in the second quarter of fiscal 2004 were $1,011.7 million, up 1.6% from $995.6 million in the second quarter of fiscal 2003. The sales increase in the second quarter of fiscal 2004 was primarily due to a 1.3% increase in same-store sales (stores open the entire second quarter in both fiscal 2004 and fiscal 2003, including replacement stores and enlargements) and new stores, partially offset by closed stores. We saw weakening in consumer demand and in our operating performance in the second half of the second quarter. We believe same-store sales in the second quarter of fiscal 2004 benefited from increased promotional spending, offsetting the 1.4% same-store sales decrease in the first quarter of fiscal 2004. Sales in the first six months of fiscal 2004 were $2,001.8 million, up 0.1% from $2,000.3 million in the first six months of fiscal 2003. The sales increase in the first six months of fiscal 2004 was primarily due to new stores, partially offset by a 0.1% decrease in same-store sales and by closed stores. The Company operated 142 stores and 143 stores at the end of the second quarters of fiscal 2004 and fiscal 2003, respectively.

          Gross Profit. Gross profit represents the difference between sales and cost of goods sold, which includes the cost of inventory sold and the related purchase and distribution costs, net of vendor allowances and rebates. Gross profit in the second quarter of fiscal 2004 was $283.7 million or 28.0% of sales compared to $281.7 million or 28.3% of sales in the second quarter of fiscal 2003. Gross profit in the first six months of fiscal 2004 was $563.1 million or 28.1% of sales compared to $567.5 million or 28.4% of sales in the first six months of fiscal 2003. The decrease in gross profit margin in the second quarter and first six months of fiscal 2004 was primarily due to the inability to pass on the full cost of increases in wholesale prices as well as increased promotional spending.

          Selling, General and Administrative Expenses (“SG&A”). SG&A in the second quarter of fiscal 2004 was $248.2 million or 24.5% of sales compared to $232.5 million or 23.3% of sales in the second quarter of fiscal 2003. SG&A in the second quarter of fiscal 2003 included a $12.1 million gain from the disposition of real estate, partially offset by a $3.0 million charge related to a labor buyout program in some of our stores and a headcount reduction program in our corporate office. Excluding the net gain of $9.1 million in the second quarter of fiscal 2003, SG&A in the second quarter of fiscal 2004 increased by $6.6 million compared to the second quarter of fiscal 2003 primarily due to higher payroll, health and welfare and pension expenses, partially offset by lower self-insured liability costs. SG&A in the first six months of fiscal 2004 was $492.8 million or 24.6% of sales compared to $478.7 million or 23.9% of sales in the first six months of fiscal 2003. SG&A in the first six months of fiscal 2004 included a $1.2 million gain from the disposition of real estate. SG&A in the first six months of fiscal 2003 included a $13.7 million gain from the disposition of real estate, partially offset by a $8.1 million charge related to a labor buyout program in some of our stores and a headcount reduction program in our corporate office. Excluding the net gains of $1.2 million and $5.6 million in the first six months of fiscal 2004 and 2003, respectively, SG&A in the first six months of fiscal 2004 increased by $9.7 million compared to the first six months of fiscal 2003 primarily due to higher payroll, health and welfare and pension expenses, partially offset by lower self-insured liability and snow removal costs.

14

Pathmark Stores, Inc.

          Depreciation and Amortization. Depreciation and amortization in the second quarter of fiscal 2004 were $21.5 million compared to $21.3 million in the second quarter of fiscal 2003. Depreciation and amortization in the first six months of fiscal 2004 were $43.0 million compared to $42.5 million in the first six months of fiscal 2003. The increase in depreciation and amortization in the second quarter and the first six months of fiscal 2004 was primarily due to an increase in related property and equipment.

          Operating Earnings. Operating earnings in the second quarter of fiscal 2004 were $14.0 million compared to $27.9 million in the second quarter of fiscal 2003. Operating earnings in the first six months of fiscal 2004 were $27.3 million compared to $46.3 million in the first six months of fiscal 2003. The decrease in operating earnings in the second quarter of fiscal 2004 was primarily due to higher SG&A. SG&A in the second quarter of fiscal 2003 included a $12.1 million real estate gain, partially offset by a $3.0 million labor buyout and headcount reduction charge. The decrease in operating earnings in the first six months of fiscal 2004 was primarily due to higher SG&A. SG&A in the first six months of 2003 included a $13.7 million real estate gain, partially offset by a $8.1 million labor buyout and headcount reduction charge.

          Interest Expense. Interest expense was $16.3 million in the second quarter of fiscal 2004 compared to $17.5 million in the second quarter of fiscal 2003. Interest expense in the first six months of fiscal 2004 was $32.8 million compared to $34.4 million in the first six months of fiscal 2003. The decrease in interest expense in the second quarter and the first six months of fiscal 2004 was primarily due to lower interest rates; interest expense in the second quarter and first six months of fiscal 2003 included $0.5 million related to the write-off of deferred financing costs resulting from the repayment of the term loan.

          Income Tax Benefit (Provision). The income tax benefits of $0.7 million in the second quarter of fiscal 2004 and $2.1 million in the first six months of fiscal 2004 reflect a provision for certain state taxes and a change in our estimated effective annual income tax rate recorded in the second quarter of fiscal 2004. As a result, the effective tax rates for the second quarter and first six months of fiscal 2004 were approximately 30.0% and 38.0%, respectively. The income tax provisions of $4.2 million and $4.8 million, respectively, in the second quarter and first six months of fiscal 2003 were based on an effective income tax rate of 40.3% for the full fiscal year. The fiscal 2003 income tax provisions were net of the Work Opportunity Tax Credit (“WOTC”), which expired on December 31, 2003. Legislation is pending to reinstate the WOTC retroactive to the beginning of 2004.

          Summary of Operations. The net loss was $1.6 million in the second quarter of fiscal 2004 compared to net earnings of $6.2 million in the second quarter of fiscal 2003. The net loss in the first six months of fiscal 2004 was $3.4 million compared to net earnings of $7.1 million in the first six months of fiscal 2003. The decrease in net earnings in the second quarter and the first six months of fiscal 2004 was primarily due to a decrease in operating earnings, partially offset by lower interest expenses and lower income tax provisions.

Liquidity and Capital Resources

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

15

Pathmark Stores, Inc.

          The decrease in cash provided by operating activities was primarily due to lower earnings and less cash provided by operating assets and liabilities, partially offset by lower cash interest payments due to the timing of the cash interest payments under the Senior Subordinated Notes as compared to the term loan; in fiscal 2003, the Company issued $150 million of Senior Subordinated Notes and repaid the $150 million of the term loan. The increase in cash used for investing activities was due to higher capital expenditures and the acquisition of CSC, partially offset by lower proceeds from the sale of real estate. The increase in cash provided by financing activities in fiscal 2004 was primarily due to increased borrowings under the working capital facility; fiscal 2003 included an $18.0 million prepayment of the term loan.

          Debt Service and Liquidity. The Company’s Credit Agreement consists of a term loan (the “Term Loan”) and a $175 million revolving working capital facility (the “Working Capital Facility”) (including a maximum of $125 million in letters of credit). As of July 31, 2004, borrowings under the Term Loan and the Working Capital Facility were $45.7 million and $25.6 million, respectively and outstanding letters of credit were $58.2 million. The Credit Agreement contains certain covenants which, among other things, place limits on the incurrence of additional indebtedness, issuance of cash-pay preferred stock, repurchase of Company stock, incurrence of liens, sale-leaseback transactions, hedging activities, sale or discount of receivables, investments, loans, advances, guarantees with affiliates, asset sales, acquisitions, capital expenditures, mergers and consolidations, changing lines of business, repayments of other indebtedness, amendments to organizational documents and other matters customarily restricted in such agreements. In addition, the Credit Agreement prohibits the payment of cash dividends. The Credit Agreement also contains certain financial maintenance covenants. The Credit Agreement contains customary events of default, including without limitation, payment defaults, material breaches of representations, warranties and covenants, certain events of bankruptcy and insolvency, and a change of control.

          We were in compliance with all Credit Agreement covenants as of July 31, 2004. Based on management’s operating projections for the second half of fiscal 2004, it is probable that at the end of the third quarter we will not be in compliance with certain covenants in the Credit Agreement for the four-fiscal quarters ending October 30, 2004, which would be an Event of Default under the Credit Agreement. However, one of the lenders in our existing bank group has agreed to use its best efforts to arrange for commitments for a facility to completely refinance the Credit Agreement on or before October 8, 2004. If we complete our refinancing by the end of the third quarter of fiscal 2004, we believe that cash flows generated from operations, supplemented by the availability of capital lease financing and unused borrowing capacity under a new revolving credit agreement, would be sufficient to provide for our debt service requirements, working capital needs and capital expenditure program for the foreseeable future. There can be no assurance, however, that we will be able to complete our planned refinancing of the Credit Agreement prior to the end of the third quarter or, if we cannot, that our business will be able to generate cash flow above current levels sufficient to meet required covenant levels under the Credit Agreement. Should we be unable to timely complete our planned refinancing, we will initiate discussions with the Credit Agreement lenders to seek relief in connection with our financial covenants. There are no credit agency ratings-related triggers in either the Credit Agreement or in the Indenture relating to the Senior Subordinated Notes that would adversely impact the cost of borrowings, annual amortization of principal or related debt maturities.

          Borrowings under the Credit Agreement bear interest at floating rates equal to LIBOR plus an applicable margin, subject to decrease, depending on the total debt to consolidated EBITDA ratio. Borrowings under the Working Capital Facility and the Term Loan bear interest at rates of LIBOR + 3.5% and LIBOR + 4.5%, respectively. We are required to repay a portion of the borrowing under the Term Loan each year, so as to retire such indebtedness in its entirety by July 15, 2007. The Working Capital Facility expires on July 15, 2005. The weighted-average interest rate in effect on all borrowings under the Term Loan was 5.7% during the first six months of fiscal 2004.

16

Pathmark Stores, Inc.

          As of July 31, 2004, our remaining Term Loan balance was payable as follows (in millions):

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

          We have outstanding $350 million aggregate principal amount of Senior Subordinated Notes which pay cash interest semi-annually on February 1 and August 1. The Indenture contains a number of restrictive covenants, including a restriction on our ability to declare cash dividends on our common stock. We were in compliance with all Senior Subordinated Notes covenants as of July 31, 2004. An Event of Default under the Credit Agreement would not constitute an Event of Default under the Indenture unless and until the Credit Agreement lenders accelerate payment thereunder.

          Capital Expenditures. Capital expenditures in the second quarter of fiscal 2004, including property acquired under capital leases and technology investments, were $29.1 million compared to $17.8 million in the second quarter of fiscal 2003. Total investments in the first six months of fiscal 2004 were $64.5 million, which were comprised of capital expenditures of $44.9 million, the Acquisition for $4.5 million and capital leases of $15.1 million compared to capital expenditures of $30.8 million in the first six months of fiscal 2003. During the first six months of fiscal 2004, we acquired the Newark Store, opened one new store, renovated ten stores and closed two stores, one of which was operated by a joint venture. During the remainder of fiscal 2004, we expect to complete ten store renovations. Capital expenditures for fiscal 2004, including property acquired under capital leases, the Acquisition and technology investments, are expected to be approximately $105 million.

Critical Accounting Policies

          Our discussion of results of operations and financial condition relies on our consolidated financial statements that are prepared based on certain critical accounting policies that require management to make judgments and estimates that are subject to varying degrees of uncertainty. We believe that investors need to be aware of these policies and how they impact our financial statements as a whole, as well as our related discussion and analysis presented herein. While we believe that these accounting policies are based on sound measurement criteria, actual future events can and often do result in outcomes that can be materially different from these estimates or forecasts. The accounting policies and related risk described in our Annual Report on Form 10-K for the year ended January 31, 2004 are those that depend most heavily on these judgments and estimates. As of July 31, 2004, there have been no material changes to any of the critical accounting policies contained therein.

17

Pathmark Stores, Inc.

New Accounting Pronouncements

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

          In May 2004, the staff of the FASB issued FSP No. FAS 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003,” which superseded FSP No. FAS 106-1. This FSP provides guidance on the accounting for the effects of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Act”). FSP No. FAS 106-1 allowed companies to either assess the effect of the Act on their retirement-related benefit costs and obligations or to defer accounting for the effects of the Act until authoritative guidance was issued. We elected to defer any accounting for the effects of the Act pursuant to FSP No. FAS 106-1 and made that election in our fiscal quarter ended May 1, 2004, the first period in which the plan’s accounting for the effects of the Act normally would have been reflected in our financial statements. We and our actuarial advisors determined that benefits provided by the plan as of the date of enactment were at least actuarially equivalent to Medicare Part D, and, accordingly, we will be entitled to the federal subsidy. We performed a measurement of the effects of the Act on our APBO as of January 1, 2004, the date that followed the enactment of the Act. We have elected to early adopt the provisions of FSP No. FAS 106-2 for our second quarter ended July 31, 2004, and have incorporated the required disclosure provisions into our financial statements (see Note 7, “Benefits”). Our APBO as of the beginning of this fiscal year decreased by $4.5 million as a result of the Act. This change in the APBO due to the Act is considered an actuarial gain. In measuring the $4.5 million APBO impact of the Act, we projected that our prescription drug per capita plan costs would, effective on January 1, 2006, decrease by 20% on average for members of one of our collective-bargaining units as a result of the federal subsidy and that we would use the federal subsidy to offset plan costs in order to establish retiree contributions, and there would be no change in participation rates. In measuring the impact of the Act, we projected that all current and future retirees of one of our collective-bargaining units would receive prescription drug benefits that are at least actuarially equivalent (as defined in the Act) to Medicare Part D. We based this on a comparison of the value of the prescription drug plan (net of retiree contribution) compared to Medicare Part D (net of retiree premium), using an actuarial model of prescription drug expenses for employer-sponsored medical plans. The effect of applying FSP No. FAS 106-2 had no cumulative effect on our retained earnings as of January 31, 2004. Accordingly, in applying the guidance in SFAS No. 3, we reported net periodic benefit costs of $350,000 for the first six months of fiscal 2004 representing half of the $0.7 million annual reduction under the Act. Had the effect of FSP No. FAS 106-2 been applied retroactively to the beginning of fiscal 2004, net periodic benefit cost for each of the fiscal quarters ended July 31, 2004 and May 1, 2004 would have been reduced by $0.2 million.

Forward-Looking Information

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

18

Pathmark Stores, Inc.

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

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

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

          Our financial results are subject to risk from interest rate fluctuations on debt which carries variable interest rates. Variable rate debt outstanding under our Term Loan was $45.7 million on July 31, 2004. The interest rate in effect on all borrowings under our Term Loan was 5.7% during the first six months of fiscal 2004. A 1% change in interest rates applied to the $45.7 million balance of floating-rate Term Loan debt would affect pre-tax annual results of operations by approximately $0.5 million. Our Senior Subordinated Notes bear interest at a fixed rate of 8.75%, and are, therefore, not subject to risk from interest rate fluctuations. The principal objective of our investment management activities is to maintain acceptable levels of interest rate and liquidity risk to facilitate our funding needs. As part of our risk management, we may use derivative financial products such as interest rate hedges and interest rate swaps in the future.

Item 4. Controls and Procedures.

          The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures pursuant to Rule 13a-15(b) of the Exchange Act as of July 31, 2004. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of July 31, 2004, the Company’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Company required to be included in the Company’s Exchange Act reports.

          There has been no change during the Company’s fiscal quarter ended July 31, 2004 in the Company’s internal controls over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financing reporting.

19

Pathmark Stores, Inc.

Part II. Other Information

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

(a)	The Company held its Annual Meeting of Shareholders on June 11, 2004.

(b)	Results of votes of security holders.

	(1)	Election of Directors	For	Withheld
		William J. Begley	26,805,112	354,352
		Daniel H. Fitzgerald	26,542,089	617,375
		Eugene M. Freedman	26,534,871	624,593
		Bruce Hartman	26,809,370	350,094
		James L. Moody, Jr.	26,810,131	349,333
		Eileen R. Scott	26,698,168	461,296
		Frank G. Vitrano	26,664,322	495,142

(2)

Ratification of Deloitte & Touche LLP as independent auditors for fiscal 2004:

		For	Against	Abstained
		26,500,359	644,716	14,389

Item 6. Exhibits and Reports on Form 8-K.

1)

Exhibits:

31.1:

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

31.2:

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

32.1:

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

32.2:

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

2)	Reports on Form 8-K:

On May 12, 2004, we furnished a Current Report on Form 8-K to the SEC under Item 12 containing our press release dated May 12, 2004, attached thereto as Exhibit 99.1

On June 3, 2004, we furnished a Current Report on Form 8-K to the SEC under Item 12 containing our press release dated June 3, 2004, attached thereto as Exhibit 99.1.

20

Pathmark Stores, Inc.

Signatures

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

Date: September 9, 2004

21