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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
January 31, 1998 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, $.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. [x]
As of March 30, 1998, the aggregate market value of the voting stock held
by non-affiliates of the Registrant was approximately $79,281,626.00, based upon
the closing price of $15.75 per share on March 30, 1998, as reported by the
Nasdaq National Market.*
As of March 30, 1998, there were 8,924,697 shares of Common Stock, $.01 par
value, and 2,989,853 shares of Class A Common Stock, $.01 par value,
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part II - Portions of the Registrant's Annual Report to security holders
for Fiscal Year Ended January 31, 1998 ("Annual Report").
Part III - Portions of the Registrant's Proxy Statement with respect to
its 1998 Annual Meeting of Shareholders ("Proxy Statement").
_____________________________
* 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.
- --------------------------------------------------------------------------------
As used in this Annual Report on Form 10-K, references to a "fiscal year"
refer to the 52 or 53 week period ending on the Saturday nearer January 31 of
the following calendar year (e.g. a reference to fiscal 1996 is a reference to
the fiscal year ended February 1, 1997).
"SAFE HARBOR" STATEMENT
- -----------------------
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 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
The Bon-Ton Stores, Inc., together with its subsidiaries (collectively, the
"Company" or "The Bon-Ton"), operates 64 quality fashion department stores in
secondary markets with 35 stores in Pennsylvania, 24 in New York, three stores
in Maryland and one store in each of West Virginia and New Jersey. The
Company's strategy focuses on being the premier fashion retailer in smaller
markets that demand, but often have limited access to, better branded
merchandise. In many of its markets, The Bon-Ton is the primary destination for
branded fashion merchandise from top designers such as Calvin Klein, Liz
Claiborne, Nautica, Ralph Lauren and Tommy Hilfiger.
The Bon-Ton provides an in-depth selection of high-quality, well-known
branded merchandise at competitive prices in upscale shopping environments.
None of The Bon-Ton's stores are located in major metropolitan markets, and most
are located in smaller secondary markets. The Bon-Ton's strategic focus is on
smaller secondary markets that are served primarily by moderate-price
competitors offering a more limited selection of better branded fashion
merchandise. The Company's executive offices are located at 2801 East Market
Street, York, Pennsylvania.
MERCHANDISING
The Bon-Ton stores offer moderate and better fashion apparel, home
furnishings, cosmetics, accessories, shoes and other items. The Company's sales
of apparel constituted 63% of sales in fiscal year 1997. The chart below
illustrates the sales by product category for fiscal 1997, fiscal 1996 and
fiscal 1995:
2
FISCAL YEAR
----------------------
MERCHANDISE CATEGORY 1997 1996 1995
- -------------------- ------ ------ ------
Women's clothing..... 28.0% 27.4% 27.0%
Men's clothing....... 17.8 17.7 17.6
Home................. 12.2 12.0 11.8
Cosmetics............ 9.7 9.8 10.0
Children's clothing.. 7.0 7.4 8.1
Accessories.......... 7.3 7.9 8.1
Junior's clothing.... 5.5 5.5 5.6
Intimate apparel..... 5.0 5.3 5.1
Shoes................ 5.0 4.7 4.4
Fine Jewelry......... 2.0 1.7 1.6
Beauty Salon......... 0.5 0.6 0.7
----- ----- -----
Total............. 100.0% 100.0% 100.0%
===== ===== =====
The Company carries a number of highly recognized brand names, including
Calvin Klein, Cole Haan, Estee Lauder, Jones New York, Kenneth Cole, Liz
Claiborne, Nautica, Nine West, Ralph Lauren, Steve Madden, Tommy Hilfiger, Tommy
Hilfiger Jeans and Via Spiga, and within these brands chooses collections which
balance fashion, price and selection.
The Company continues to implement its strategy of shifting the merchandise
mix from predominantly moderate to a higher proportion of better brands and
assessing each store to determine the appropriate product mix for the market it
serves. As part of this process, the Company has revised its inventory strategy
to carry a deeper selection from fewer, select vendors.
Complementing its branded merchandise, the Company's exclusive private
brand merchandise provides fashion at competitive pricing under names such as
Andrea Viccaro, Jenny Buchanan, Susquehanna Trail Outfitters and Susquehanna
Blues. The Bon-Ton views its private brand merchandise as a strategic addition
to its strong array of highly recognized, quality national brands and as an
opportunity to increase brand exclusiveness, customer loyalty and competitive
differentiation.
The Company's business, like that of most retailers, is subject to seasonal
fluctuations, with the major portion of sales and income realized during the
latter half of each fiscal year, which includes the back-to-school and holiday
seasons.
3
MARKETING
The Bon-Ton seeks to attract new customers and to maintain customer loyalty
with frequent-shopper clubs such as "Club X", which was created for the
Company's junior customers. Through its "retail-tainment" programs, the Company
promotes in-store events such as fashion shows, wardrobe seminars and cooking
demonstrations in selected markets, and tie-ins with local charitable and
cultural organizations.
The Company attracts customers by offering services such as free gift wrap,
special order capability and in-store alterations. In addition, through its
"Certified Value" program, the Company maintains everyday value prices on staple
items such as turtlenecks, T-shirts, shorts and denim within major product
groups. To increase merchandise turnover, the Company systematically marks down
slow-selling merchandise that is no longer current.
The Company conducts its advertising and promotional programs through
newspaper advertisements, direct mail and, to a lesser extent, local television
and radio. The Company maintains an in-house advertising group that produces
substantially all of its print advertising. The effectiveness of the Company's
direct mail efforts has been greatly enhanced through database management
systems. By accurately identifying the predictors of response to its direct
mail pieces, the Company now has the ability to rank, score and select customers
with event-specific information.
STORE FACILITIES
The Company's stores vary in size from approximately 45,000 to 160,000
gross square feet with 42 of such stores at less than 90,000 gross square feet.
All but two of the Company's stores are anchor tenants in shopping malls or in,
or adjacent to, strip shopping centers. All of the Company's stores are
operated as "The Bon-Ton".
The following table sets forth the total of The Bon-Ton stores at the
beginning and end of each of the last five fiscal years, including the number of
additional stores from acquisitions and the opening of new stores and the number
of store closures:
Fiscal Year 1997 1996 1995 1994 1993
- ----------- ---- ---- ---- ---- ----
Number of stores:
Beginning of year 64 68 69 35 36
Additions 0 1 4 35 1
Closings 0 (5) (5) (1) (2)
---- ---- ---- ---- ----
End of year 64 64 68 69 35
4
EXPANSION
The Company was incorporated in Pennsylvania in 1996 and is the successor
to S. Grumbacher & Son, a family business which was founded in 1898.
In 1994, the Company doubled its number of stores with three acquisitions
involving 35 stores, including 19 stores from Hess's Department Stores, Inc.,
the ten stores of Adam, Meldrum & Anderson Co., Inc., based in Buffalo, New York
and the six stores of C.E. Chappell & Sons, Inc., based in Syracuse, New York.
In 1995 and 1996, the Company entered the Rochester and Elmira, New York markets
with four acquired stores and the opening of one additional store, and opened a
new store in Jamestown, New York in March 1998. In addition, the Company closed
ten stores between March 1995 and January 1997 to eliminate mall or market
duplication resulting from such acquisitions or to close underperforming stores,
and closed its Rome, Georgia store in April 1998.
The Company plans to maintain its growth by expanding and upgrading its
existing stores and by opening new stores and will consider opportunities for
growth through acquisitions of department store companies or their real estate
assets if and when such opportunities arise. The Company's market positioning
strategy has been to locate its new stores or acquire existing companies or
their stores in secondary markets generally within or contiguous to its existing
areas of operations.
PURCHASING
The Bon-Ton's strategy is to build relationships with its top vendors,
creating working alliances that will be mutually beneficial to the vendor and
the Company. The Company has reduced its total number of vendors by 44% since
1994 and, as of January 1998, the Company purchases merchandise from
approximately 1,350 domestic and foreign manufacturers and suppliers, with
relatively little concentration in any one supplier.
The Company purchases certain of its private brand merchandise through
Frederick Atkins, Inc. ("Atkins"), an association of major retailers that
provides its members with group purchasing opportunities. The Company's
membership in Atkins also entitles it to receive current information about
marketing and operating trends.
MANAGEMENT INFORMATION AND CONTROL SYSTEM
The Company operates a proprietary management information and control
system with the capability to track inventory from the distribution centers to
the point-of-sale and to generate financial reports by multiple categories. The
Company currently operates seven primary system
5
modules: Merchandising; Financial; Point-of-Sale; Purchase Order Management;
Financial Transfer; Receiving; and Planning & Allocation. The Company utilizes
the information generated from these modules to execute timely decisions in
relation to the management of its business on a daily, weekly and monthly basis.
The Company is in the process of enhancing its management information and
control system to utilize advance shipping information through an electronic
data interchange in order to expedite the flow of merchandise through the
distribution centers. The Company believes that this system will provide
improved productivity and better in-stock availability. The Company also plans
to modernize its in-store systems over the next several years to improve
operating efficiencies. The use of radio frequency for barcode scanning will
streamline price change processing, re-ticketing, price audits and signage for
promotional events, and an upgrade to the point-of-sale system, including an
updated gift registry system, is planned to further enhance customer service and
inventory management.
YEAR 2000 DATE CONVERSION
Many existing computer programs use only two digits to identify a year in
the date field. These programs were designed and developed without considering
the impact of the upcoming century change in the year 2000. If not corrected,
many computer applications could fail or create erroneous results when
processing year 2000 data.
The Company has completed an assessment of the potential effects of the
year 2000 century change and has established a central office to coordinate the
identification, evaluation and implementation of changes to the Company's
systems and applications necessary to achieve a year 2000 date conversion. All
internally developed systems, which represent 69% of installed applications,
have been modified to process year 2000 dates. The remaining systems are
commercially supplied software packages maintained by third party vendors and
are scheduled to be upgraded to a year 2000 version or replaced over the next 18
months. All installed systems require testing, which is planned over the next
two years. The cost to complete the conversion, including internal personnel
costs, is estimated to be $1,100,000. The Company is communicating with major
suppliers, financial institutions and service providers to coordinate the
conversion effort.
CUSTOMER CREDIT
Bon-Ton customers may pay for their purchases with The Bon-Ton proprietary
credit card, Visa, Mastercard, American Express, cash or check.
6
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 1997, 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.
During fiscal 1997 and 1996, the Company issued 273,000 and 255,000 Bon-Ton
credit cards, respectively, for newly opened accounts.
The following table summarizes the percentage of total sales generated by
payment type:
TYPE OF PAYMENT FISCAL YEAR
- ---------------- ---------------------------
1997 1996 1995
------ ------ ------
Bon-Ton credit card............................ 50% 51% 55%
Visa, Mastercard, American Express............. 22 20 16
Cash or check.................................. 28 29 29
---- ---- ----
Total..................................... 100% 100% 100%
==== ==== ====
All phases of The Bon-Ton proprietary credit card operation are handled by
the Company except statement mailing and the processing of customer mail
payments, which processing 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. According to the National Retail
Federation, net write-offs as a percentage of credit sales for the retail
industry ranged from 1.06% to 5.09% in 1996. The Company's bad debt expense is
in the lower end of this range.
COMPETITION
The Company faces competition for customers from traditional department
stores such as J. C. Penney and Company, Inc. ("J.C. Penney"), Federated
Department Stores Inc. ("Federated"), The May Department Stores Company ("The
May Company") and Sears, Roebuck and Co. ("Sears"), from regional department
stores such as Boscov's and from specialty stores and catalogue and other
retailers. In addition, the Company faces competition for store locations from
other department stores and other large retailers. In a number of its markets,
the Company competes for customers with national department store chains which
are better established in such markets than the Company and which offer a
similar mix of better branded merchandise as the Company. In other markets, the
Company faces potential competition from national chains that to date have not
entered such markets and from national chains which have stores in the Company's
markets but currently do not carry similar better branded goods as the Company.
In all markets, the Company generally competes for customers with department
stores offering moderately priced goods. Many of the Company's competitors are
units of large national or regional chains that may have substantially greater
financial and
7
other resources than the Company. Some of the Company's competitors have greater
leverage with vendors of better merchandise than the Company, which may allow
such competitors to obtain such merchandise more easily or on better terms than
the Company. Competition with The May Company, in particular, increased during
fiscal 1994 and 1995 as a result of The Bon-Ton's entry into certain markets in
which The May Company stores are located and The May Company's entry into
certain markets in which The Bon-Ton's stores are located. Currently, The Bon-
Ton competes directly with The May Company in a significant number of The Bon-
Ton's geographic markets. In several of the Company's markets, the Company's
stores compete with other department stores in the immediate vicinity which are
larger and/or have a superior location in the relevant mall or local shopping
area.
The Company believes it compares favorably with its competitors with
respect to quality, depth and breadth of merchandise, prices for comparable
quality merchandise, customer service and store environment. The Company also
believes its knowledge of smaller secondary markets in particular, developed
over its many years of operation, and its focus on secondary markets as its
primary area of operation, give it an advantage that cannot be readily
duplicated.
ASSOCIATES
As of January 31, 1998, the Company had approximately 2,600 full-time and
6,000 part-time associates. The Company also employs additional part-time
clerks and cashiers during peak periods. None of the Company's associates are
represented by a labor union. The Company believes that its relationship with
its associates is good.
ITEM 2. PROPERTIES.
The Company leases 56 of its stores and owns eight stores, three of which
are subject to ground leases. The Company leases a total of 154,600 square feet
for its executive and administrative offices which are located at or near the
York Mall in York, Pennsylvania. The Company also leases the land (but owns the
building) for its 143,700 square foot distribution center in York, Pennsylvania
and leases its 326,000 square foot distribution center in Allentown,
Pennsylvania.
8
The following table provides certain information regarding the Company's
store properties:
STORE PROPERTIES
----------------
APPROXIMATE
GROSS SQUARE
MARKET LOCATION FEET
------ -------- ------------
PENNSYLVANIA
Allentown South Mall 111,000
Bethlehem Westgate Mall 107,100
Bloomsburg Columbia Mall 46,100
Butler Clearview Mall 63,600
Carlisle Carlisle Plaza Mall 59,900
Chambersburg Chambersburg Mall 55,600
Doylestown Doylestown Shopping Center 55,500
Easton Palmer Park Mall 120,200
Greensburg Westmoreland Mall 99,900
Hanover North Hanover Mall 67,600
Harrisburg Camp Hill (Free Standing) 145,200
Colonial Park Shopping Center 136,500
Indiana Indiana Mall 60,400
Johnstown The Galleria 80,900
Lancaster Park City Center 144,800
Lebanon Lebanon Plaza Mall 53,700
Lewistown Central Business District 46,700
Oil City/Franklin Cranberry Mall 45,200
Pottsville Schuylkill Mall 61,100
Quakertown Richland Mall 88,100
Reading Berkshire Mall 159,400
Scranton Keyser Oak Plaza 57,600
State College Nittany Mall 70,200
Stroudsburg Stroud Mall 87,000
Sunbury Susquehanna Valley Mall 60,200
Trexlertown Trexler Mall 54,000
Uniontown Uniontown Mall 71,000
Warren Warren Mall 50,000
Washington Franklin Mall 78,100
Williamsport Lycoming Mall 60,100
Wilkes-Barre Midway Shopping Center 66,000
Wyoming Valley Mall 159,500
York York Galleria 128,200
Queensgate Shopping Center 85,100
West Manchester Mall 80,200
9
APPROXIMATE
GROSS SQUARE
MARKET LOCATION FEET
------ -------- ------------
NEW YORK
Binghamton Oakdale Mall 80,000
Buffalo Northtown Plaza 100,800
Walden Galleria 150,000
Eastern Hills Mall 151,200
McKinley Mall 97,200
Sheridan/Delaware Plaza 124,100
Southgate Plaza 100,500
Elmira Arnot Mall 74,800
Ithaca Pyramid Mall 52,400
Jamestown Chautauqua Mall 60,000
Lockport Lockport Mall 82,000
Massena St. Lawrence Centre 51,000
Niagara Falls Summit Park Mall 88,100
Olean Olean Mall 73,000
Rochester The Mall at
Greece Ridge Center 144,600
The Marketplace Mall 100,000
Irondequoit Mall 102,600
Eastview Mall 118,900
Saratoga Springs Wilton Mall 71,700
Syracuse Carousel Center 80,000
Camillus Mall 64,700
Great Northern Mall 98,400
Shoppingtown Mall 70,100
Watertown Salmon Run Mall 50,200
MARYLAND
Cumberland Country Club Mall 60,900
Frederick Frederick Towne Mall 77,900
Hagerstown Valley Mall 100,000
WEST VIRGINIA
Martinsburg Martinsburg Mall 65,800
NEW JERSEY
Phillipsburg Phillipsburg Mall 65,000
ITEM 3. LEGAL PROCEEDINGS.
The Company is involved in various proceedings that are incidental to
its normal course of business. The Company does not expect that any of such
proceedings will have a material adverse effect on the Company's financial
position or results of operations.
10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
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 Wilansky................ 50 President, Chief Executive Officer
and Director
M. Thomas ("Tim") Grumbacher.... 58 Chairman of the Board and Director
Michael L. Gleim................ 55 Vice Chairman - Chief Operating
Officer and Director
Douglas Lamm.................... 51 Executive Vice President -
Softlines Merchandise
James H. Baireuther............. 51 Senior Vice President-Chief
Financial Officer
Robert W. Bennet................ 41 Senior Vice President-General
Merchandise Manager
Jack Boonshaft.................. 55 Senior Vice President-Stores
J. Rick Cusick ................. 40 Senior Vice President-General
Merchandise Manager
H. Stephen Evans................ 48 Senior Vice President-Real Estate,
Legal and Governmental Affairs
Elizabeth R. Feher.............. 37 Senior Vice President-General
Merchandise Manager
William T. Harmon............... 43 Senior Vice President-Sales
Promotion, Marketing and Strategic
Planning
Theodore C. Johnson, Jr......... 64 Senior Vice President-Human
Resources
11
Cheryl Jan Ladnier.............. 49 Senior Vice President-Product
Development, Fashion Merchandising
and Special Events
Patrick J. McIntyre............. 53 Senior Vice President-Chief
Information Officer
Ryan J. Sattler................. 53 Senior Vice President-Operations
Stephen M. Sloane............... 51 Senior Vice President-General
Merchandise Manager
Stephanie Stough................ 46 Senior Vice President-Merchandise
Planning & Control
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 Company for more than 19 years. From 1992 to August
1995, he was President and Chief Executive Officer of the Foley's division of
The May Company, and from 1991 to 1992, he was President and Chief Executive
Officer of the Filene's division of The May Company. Prior to that, he was with
the Hecht's and Lord & Taylor divisions of The May Company.
Mr. Grumbacher joined the Company in 1961 and has been Chairman of the
Board since August 1991. 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 for
more than 25 years.
Mr. Lamm joined the Company as Senior Vice President - General Merchandise
Manager in October 1995 and was appointed Executive Vice President - Softlines
Merchandise in February 1998. Prior to joining the Company, Mr. Lamm owned a
chain of women's large size apparel boutiques 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. Baireuther joined the Company as Senior Vice President - Chief
Financial Officer in June 1996. From September 1994 until he joined the
Company, Mr. Baireuther was Senior Vice President - Chief Financial Officer at
DAC Vision ("DAC"), a manufacturer and distributor of optical supplies. Prior
to joining DAC, he was Executive Vice President - Chief Financial Officer for
Eye Care Centers of America, a retail optical superstore chain and wholly-owned
subsidiary of Sears, 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.
12
Mr. Bennet joined the Company in March 1993 as Divisional Vice President -
Divisional Merchandise Manager. In February 1998, Mr. Bennet was named Senior
Vice President - General Merchandise Manager. Prior to joining the Company, Mr.
Bennet was with the Famous-Barr division of The May Company for more than
fourteen years, last serving as Divisional Merchandise Manager - Accessories.
Mr. Boonshaft joined the Company in January 1996 as Vice President -
Stores' Merchandising and was named Senior Vice President - Stores in February
1998. Prior to joining the Company, Mr. Boonshaft was with the Hecht's division
of The May Company, where his last position was Regional Vice President - Stores
from 1986 to 1995.
Mr. Cusick joined the Company in October 1996 as Divisional Vice President
- - Divisional Merchandise Manager and was named Senior Vice President - General
Merchandise Manager in July 1997. Prior to joining the Company, Mr. Cusick was
at Marshall's from September 1995 to February 1996, where he held the position
of Divisional Vice President - Divisional Merchandise Manager. From 1980 to
1995, Mr. Cusick held a variety of merchandising positions with Filene's,
Foley's and The Broadway.
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 for more than
twelve years.
Ms. Feher joined the Company as Divisional Vice President - Divisional
Merchandise Manager in October 1994 and was named Senior Vice President -
General Merchandise Manager in February 1998. Ms. Feher was previously
associated with Hess's Department Stores, Inc., where she served as Vice
President - Merchandise Manager for over six years.
Mr. Harmon joined the Company as Senior Vice President - Sales Promotion,
Marketing and Strategic Planning in June 1997. From December 1992 to June 1997,
Mr. Harmon was Senior Vice President - Merchandise Planning and Assistant to the
President of Foley's, and from June 1989 to December 1992 he was Vice President
- - Assistant to the President of Filene's. Prior to that, he was employed by
McKinsey & Company for seven years.
Mr. Johnson has been Senior Vice President - Human Resources of the Company
since 1988.
Ms. Ladnier joined the Company as Senior Vice President - Sales Promotion
and Marketing in December 1993, was subsequently named Senior Vice President-
Marketing and Corporate Communications. In May 1997 she was named Senior Vice
President - Product Development, Fashion Merchandising and Special Events.
Prior to joining the Company, Ms. Ladnier had been with Neiman-Marcus as
Corporate Vice President - Public Relations from January 1993 until October
1993, and prior to that she was with The May Company for fourteen years.
Mr. McIntyre joined the Company as Senior Vice President - Chief
Information Officer in June 1997. From 1988 to June 1997, Mr. McIntyre was
Senior Vice President - Chief Information Officer for the Cato Corporation, a
women's specialty retailer. Prior to that, he held similar positions with the
Higbee Company and Burdine's Department Store.
13
Mr. Sattler joined the Company as Vice President - Distribution and
Operations in 1986 and was promoted to Senior Vice President - Operations in
1990.
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, and from July 1995 until December 1995 he was Vice President -
General Merchandise Manager at McRae's Department Stores. Prior to that, Mr.
Sloane was associated with The May Company for over 17 years, having most
recently served as Vice President-Merchandising at Foley's.
Ms. Stough joined the Company in March 1987 as Director of Merchandise
Planning and Control. In February 1991 she was promoted to Vice President -
Merchandise Planning and Control and in May 1997 she was promoted to Senior Vice
President - Merchandise Planning and Control.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock, $.01 par value ("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, $.01 par value ("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 range of the sales price of the Common Stock as furnished by
Nasdaq:
FISCAL 1997
--------------------
HIGH LOW
------- -----------
1st Quarter $ 7.375 $ 5.625
2nd Quarter 9.125 6.250
3rd Quarter 15.000 7.875
4th Quarter 17.500 11.750
FISCAL 1996
--------------------
HIGH LOW
------- -----------
1st Quarter $8.250 $4.875
2nd Quarter 6.875 5.000
3rd Quarter 6.750 5.125
4th Quarter 7.375 4.875
On March 30, 1998, there were approximately 300 shareholders of record of
the Company's Common Stock and five shareholders of record of the Company's
Class A Common Stock.
14
The Company has not paid cash dividends since its initial public offering
in September 1991 and does not anticipate paying any cash dividends in the
foreseeable future. The Company intends to retain its earnings, if any, for the
operation and expansion of its business. The payment and rate of future
dividends, if any, are subject to the discretion of the Board of Directors of
the Company and will depend upon the Company's earnings, financial condition,
capital requirements, contractual restrictions under its current indebtedness
and other factors. The Company's revolving credit facility contains restrictions
on the Company's ability to pay dividends and make other distributions.
ITEM 6. SELECTED FINANCIAL DATA.
Item 6 is hereby incorporated by reference to the material under "Selected
Consolidated Financial and Operating Data" on page 25 of the Company's Annual
Report attached hereto as Exhibit 13.1.
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 26 through 29 of the Company's Annual Report, attached
hereto as exhibit 13.2.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
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
30 through 47 of the Company's Annual Report, attached hereto as exhibit 13.3.
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 Proxy Statement and is hereby
incorporated by reference thereto.
15
ITEM 11. EXECUTIVE COMPENSATION.
The information called for by this Item will be contained in the Company's
Proxy Statement 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).
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.
The information called for by this Item will be contained in the Company's
Proxy Statement 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
Proxy Statement and is hereby incorporated by reference thereto.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this report:
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:
The following exhibits are filed herewith or incorporated by reference as
indicated below:
EXHIBIT DOCUMENT IF INCORPORATED
NO. DESCRIPTION BY REFERENCE
- ------- ----------- ------------
3.1 Articles of Incorporation Exhibit 3.1 to the Company's Report on Form 8-B, File No. 0-19517 ("Form 8-B")
3.2 Bylaws Exhibit 3.2 to Form 8-B
10.1 Shareholder's Agreement by and among Exhibit 10.3 to Amendment No. 2 to the Company's Registration Statement on
the Company and the shareholders Form S-1, File No. 33-42142 ("1991 Form S-1")
named therein
16
*10.2(a) Employment Agreement between the Exhibit 99 to the Company's Report on Form 8-K dated March 26, 1998, File No.
Company and Heywood Wilansky 0-19517.
* (b) The Bon-Ton Stores, Inc. Supplemental Exhibit 10.2(b) to the Company's Registration Statement on Form S-1 dated
Executive Retirement Plan for March 27, 1998, File No. 333-48811 ("1998 Form S-1")
Heywood Wilansky
* (c) The Bon-Ton Stores, Inc. Five Year Cash Exhibit 10.2(c) to 1998 Form S-1
Bonus Plan for Heywood Wilansky
*10.3 Employment Agreement between the Exhibit 10.4 to Form 8-B
Company and Michael L. Gleim
*10.4 Form of severance agreement between Exhibit 10.14 to Form 8-B
the Company and certain of its executive
officers
*10.5(a) Amended and Restated 1991 Stock Option Exhibit 4.1 to the Company's Registration Statement on Form S-8, File No.
and Restricted Stock Plan 333-36633
* (b) Phantom Equity Replacement Stock Option Exhibit 10.18 to 1991 Form S-1
Plan
10.6 Ground Leases for distribution center Exhibit 10.12 to 1991 Form S-1
located in York, Pennsylvania between
the Company and M. Thomas Grumbacher,
as amended
10.7 Ground Lease for York Galleria store, Exhibit 10.14 to 1991 Form S-1
York, Pennsylvania between the Company
and MBM Land Associates Limited
Partnership
10.8 (a) Sublease of Butler, Pennsylvania store Exhibit 10.15 to 1991 Form S-1
between the Company and M. Thomas
Grumbacher
(b) First Amendment to Butler, Pennsylvania Exhibit 10.21 to Amendment No. 1 to 1991 Form S-1
sublease
(c) Corporate Guarantee with respect to Exhibit 10.24 to Amendment No. 1 to 1991 Form S-1
Butler, Pennsylvania lease
10.9 (a) Sublease of Oil City, Pennsylvania store Exhibit 10.16 to 1991 Form S-1
between the Company and M. Thomas
Grumbacher
(b) First Amendment to Oil City, Pennsylvania Exhibit 10.22 to Amendment No. 1 to 1991 Form S-1
sublease
(c) Corporate Guarantee with respect to Oil Exhibit 10.26 to Amendment No. 1 to 1991 Form S-1
City, Pennsylvania lease
*10.10 The Company's Profit Sharing/Retirement Exhibit 10.24 to the Company's Annual Report on Form 10-K for the fiscal year
Savings Plan, amended and restated as of ended January 28, 1995 ("1994 Form 10-K")
July 1, 1994
17
10.11 (a) Amended and Restated Exhibit 10.16(a) to Amendment No.
Receivables Purchase 2 to 1998 Form S-1
Agreement dated as of
January 12, 1995 among
The Bon-Ton Receivables
Corp., The Bon-Ton
Receivables Partnership,
L.P., Falcon Asset
Securitization Corporation,
The First National
Bank of Chicago, and the
other financial
institutions party thereto
(b) Amendment dated as of June 30, Exhibit 10.16(b) to Amendment No.
1995 to Amended and Restated 1 to 1998 Form S-1
Receivables Purchase Agreement
*10.12 Management Incentive Plan Exhibit 10.13 to the Company's
and Addendum to Management Annual Report on Form 10-K
Incentive Plan for the fiscal year ended February
1, 1997 ("1996 Form 10-K")
*10.13 The Bon-Ton Stores, Inc. Exhibit 10.14 to 1996 Form 10-K
Long-Term Incentive Plan
For Principals
10.14 (a) Credit Agreement dated as of Exhibit 10.1 to the Company's
April 15, 1997 among the Quarterly Report on Form 10-Q
Company, Adam, Meldrum for the quarter ended May 3, 1997
& Anderson Co, Inc., and The ("Form 10-Q")
Bon-Ton Stores of Lancaster,
Inc., the Other Credit Parties
Signatory thereto, the Lenders
Signatory thereto from time to
time, the First National
Bank of Boston and General
Electric Capital Corporation
(b) First Amendment to Credit Exhibit 10.3(b) to 1998 Form S-1
Agreement
(c) Second Amendment to Credit Exhibit 10.3(c) to 1998 Form S-1
Agreement
(d) Third Amendment to Credit Exhibit 10.3(d) to 1998 Form S-1
Agreement
13.1 Page 25 of the Company's Annual Report.
13.2 Pages 26 through 29 of the Company's Annual Report.
13.3 Pages 30 through 47 of the Company's Annual Report.
21. Subsidiaries of the Registrant.
23. Consent of Arthur Andersen LLP.
27.1 Financial Data Schedule - Year ended January 31, 1998.
27.2 Restated Financial Data Schedule - Periods ended May 3, 1997, August
2, 1997 and November 1, 1997.
27.3 Restated Financial Data Schedule - Year ended February 1, 1997 and
Periods ended May 4, 1996, August 3, 1996 and November 2, 1996.
18
(b) Reports on Form 8-K filed during the fourth quarter.
None
________________________________________________
* Constitutes a management contract or compensatory plan or arrangement.
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 24, 1998 By: /s/ Heywood Wilansky
-----------------------
Heywood 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 and in the capacities and on the dates indicated.
Signature Capacity Date
--------- -------- ----
/s/ Heywood Wilansky President, Chief Executive April 24, 1998
---------------------------- Officer and Director
Heywood Wilansky (principal executive officer)
/s/ M. Thomas Grumbacher Director April 24, 1998
----------------------------
M. Thomas Grumbacher
/s/ Samuel J. Gerson Director April 24, 1998
----------------------------
Samuel J. Gerson
/s/ Michael L. Gleim Vice Chairman, Chief April 24, 1998
---------------------------- Operating Officer
Michael L. Gleim and Director
19
/s/ Roger S. Hillas Director April 24, 1998
----------------------------
Roger S. Hillas
/s/ Lawrence J. Ring Director April 24, 1998
----------------------------
Lawrence J. Ring
/s/ Leon D. Starr Director April 24, 1998
----------------------------
Leon D. Starr
/s/ Leon F. Winbigler Director April 24, 1998
----------------------------
Leon F. Winbigler
/s/ James H. Baireuther Senior Vice President April 24, 1998
---------------------------- and Chief Financial Officer
James H. Baireuther (principal financial and
accounting officer)
20
INDEX TO CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS...................................F-2
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS............................F-3
F-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Bon-Ton Stores, Inc.:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of The Bon-Ton Stores, Inc. included in
this annual report on form 10-K and have issued our report thereon dated March
4, 1998. Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the accompanying
index 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 audit 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 4, 1998
F-2
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 February 3, 1996:
Allowance for doubtful
accounts.................... $2,294,000 $4,043,000 (1) $604,000 (4) $(3,828,000) (2) $3,113,000
Reserve for store closing..... $7,133,000 $5,000,000 (5) $ --- $(2,563,000) (3) $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) (3) $6,984,000
Year ended January 31, 1998:
Allowance for doubtful
accounts.................... $2,769,000 $3,549,000 (1) $ --- $(4,341,000) (2) $1,977,000
Reserve for store closing..... $6,984,000 $ --- $ --- $(1,513,000) (3) $5,471,000
___________________
NOTES:
(1) Provision for loss on credit sales.
(2) Uncollectible accounts, written off, net of recoveries.
(3) Cash payments for store closing expenses, net of monies received from asset
liquidation.
(4) Represents reserves associated with the purchase of the Hess's Department
Store's Inc. accounts receivable.
(5) Represents reserves relating to stores that the Company committed to close
due to poor performance.
F-3
EXHIBIT INDEX
Exhibit Description
- ------- -----------
13.1 Page 25 of the Company's Annual Report.
13.2 Pages 26 through 29 of the Company's Annual Report.
13.3 Pages 30 through 47 of the Company's Annual Report.
21. Subsidiaries of the Registrant
23. Consent of Arthur Andersen LLP
27.1 Financial Data Schedule - Year Ended January 31, 1998
27.2 Restated Financial Data Schedule - Periods ended May 3, 1997, August 2,
1997 and November 1, 1997.
27.3 Restated Financial Data Schedule - Year ended February 1, 1997, and
Periods ended May 4, 1996, August 3, 1996 and November 2, 1996.