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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13
of the Securities Exchange Act of 1934
For the Fiscal Year Ended Commission File Number
February 1, 1997 0-19517
THE BON-TON STORES, INC.
2801 East Market Street
York, Pennsylvania 17402
(717) 757-7660
Incorporated in Pennsylvania IRS No. 23-2835229
--------------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
$0.01 par value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of April 4, 1997, the aggregate market value of the voting stock held by
non-affiliates of the registrant was approximately $35,856,835, based upon the
closing price of $7.00 per share on April 4, 1997, as reported by the Nasdaq
National Market.*
As of April 4, 1997, there were 8,348,219 shares of Common Stock, $0.01 par
value, and 2,989,853 shares of Class A Common Stock, $0.01 par value,
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part II - Portions of the registrant's Annual Report to security
holders for Fiscal Year Ended February 1, 1997.
Part III - Portions of the registrant's Proxy Statement with respect to its
1997 Annual Meeting of Shareholders.
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* Calculated by excluding all shares that may be deemed to be beneficially owned
by executive officers and directors of the registrant, without conceding that
all such persons are "affiliates" of the registrant for purposes of the federal
securities laws.
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"Safe Harbor" Statement
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Certain information included in this Annual Report on Form 10-K
contains statements that are forward looking. Such forward-looking information
involves certain risks and uncertainties that could significantly affect
anticipated results in the future, including, but not limited to, uncertainties
affecting retail generally (such as consumer confidence and demand for soft
goods); risks relating to the substantial leverage and debt service of the
Company; and competition within the markets in which the Company's stores are
located.
PART I
Item 1. Business.
General
As of April 4, 1997, The Bon-Ton Stores, Inc., together with its
subsidiaries (collectively, the "Company"), operated 64 Bon-Ton department
stores which are located primarily in middle and secondary markets in
Pennsylvania, New York and Maryland, with one store in each of West Virginia,
New Jersey and Georgia. The Company's stores, which are typically anchor tenants
of shopping malls, carry moderate to better brand name fashions and accessories
for women, men and children, as well as cosmetics, jewelry, shoes, china,
linens, housewares, gifts and other products. The Company strives to be the
leading fashion retailer in each of its markets by providing a timely, deep and
broad selection of prominent brands. In addition, the Company maintains a strong
focus on serving its target customers: women and men between the ages of 25 and
55 with family incomes between $30,000 and $75,000. The Company's executive
offices are located at 2801 East Market Street, York, Pennsylvania.
Merchandising and Marketing
All of the Company's stores carry apparel for the whole family,
cosmetics and accessories; 55 stores carry home furnishings, such as china,
linens, housewares and gifts, and 17 stores offer furniture and bedding. In
addition, 39 stores have leased fine jewelry departments and 34 stores contain
leased beauty salons.
During the fiscal years ended February 1, 1997 ("fiscal 1996"),
February 3, 1996 ("fiscal 1995") and January 28, 1995 ("fiscal 1994"), the
percentage of net sales accounted for by each of the Company's major merchandise
categories was as follows:
2
Fiscal Year
-------------------------------------------------
Merchandise Category 1996 1995 1994
- -------------------- ------ ------ ------
Women's clothing........................... 27.4% 27.5% 27.6%
Men's clothing............................. 17.7 17.5 18.0
Home....................................... 12.0 11.8 11.2
Cosmetics.................................. 9.8 9.9 10.0
Children's clothing........................ 7.4 8.0 8.1
Accessories................................ 7.9 8.0 8.4
Junior's clothing.......................... 5.5 5.6 6.0
Lingerie................................... 5.3 5.0 4.7
Shoes...................................... 4.7 4.4 4.0
Fine Jewelry............................... 1.7 1.6 1.4
Beauty Salon............................... .6 .7 .6
----- ----- -----
Total.................................. 100.0% 100.0% 100.0%
======== ======== =======
The Company's merchandising and marketing strategy is based on an
approach which balances fashion leadership, customer service, everyday value
prices on a limited number of key items and the selective use of promotions. The
Company emphasizes high-margin, high-turnover product lines, such as apparel and
accessories, in a balanced mix of moderate and better.
The Company strives to be among the first in its markets to identify
fashion trends, to advertise and stock new merchandise and to carry a full
complement of sizes and colors of the items it sells. The Company carries a line
of highly recognized quality vendors such as Liz Claiborne, Calvin Klein, Tommy
Hilfiger, Ralph Lauren, Alfred Dunner, Levi's, Bandolino and Nine West.
Complementing that product is a commitment to private brand merchandise that
provides fashion and quality at value prices. The Company has developed private
brands including Andrea Viccaro, Susquehanna Trail Outfitters, Jenny Buchanan
and Susquehanna Blues. The combination of merchandise further differentiates the
Company from its competitors.
The Company provides a variety of customer services including free gift
wrapping and special order capability. The Company also provides bridal
registries at selected stores.
Through its "Certified Value" program, the Company maintains everyday
value prices on a limited number of key items such as turtlenecks, fleece,
t-shirts, shorts and denims within certain major product groups. This provides
the customer with the confidence that these items are already value priced and
will not be placed on sale during their normal selling cycles.
The Company conducts its general advertising and promotion programs
through newspaper advertisements and circulars and, to a lesser extent, through
local television and radio. The Company maintains an in-house advertising group
that produces substantially all of its print advertising. In addition, the
Company advertises through direct mail, primarily to
3
holders of its Bon-Ton credit card. By using a database management system to
obtain information regarding past purchases of Bon-Ton credit card holders, the
Company is able to target previous purchasers of specific types of merchandise.
Store Facilities
The Company's stores vary in size from approximately 35,000 to 160,000
total square feet. Most Bon-Ton stores are one of several anchor tenants in
shopping malls, with the balance of the Company's stores generally located in or
adjacent to strip shopping centers.
The Company emphasizes strong visual presentations in key traffic areas
in its stores. Displays are changed on a frequent basis and are designed for the
market served. Each store has at least one associate responsible for visual
presentations in addition to the Company's central visual planning staff.
The Company utilizes prototype store layouts based primarily on the
Company's estimate of the size of the potential market for a particular store.
Store layouts are customized based on the actual size and configuration of the
individual stores. Although Bon-Ton stores typically utilize a "race track"
configuration (an oval aisle encircling a central core), the Company plans the
aisle layouts to provide a more pleasing visual experience. The Company
generally maintains relatively shallow racking of merchandise from the main
aisle to the store walls to facilitate customer access. The Company attempts to
arrange its products to provide a logical flow from department to department and
continually monitors its product layouts in an attempt to make shopping easier
and to maximize sales per square foot.
Expansion
The Company plans to maintain its growth by increasing sales in its
existing stores, by opening new stores and, in future years, by acquiring
suitable department store companies or their real estate assets. The Company's
market positioning strategy has been to locate its new stores or acquire
existing companies or their stores in middle and secondary markets generally
within or contiguous to its existing areas of operations.
In August 1996, the Company opened its fourth store in the greater
Rochester, New York market, completing its positioning strategy in entering that
market.
In January 1997, the Company closed stores in Frackville, PA,
Washington, PA, Johnstown, PA (Richland Mall) and Fairmont, WV. These four
stores were part of the 19 stores acquired from Hess's Department Stores, Inc.
in 1994, and were not acquired for long-term operation. In January 1997, the
Company also closed an unprofitable store in Cortland, NY which had been
acquired from C.E. Chappell & Sons, Inc. in 1994.
4
Purchasing and Distribution
The Company purchased merchandise from over 1,300 domestic and foreign
manufacturers and suppliers during fiscal 1996. During that period, the top 25
vendors by dollar volume accounted for approximately 40% of net purchases. No
vendor accounted for more than 7% of the Company's purchases. The Company
believes that alternative sources of supply are available for each category of
merchandise it purchases. In addition, the Company's buying staff purchases
private label and other merchandise through Frederick Atkins, Inc. ("Atkins"), a
national association of major retailers that provides its members with group
purchasing opportunities. In fiscal 1996, the Company purchased approximately 7%
of its merchandise from Atkins.
The Company has two primary distribution facilities: a 173,000 square
foot automated facility in York, Pennsylvania and a 396,000 square foot
automated facility in Allentown, Pennsylvania. In fiscal 1996, approximately 49%
of the Company's merchandise was processed in the York facility and 51% in
Allentown.
Merchandise is generally shipped directly from vendors to the Company's
distribution centers, except that deliveries from vendors in the New York and
Los Angeles areas are generally routed through a consolidator. Deliveries are
made from the distribution center to each store typically twice a week in the
spring season and three times weekly during the fall. Merchandise is usually
shipped ready for immediate placement on the selling floor.
Management Information and Control Systems
The Company has placed substantial emphasis on upgrading its management
information and control systems. Control of the Company's merchandising
activities is maintained by a set of on-line systems, including a point-of-sale
and sales reporting system, a purchase order management system, a receiving
system and a merchandise planning system. These closely linked systems track
merchandise from order through sale, comparing actual to planned results and
highlighting areas requiring management attention.
The Company's enhancement of its management information and control
systems is an ongoing process. During fiscal 1996, the Company expanded the use
of vendor bar codes to eliminate ticketing and to facilitate cross docking of
merchandise, implemented a new on-line system to handle furniture and expanded
the bridal registry system to all 55 stores which carry home furnishings. It
also introduced radio frequency scanning at the Company's distribution centers
and bar code scanning at its control vendor return site. These technologies
greatly enhance the movement of merchandise through the distribution process.
During fiscal 1997, the Company plans to expand the utilization of scanning at
its stores.
5
Customer Credit
Bon-Ton customers may pay for their purchases with The Bon-Ton
proprietary credit card, Visa, Mastercard, American Express, cash or check.
During fiscal 1996, the Company issued 256,000 Bon-Ton credit cards for
newly opened accounts. The Company has made a significant investment in its
credit card program since it believes that The Bon-Ton credit card holders
generally constitute its most loyal and active customers; during fiscal 1996,
the average dollar amount for proprietary credit card purchases substantially
exceeded the average dollar amount for cash purchases. The Company believes that
its credit card is a particularly productive tool for customer segmentation and
target marketing.
The following table summarizes the percentage of total sales generated
by type of payment for fiscal 1996, 1995 and 1994:
Type of Payment Fiscal Year
--------------- ----------------------------------------
1996 1995 1994
------ ------ ------
Bon-Ton credit card............................... 51% 55% 54%
Visa, Mastercard, American Express ............... 20% 16% 13%
Cash or check..................................... 29% 29% 33%
----- ----- -----
Total......................................... 100% 100% 100%
===== ===== =====
All phases of the credit card operation are handled by the Company
except statement mailing and the processing of customer mail payments, which is
performed pursuant to a retail lockbox agreement with a bank. Decisions whether
to issue a credit card to an applicant are made on the basis of a credit scoring
system. The Company believes that its bad debt expense (as a percentage of total
proprietary credit card sales) is consistent with the department store industry
average.
Competition
The retail department store business is highly competitive. The Company
competes for customers and suitable store locations with national department
store chains such as JCPenney, The May Department Stores Company and Sears, as
well as with regional department stores such as Boscov's. The Company also
competes with catalogue retailers and specialty stores. Many of the stores that
compete with the Company's stores are owned by corporations that are
considerably larger than the Company and have substantially greater financial
and other resources. In addition to its current competitors, the Company faces
potential competition from other national chains that to date generally have not
entered the markets served by the Company. The Company's stores compete on the
basis of quality, depth and breadth of merchandise, prices for comparable
quality merchandise, customer service and store environment.
6
Associates
As of April 4, 1997, the Company had approximately 3,500 full-time and
4,100 part-time associates. The Company also employs additional part-time clerks
and cashiers during peak periods. None of the Company's associates is
represented by a labor union. The Company believes that its relationship with
its associates is good.
Item 2. Properties.
The following table provides certain information regarding the
Company's properties as of April 10, 1997. The Company believes that the rents
at its leased locations are generally at or below market rates.
Store Properties
----------------
Approximate Year Opened
Gross Square or Acquired/
Market Location Feet Owned or Leased
- ------ -------- ------------ ---------------
PENNSYLVANIA
Allentown South Mall 111,000 1994/Leased
Bethlehem Westgate Mall 107,100 1994/Leased
Bloomsburg Columbia Mall 46,100 1988/Leased
Butler Clearview Mall 63,600 1982/Leased
Carlisle Carlisle Plaza Mall 59,900 1977/Leased
Chambersburg Chambersburg Mall 55,600 1985/Leased
Doylestown Doylestown Shopping Center 35,100 1994/Leased
Easton Palmer Park Mall 120,200 1994/Leased
Greensburg Westmoreland Mall 99,900 1987/Owned/(1)/
Hanover North Hanover Mall 60,100 1971/Leased
Harrisburg Camp Hill (Free Standing) 145,200 1987/Owned
Colonial Park Shopping Center 136,500 1987/Leased
Indiana Indiana Mall 60,400 1979/Leased
Johnstown The Galleria 80,900 1992/Leased
Lancaster Park City Center 144,800 1992/Leased
Lebanon Lebanon Plaza Mall 53,700 1994/Leased
Lewistown Central Business District 46,700 1972/Owned
Oil City/Franklin Cranberry Mall 45,200 1982/Leased
Pottsville Schuylkill Mall 61,100 1987/Leased
Quakertown Richland Mall 88,100 1994/Leased
Reading Berkshire Mall 159,400 1987/Leased
Scranton Keyser Oak Plaza 57,600 1980/Leased
State College Nittany Mall 70,200 1994/Leased
Stroudsburg Stroud Mall 87,000 1994/Leased
Sunbury Susquehanna Valley Mall 60,200 1978/Leased
Trexlertown Trexler Mall 54,000 1994/Leased
Uniontown Uniontown Mall 61,500 1976/Leased
Warren Warren Mall 50,000 1980/Leased
Washington Franklin Mall 78,100 1987/Leased
Williamsport Lycoming Mall 60,100 1986/Leased
Wilkes-Barre Midway Shopping Center 66,000 1987/Leased
Wyoming Valley Mall 159,500 1987/Leased
York York Galleria 128,200 1989/Owned/(1)/
Queensgate Shopping Center 85,100 1962/Leased
West Manchester Mall 80,200 1981/Leased
7
Approximate Year Opened
Gross Square or Acquired/
Market Location Feet Owned or Leased
- ------ -------- ------------ ---------------
NEW YORK
Binghamton Oakdale Mall 80,000 1981/Leased
Buffalo Northtown Plaza 100,800 1994/Leased
Walden Galleria 150,000 1994/Leased
Eastern Hills Mall 151,200 1994/Leased
McKinley Mall 97,200 1994/Leased
Sheridan/Delaware Plaza 124,100 1994/Leased
Southgate Plaza 100,500 1994/Leased
Elmira Arnot Mall 74,800 1995/Leased
Ithaca Pyramid Mall 52,400 1991/Leased
Lockport Lockport Mall 82,000 1994/Leased
Massena St. Lawrence Centre 51,000 1994/Leased
Niagara Falls Summit Park Mall 88,100 1994/Leased
Olean Olean Mall 73,000 1994/Leased
Rochester The Mall at
Greece Ridge Center 144,600 1996/Owned
The Marketplace Mall 100,000 1995/Owned/(1)/
Irondequoit Mall 102,600 1995/Owned
Eastview Mall 118,900 1995/Owned
Saratoga Springs Wilton Mall 71,700 1993/Leased
Syracuse Carousel Center 80,000 1994/Leased
Camillus Mall 64,700 1994/Leased
Great Northern Mall 98,400 1994/Leased
Shoppingtown Mall 70,100 1994/Leased
Watertown Salmon Run Mall 50,200 1992/Leased
MARYLAND
Cumberland Country Club Mall 60,900 1979/Leased
Frederick Frederick Towne Mall 77,900/(2)/ 1972/Leased
Hagerstown Valley Mall 100,000 1974/Leased
WEST VIRGINIA
Martinsburg Martinsburg Mall 65,800 1994/Leased
NEW JERSEY
Phillipsburg Phillipsburg Mall 65,000 1994/Leased
GEORGIA
Rome River Bend Mall 42,700 1994/Leased
8
Other Properties
Approximate Year Opened
Gross Square or Acquired/
Market Location Feet Owned or Leased
- ------ -------- ------------ ---------------
PENNSYLVANIA
Allentown Central Business District/(3)/ 850,700 1994/Owned
Distribution Center 326,000 1994/Leased
Lancaster Central Business District/(4)/ 246,200 1992/Owned
Harrisburg Warehouse 124,200 1987/Owned
York Corporate Offices 83,000 1983/Leased
Corporate Office Annex/Credit
Service Center 58,600 1988/Leased
Corporate Services Facility 48,000 1993/Leased
Distribution Center/
Data Center 143,700 1988/Owned/(1)/
Johnstown Richland Mall/(5)/ 81,100 1994/Leased
NEW YORK
Buffalo Distribution Center/(6)/ 177,000 1994/Leased
MARYLAND
Hunt Valley Credit Service Center 2,603 1996/Leased
Footnotes:
- ---------
/(1)/ Ownership of building is subject to an underlying long-term ground lease.
/(2)/ Includes leases for two separate premises in the same mall: a 71,900 sq.
ft. main store and a 6,000 sq. ft. home store annex.
/(3)/ Store closed in January 1996. The Company is attempting to dispose of this
property.
/(4)/ Store closed in March 1995. The Company is attempting to dispose of this
property.
/(5)/ Store closed in January 1997. The Company is trying to negotiate an early
termination of the lease or assign or sublet the premises.
/(6)/ This facility's distribution operation has been consolidated into other
Bon-Ton facilities. The Company has sublet a substantial part of these
premises and is attempting to sublet the balance.
Item 3. Legal Proceedings.
The Company is not party to any material pending litigation.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
9
Item A. Executive Officers of the Company.
Certain information with respect to the executive officers of the
Company is provided below:
NAME AGE POSITION
- --------------------------------------- ----- -------------------------------------
Heywood L. Wilansky ................... 49 President, Chief Executive Officer
and Director
M. Thomas ("Tim") Grumbacher .......... 57 Chairman of the Board and Director
Michael L. Gleim ...................... 54 Vice Chairman, Chief Operating
Officer and Director
James H. Baireuther ................... 50 Senior Vice President and Chief
Financial Officer
Bernard H. Breuers .................... 55 Senior Vice President, General
Merchandise Manager
Thomas B. Daniels ..................... 53 Senior Vice President, Stores
H. Stephen Evans ...................... 47 Senior Vice President, Real Estate,
Legal and Governmental Affairs
Theodore C. Johnson, Jr. .............. 63 Senior Vice President, Human
Resources
Leroy J. Karlin ....................... 65 Senior Vice President, Information
Systems
Cheryl Jan Ladnier .................... 48 Senior Vice President, Marketing and
Corporate Communication
Douglas Lamm .......................... 50 Senior Vice President, General
Merchandise Manager
Paul Lindblom ......................... 42 Senior Vice President, General
Merchandise Manager
Ryan J. Sattler ....................... 52 Senior Vice President, Operations
Stephen M. Sloane ..................... 50 Senior Vice President, General
Merchandise Manager
10
Mr. Wilansky joined the Company in August 1995 as President, Chief
Executive Officer and a director. Prior to joining the Company, Mr. Wilansky was
employed by The May Department Stores Company for more than 19 years. From 1992
to August 1995, he was President and Chief Executive Officer of the Foley's
division of May, and from 1991 to 1992, he was President and Chief Executive
Officer of the Filene's division. Prior to that, he was with the Hecht's and
Lord & Taylor divisions of May.
Mr. Grumbacher joined the Company in 1961 and has been Chairman of the
Board since August 1991. From 1989 to 1991, Mr. Grumbacher served as Vice
Chairman, from 1977 to 1989, he was President and from 1985 to 1995 he was Chief
Executive Officer of the Company.
Mr. Gleim joined the Company in 1989 as Executive Vice President and Chief
Administrative Officer. He became Senior Executive Vice President and a director
in 1991, and Vice Chairman and Chief Operating Officer in December 1995. Prior
to joining the Company, Mr. Gleim was employed by Federated Department Stores,
Inc. for more than 25 years. He was Senior Vice President of Administration and
Chief Financial Officer of the Lazarus division of Federated from 1988 to 1989,
President of the Block's division of Federated from 1987 to 1988 and Senior Vice
President of Administration of the Lazarus division from 1986 to 1988.
Mr. Baireuther joined the Company as Senior Vice President and Chief
Financial Officer in June 1996. Prior to joining the Company, Mr. Baireuther was
Senior Vice President and Chief Financial Officer at DAC Vision, a manufacturer
of optical supplies, from 1994 to 1996. Prior to joining DAC, he was Executive
Vice President and Chief Financial Officer for Eye Care Centers of America, a
subsidiary of Sears, Roebuck and Co. from 1989 to 1994. From 1969 to 1989, Mr.
Baireuther held a variety of positions with Sears including Director of Mergers
and Acquisitions, Manager of Corporate Financial Analysis and Controller.
Mr. Breuers joined the Company as Senior Vice President, General
Merchandise Manager in April 1996. Mr. Breuers was previously at Marshall's from
1991 to 1996, where he held the position of Senior Vice President-General
Merchandise Manager. Prior to that, he was associated with Women's Specialty
Retailing, a subsidiary of U.S. Shoe Company, from 1987 to 1991, and with the
Hecht's division of The May Department Stores Company from 1972 to 1987.
Mr. Daniels joined the Company in June 1994 as Senior Vice President,
Stores. Mr. Daniels was previously employed by the Kaufmann's division of The
May Department Stores Company from 1993 until June 1994 as Regional Vice
President of Stores supervising all Cleveland-based stores. Prior to the merger
of May Company's Kaufmann's and Cleveland Divisions, he served as Senior Vice
President and Director of Stores for May Company-Cleveland from 1988 to 1993.
Mr. Daniels' association with The May Department Stores Company began in 1974.
Mr. Evans joined the Company as Senior Vice President, Real Estate in 1991
and was named Senior Vice President, Real Estate, Legal and Governmental Affairs
in 1993. Mr. Evans was previously employed by J.C. Penney Company, Inc. from
1978 to 1991 where he served most recently as a Senior Regional Real Estate
Representative from 1986 to 1991.
Mr. Johnson has been Senior Vice President, Human Resources of the Company
since 1988. Mr. Johnson was previously associated with the Higbee Company, a
department store company based in Cleveland, Ohio, where he served most recently
as Senior Vice President-Human Resources for more than five years.
11
Mr. Karlin joined the Company as Senior Vice President, Information
Services in 1989. Mr. Karlin was previously associated with Federated Department
Stores, Inc., where he served as Divisional Vice President at the Southeast
Region Data Center in Atlanta, Georgia from 1987 to 1989 and as Director of Data
Processing at Foley's Department Store in Houston, Texas from 1979 to 1987.
Ms. Ladnier joined the Company as Senior Vice President, Sales Promotion
and Marketing in December 1993, and was named Senior Vice President, Marketing
and Corporate Communications in 1996. From January 1993 until October 1993, Ms.
Ladnier served as Corporate Vice President, Public Relations at Neiman-Marcus in
Dallas, Texas. Prior to that she was associated with The May Department Stores
Company for 14 years where she served as Senior Vice President, Sales Promotion
and Marketing for three divisions, most recently the May D and F division in
Denver, Colorado.
Mr. Lamm joined the Company as Senior Vice President, General Merchandise
Manager in October 1995. Prior to joining the Company, Mr. Lamm owned a chain of
women's large size apparel specialty stores from 1988 to 1995, and from 1984 to
1988 was Senior Vice President and General Merchandise Manager at Venture
Stores, Inc. in St. Louis.
Mr. Lindblom joined the Company as Senior Vice President, General
Merchandise Manager in 1992. Mr. Lindblom was previously employed by The May
Department Stores Company from 1988 to 1992 where he served as Senior Vice
President, General Merchandise Manager in its G. Fox division in Hartford,
Connecticut. Prior to that, Mr. Lindblom was associated with Macy's Department
Stores from 1980 to 1988 where he most recently served as Divisional Merchandise
Manager in Atlanta, Georgia.
Mr. Sattler joined the Company as Vice President, Distribution and
Operations in 1986 and was promoted to Senior Vice President, Operations in
1990. Mr. Sattler previously served as Vice President-Director of Gimbels
Midwest Department Stores in Milwaukee, Wisconsin from 1983 to 1986.
Mr. Sloane joined the Company as Senior Vice President, General Merchandise
Manager in February 1997. From December 1995 until February 1997, Mr. Sloane was
Vice President-General Merchandise Manager at Dick's Clothing & Sporting Goods,
Pittsburgh, Pennsylvania, and from July 1995 until December 1995 he was Vice
President-General Merchandise Manager at McRae's Department Stores, Jackson,
Mississippi. Prior to that, Mr. Sloane was associated with The May Department
Stores Company for over 17 years, having most recently served as Vice President-
Merchandising at Foley's in Houston, Texas.
PART II
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters.
The Company's Common Stock is traded on the Nasdaq National Market (symbol:
BONT). There is no established public trading market for the Company's Class A
Common Stock. The Class A Common Stock is convertible on a share for share basis
into Common Stock. The following table sets forth for the periods indicated the
high and low sales prices per share of the Common Stock as furnished by Nasdaq:
12
Fiscal 1996
-------------------------------
High Low
-------- --------
1st Quarter $8.250 $4.688
2nd Quarter 6.875 5.000
3rd Quarter 6.750 5.125
4th Quarter 7.375 4.875
Fiscal 1995
-------------------------------
High Low
-------- --------
1st Quarter $12.250 $9.750
2nd Quarter 11.250 6.750
3rd Quarter 8.688 6.000
4th Quarter 6.750 4.500
On April 4, 1997, there were 289 shareholders of record of the Company's
Common Stock and 5 shareholders of record of the Company's Class A Common Stock.
No dividends have been paid on the Common Stock since the beginning of
fiscal 1992. The Company's Board of Directors intends to reinvest earnings in
the Company's business to support its operations and expansion. The Board of
Directors has no present intention to pay cash dividends in the foreseeable
future, and will determine whether to declare cash dividends in the future in
light of the Company's earnings, financial condition and capital requirements.
In addition, the Company has certain credit agreements that limit the payment of
dividends.
Item 6. Selected Financial Data.
The following selected financial data, except pro forma amounts, have been
derived from the Company's consolidated financial statements which have been
audited by Arthur Andersen LLP, independent auditors. The information set forth
below should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the consolidated financial
statements of the Company and notes thereto. See Items 7 and 8.
13
(Dollars in thousands except per share data)
FISCAL YEAR
-----------------------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
Statement of Operations Data:
Net sales ..................................... $626,482 $607,357 $494,908 $336,733 $333,764
Other income, net ............................. 2,430 2,266 2,581 2,597 2,266
------- ------- ------- ------- -------
628,912 609,623 497,489 339,330 336,030
------- ------- ------- ------- -------
Costs and expenses:
Costs of merchandise sold ................. 395,563 387,947 299,914 206,542 206,915
Selling, general and administrative ....... 197,315 204,867 162,442 108,647 107,448
Depreciation and amortization ............. 12,758 11,895 8,465 6,593 5,478
Unusual (income) expense .................. (3,171) 5,471 -- -- --
Restructuring charges ..................... -- 5,690 -- -- --
------- ------- ------- ------- -------
Income (loss) from operations .......... 26,447 (6,247) 26,668 17,548 16,189
Interest expense, net ..................... 14,687 8,722 5,475 4,042 5,506
------- ------- ------- ------- -------
Income (loss) before income taxes ......... 11,760 (14,969) 21,193 13,506 10,683
Income tax provision (benefit) ............ 4,949 (5,766) 7,563 4,727 3,632
------- ------- ------- ------- -------
Income (loss) before cumulative effect of a change
in accounting principle .................. 6,811 (9,203) 13,630 8,779 7,051
Cumulative effect of changing to the liability
method of accounting for income taxes (1). -- -- -- 1,500 --
------- ------- ------- ------- -------
Net income (loss) ......................... $ 6,811 $(9,203) $ 13,630 $ 10,279 $ 7,051
======= ======= ======= ======= =======
Per Share Amounts:
Earnings per Common Share
Income (loss) before cumulative effect of a change
in accounting principle ................. $ 0.61 $ (0.83) $ 1.23 $ 0.80 $ 0.64
Cumulative effect of changing to the liability
method of accounting for income taxes (1) -- -- -- 0.14 --
------- ------- ------- ------- -------
Net income (loss) per share ............... $ 0.61 $ (0.83) $ 1.23 $ 0.94 $ 0.64
======= ======= ======= ======= =======
Weighted average shares outstanding (2) ....... 11,134,000 11,044,000 11,051,000 10,983,000 11,015,000
Year ended
----------------------------------------------------------------------
February 1, February 3, January 28, January 29, January 30,
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
Balance Sheet Data:
Working capital................................ $102,853 $ 90,758 $ 62,539 $ 70,688 $ 81,605
Total assets................................... 341,252 331,173 270,228 190,431 196,354
Long-term debt and capital leases.............. 128,098 127,893 60,521 34,741 53,099
Shareholders' equity........................... $111,485 $104,174 $112,447 $ 98,551 $ 88,011
(1) The Company adopted SFAS No. 109, "Accounting for Income Taxes", at the
beginning of fiscal 1993.
(2) When the effect is dilutive, weighted average shares outstanding include
common stock equivalents, which represent stock options and restricted
stock grants, and is computed using the treasury stock method.
14
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Item 7 is hereby incorporated by reference to the material under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on pages 18 through 22 of the Company's Annual Report to
Shareholders for the fiscal year ended February 1, 1997, attached hereto as
exhibit 13.1.
Item 8. Consolidated Financial Statements and Supplementary Data.
Item 8 is hereby incorporated by reference to the Report of Independent
Public Accountants, Consolidated Financial Statements and Notes thereto on pages
23 through 39 of the Company's Annual Report to Shareholders for the fiscal year
ended February 1, 1997, attached hereto as exhibit 13.2.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information regarding executive officers called for by Item 401 of
Regulation S-K is included in Part I as Item A, in accordance with General
Instruction G(3) to Form 10-K. The remainder of the information called for by
this Item will be contained in the Company's definitive Proxy Statement with
respect to the Company's Annual Meeting of Shareholders to be held in 1997, to
be filed with the Securities and Exchange Commission within 120 days following
the end of the Company's fiscal year, and is hereby incorporated by reference
thereto.
Item 11. Executive Compensation.
The information called for by this Item will be contained in the
Company's definitive Proxy Statement with respect to the Company's Annual
Meeting of Shareholders to be held in 1997, to be filed with the Securities and
Exchange Commission within 120 days following the end of the Company's fiscal
year, and is hereby incorporated by reference thereto (other than the
information called for by Item 402(i), (k) and (l) of Regulation S-K, which is
not incorporated herein by reference).
15
Item 12. Security Ownership of Certain Beneficial Owners
and Management.
The information called for by this Item will be contained in the
Company's definitive Proxy Statement with respect to the Company's Annual
Meeting of Shareholders to be held in 1997, to be filed with the Securities
and Exchange Commission within 120 days following the end of the Company's
fiscal year, and is hereby incorporated by reference thereto.
Item 13. Certain Relationships and Related Transactions.
The information called for by this Item will be contained in the
Company's definitive Proxy Statement with respect to the Company's Annual
Meeting of Shareholders to be held in 1997, to be filed with the Securities
and Exchange Commission within 120 days following the end of the Company's
fiscal year, and is hereby incorporated by reference thereto.
PART IV
Item 14. Exhibits, Consolidated Financial Statement Schedules,
and Reports on Form 8-K.
(a) 1. Consolidated Financial Statements -- See Item 8 above.
2. Consolidated Financial Statement Schedules -- See the Index
to Consolidated Financial Statement Schedules on page F-1.
3. Exhibits:
3.1 The Company's Articles of Incorporation (incorporated by
reference to Exhibit 3.1 to the Company's Report on Form 8-B,
File 0-19517).
3.2 The Company's Bylaws (incorporated by reference to Exhibit 3.2
to the Company's Report on Form 8-B, File 0-19517).
10.1 Shareholder's Agreement by and among the Company and the
shareholders named therein (incorporated by reference to
Exhibit 10.3 to Amendment No. 2 to the Company's Registration
Statement on Form S-1, File 33-42142).
*10.2 (a) Employment Agreement between the Company and Heywood L.
Wilansky (incorporated by reference to Exhibit 10.3 to
the Company's Report on Form 8-B, File 0-19517).
*10.2 (b) Amending Agreement between the Company and Heywood L.
Wilansky.
*10.3 Employment Agreement between the Company and Michael L. Gleim
(incorporated by reference to Exhibit 10.4 to the Company's
Report on Form 8-B, File 0-19517).
16
*10.4 Form of severance agreement between the Company and its
executive officers (incorporated by reference to Exhibit 10.14
to the Company's Report on Form 8-B, File 0-19517).
*10.5 Amended and Restated 1991 Stock Option and Restricted Stock
Plan (incorporated by reference to Exhibit 10.5 to the
Company's Report on Form 8-B, File 0-19517).
10.6 Ground Leases for distribution center located in York,
Pennsylvania, by and between The Bon-Ton Department Stores,
Inc. and M. Thomas Grumbacher, as amended (incorporated by
reference to Exhibit 10.12 to the Company's Registration
Statement on Form S-1, File 33-42142).
10.7 Ground Lease for York Galleria, York, Pennsylvania by and
between The Bon-Ton Department Stores, Inc. and MBM Land
Associates (incorporated by reference to Exhibit 10.14 to the
Company's Registration Statement on Form S-1, File 33-42142).
10.8 (a) Sublease of Butler, Pennsylvania store by and between
The Bon-Ton Department Stores, Inc. and M. Thomas
Grumbacher (incorporated by reference to Exhibit 10.15
to the Company's Registration Statement on Form S-1,
File 33-42142).
(b) First Amendment to Butler, Pennsylvania sublease
(incorporated by reference to Exhibit 10.21 to Amendment
No. 1 to the Company's Registration Statement on Form
S-1, File 33-42142).
(c) Corporate Guarantee with respect to Butler, Pennsylvania
lease (incorporated by reference to Exhibit 10.24 to
Amendment No. 1 to the Company's Registration Statement
on Form S-1, File 33-42142).
10.9 (a) Sublease of Oil City, Pennsylvania store by and between
The Bon-Ton Department Stores, Inc. and M. Thomas
Grumbacher (incorporated by reference to Exhibit 10.16
to the Company's Registration Statement on Form S-1,
File 33-42142).
(b) First Amendment to Oil City, Pennsylvania sublease
(incorporated by reference to Exhibit 10.22 to Amendment
No. 1 to the Company's Registration Statement on Form
S-1, File 33-42142).
(c) Corporate Guarantee with respect to Oil City,
Pennsylvania lease (incorporated by reference to Exhibit
10.26 to Amendment No. 1 to the Company's Registration
Statement on Form S-1, File 33-42142).
*10.10 The Company's Profit Sharing/Retirement Savings Plan,
amended and restated as of July 1, 1994 (incorporated by
reference to Exhibit 10.24 to the Company's Annual
Report on Form 10-K for the fiscal year ended
January 28, 1995).
17
10.11 Receivables Purchase Agreement dated as of January 27,
1995 among The Bon-Ton Receivables Corp., Falcon Asset
Securitization Corporation, The First National Bank of
Chicago, and the other financial institutions party
hereto (incorporated by reference to Exhibit 10.26 to
the Company's Annual Report on Form 10-K for the fiscal
year ended January 28, 1995).
10.12 Tax Indemnification Agreement (incorporated by reference
to Exhibit 10.17 to Amendment No. 2 to the Company's
Registration Statement on Form S-1, File 33-42142).
*10.13 Management Incentive Plan and Addendum to Management
Incentive Plan.
*10.14 The Bon-Ton Stores, Inc. Long-Term Incentive Plan For
Principals.
13.1 Pages 18 through 22 of the Company's Annual Report to
Shareholders for the fiscal year ended February 1, 1997.
13.2 Pages 23 through 39 of the Company's Annual Report to
Shareholders for the fiscal year ended February 1, 1997.
21. Subsidiaries of the Registrant.
23. Consent of Arthur Andersen LLP.
27. Financial Data Schedules.
(b) Reports on Form 8-K filed during the fourth quarter.
None.
______________________________________________
* Constitutes a management contract or compensatory plan or arrangement.
18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
THE BON-TON STORES, INC.
Dated: April 28, 1997 By: /s/ Heywood L. Wilansky
----------------------------
Heywood L. Wilansky
President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.
Signature Capacity Date
- --------- -------- ----
/s/ Heywood L. Wilansky Chief Executive April 28, 1997
- ------------------------------- Officer and Director
Heywood L. Wilansky (principal executive officer)
/s/ M. Thomas Grumbacher Director April 28, 1997
- -------------------------------
M. Thomas Grumbacher
/s/ Samuel J. Gerson Director April 28, 1997
- -------------------------------
Samuel J. Gerson
/s/ Michael L. Gleim Vice Chairman, Chief April 28, 1997
- ------------------------------- Operating Officer
Michael L. Gleim and Director
/s/ Roger S. Hillas Director April 28, 1997
- -------------------------------
Roger S. Hillas
/s/ Lawrence J. Ring Director April 28, 1997
- -------------------------------
Lawrence J. Ring
19
/s/ Leon D. Starr Director April 28, 1997
- -------------------------------
Leon D. Starr
/s/ Leon F. Winbigler Director April 28, 1997
- -------------------------------
Leon F. Winbigler
/s/ James H. Baireuther Senior Vice President and April 28, 1997
- ------------------------------- Chief Financial Officer
James H. Baireuther (principal financial and
accounting officer)
20
INDEX TO CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS.........................F-2
F-1
Schedule II: VALUATION AND QUALIFYING ACCOUNTS
THE BON-TON STORES, INC. AND SUBSIDIARIES
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- -------- -------- -------- -------- -------- --------
Balance at Charged to Balance at
Beginning Costs Other End of
Classification of Period & Expenses Increase Deductions Period
- -------------- ------------ ------------ ------------ ------------ ------------
Year ended January 28, 1995:
Allowance for doubtful
accounts..................... $ 1,134,000 $ 1,916,000 /(1)/ $ 2,361,000 /(5)/ $(3,117,000) /(2)/ $ 2,294,000
Reserve for store closing....... $ 263,000 $ 2,132,000 /(3)/ $ 5,025,000 /(6)/ $ (287,000) /(4)/ $ 7,133,000
Year ended February 3, 1996:
Allowance for doubtful
accounts..................... $ 2,294,000 $ 4,043,000 /(1)/ $ 604,000 /(7)/ $(3,828,000) /(2)/ $ 3,113,000
Reserve for store closing....... $ 7,133,000 $ 5,000,000 /(8)/ $ --- $(2,563,000) /(4)/ $ 9,570,000
Year ended February 1, 1997:
Allowance for doubtful
accounts..................... $ 3,113,000 $ 5,018,000 /(1)/ $ --- $(5,362,000) /(2)/ $ 2,769,000
Reserve for store closing....... $ 9,570,000 $ --- $ --- $(2,586,000) /(4)/ $ 6,984,000
- -------------------
NOTES:
(1) Provision for loss on credit sales.
(2) Uncollectible accounts, written off, net of recoveries.
(3) Provision for expenses and the write off of assets associated with the
store closings.
(4) Cash payments for store closing expenses, net of monies received from asset
liquidation.
(5) Represents the allowance for losses on accounts receivable recorded in
purchase accounting.
(6) Represents reserves recorded in purchase accounting for the costs
associated with closing certain acquired stores.
(7) Represents reserves associated with the purchase of the Hess's Department
Store's Inc. accounts receivable.
(8) Represents reserves relating to stores that the Company has committed to
close due to poor performance.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To the Shareholders of
The Bon-Ton Stores, Inc.:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in The Bon-Ton Stores, Inc.'s annual
report to shareholders, incorporated by reference in this Form 10-K, and have
issued our report thereon dated March 5, 1997 (except with respect to the matter
discussed in Note 17 to the consolidated financial statements, as to which the
date is April 10, 1997). Our audits were made for the purpose of forming an
opinion on these statements taken as a whole. The schedule listed in Item
14(a)(2) is the responsibility of the Company's management and is presented for
purposes of complying with the Securities and Exchange Commission's rules and is
not part of the basic financial statements. This schedule has been subjected to
the auditing procedures applied in the audits of the basic financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
/s/ Arthur Andersen LLP
Philadelphia, PA
March 5, 1997
F-2
EXHIBIT INDEX
Exhibit Description
- ------- -----------
10.2(b) Amending Agreement between the Company and Heywood L. Wilansky
10.13 Management Incentive Plan and Addendum to Management Incentive Plan
10.14 The Bon-Ton Stores, Inc. Long-Term Incentive Plan For Principals
13.1 Pages 18 through 22 of the Company's Annual Report to Shareholders
for the year ended February 1, 1997
13.2 Pages 23 through 39 of the Company's Annual Report to Shareholders
for the fiscal year ended February 1, 1997
21. Subsidiaries of the Registrant
23. Consent of Arthur Andersen LLP
27. Financial Data Schedules