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Table of Contents

 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
     
For the Quarter ended October 29, 2011   Commission File Number
    0-19517
THE BON-TON STORES, INC.
2801 East Market Street
York, Pennsylvania 17402
(717) 757-7660
     
Incorporated in Pennsylvania   IRS No. 23-2835229
 
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 twelve 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 þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
             
Large accelerated filer o   Accelerated filer þ   Non-accelerated filer o   Smaller reporting company o
        (Do not check if a smaller reporting company)    
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
As of November 25, 2011, there were 16,750,076 shares of Common Stock, $.01 par value, and 2,951,490 shares of Class A Common Stock, $.01 par value, outstanding.
 
 

 

 


TABLE OF CONTENTS

PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED STATEMENTS OF CASH FLOWS
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 4. CONTROLS AND PROCEDURES
PART II: OTHER INFORMATION
ITEM 6. EXHIBITS
SIGNATURES
EX-31.1
EX-31.2
EX-32.1
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT


Table of Contents

PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE BON-TON STORES, INC.
CONSOLIDATED BALANCE SHEETS
                 
(In thousands except share and per share data)   October 29,     January 29,  
(Unaudited)   2011     2011  
Assets
               
Current assets:
               
Cash and cash equivalents
  $ 12,808     $ 16,339  
Merchandise inventories
    956,835       682,324  
Prepaid expenses and other current assets
    66,483       78,418  
 
           
Total current assets
    1,036,126       777,081  
 
           
 
               
Property, fixtures and equipment at cost, net of accumulated depreciation and amortization of $728,831 and $657,541 at October 29, 2011 and January 29, 2011, respectively
    679,021       703,432  
Deferred income taxes
    11,086       9,587  
Intangible assets, net of accumulated amortization of $51,718 and $46,245 at October 29, 2011 and January 29, 2011, respectively
    123,787       130,080  
Other long-term assets
    29,012       36,059  
 
           
Total assets
  $ 1,879,032     $ 1,656,239  
 
           
 
               
Liabilities and Shareholders’ Equity
               
Current liabilities:
               
Accounts payable
  $ 389,182     $ 175,249  
Accrued payroll and benefits
    33,272       45,769  
Accrued expenses
    150,758       167,204  
Current maturities of long-term debt
    7,311       6,978  
Current maturities of obligations under capital leases
    4,921       5,825  
Deferred income taxes
    15,465       12,709  
Income taxes payable
    42       137  
 
           
Total current liabilities
    600,951       413,871  
 
           
 
               
Long-term debt, less current maturities
    984,946       856,687  
Obligations under capital leases, less current maturities
    57,607       61,043  
Other long-term liabilities
    145,073       141,286  
 
           
Total liabilities
    1,788,577       1,472,887  
 
           
 
               
Contingencies (Note 11)
               
 
               
Shareholders’ equity:
               
Preferred Stock — authorized 5,000,000 shares at $0.01 par value; no shares issued
           
Common Stock — authorized 40,000,000 shares at $0.01 par value; issued shares of 17,077,876 and 16,520,859 at October 29, 2011 and January 29, 2011, respectively
    171       165  
Class A Common Stock — authorized 20,000,000 shares at $0.01 par value; issued and outstanding shares of 2,951,490 at October 29, 2011 and January 29, 2011
    30       30  
Treasury stock, at cost - 337,800 shares at October 29, 2011 and January 29, 2011
    (1,387 )     (1,387 )
Additional paid-in-capital
    154,134       153,331  
Accumulated other comprehensive loss
    (37,009 )     (36,498 )
(Accumulated deficit) retained earnings
    (25,484 )     67,711  
 
           
Total shareholders’ equity
    90,455       183,352  
 
           
Total liabilities and shareholders’ equity
  $ 1,879,032     $ 1,656,239  
 
           
The accompanying notes are an integral part of these consolidated financial statements.

 

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THE BON-TON STORES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
                                 
    THIRTEEN     THIRTY-NINE  
    WEEKS ENDED     WEEKS ENDED  
(In thousands except per share data)   October 29,     October 30,     October 29,     October 30,  
(Unaudited)   2011     2010     2011     2010  
Net sales
  $ 656,070     $ 700,514     $ 1,901,431     $ 1,970,483  
Other income
    14,498       16,423       42,888       44,285  
 
                       
 
    670,568       716,937       1,944,319       2,014,768  
 
                       
 
                               
Costs and expenses:
                               
Costs of merchandise sold
    410,703       432,852       1,203,888       1,224,343  
Selling, general and administrative
    234,856       235,422       676,681       687,498  
Depreciation and amortization
    23,271       24,798       74,005       77,538  
Amortization of lease-related interests
    1,195       1,131       3,584       3,424  
 
                       
Income (loss) from operations
    543       22,734       (13,839 )     21,965  
Interest expense, net
    21,938       28,347       68,005       85,037  
Loss on extinguishment of debt
                9,450        
 
                       
 
                               
Loss before income taxes
    (21,395 )     (5,613 )     (91,294 )     (63,072 )
Income tax provision (benefit)
    640       661       (971 )     474  
 
                       
 
                               
Net loss
  $ (22,035 )   $ (6,274 )   $ (90,323 )   $ (63,546 )
 
                       
 
                               
Per share amounts —
                               
Basic:
                               
Net loss
  $ (1.21 )   $ (0.36 )   $ (5.00 )   $ (3.60 )
 
Diluted:
                               
Net loss
  $ (1.21 )   $ (0.36 )   $ (5.00 )   $ (3.60 )
 
                       
The accompanying notes are an integral part of these consolidated financial statements.

 

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THE BON-TON STORES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
                 
    THIRTY-NINE  
    WEEKS ENDED  
(In thousands)   October 29,     October 30,  
(Unaudited)   2011     2010  
Cash flows from operating activities:
               
Net loss
  $ (90,323 )   $ (63,546 )
Adjustments to reconcile net loss to net cash used in operating activities:
               
Depreciation and amortization
    74,005       77,538  
Amortization of lease-related interests
    3,584       3,424  
Share-based compensation expense
    3,995       5,570  
Loss on sale of property, fixtures and equipment
    7       208  
Reclassifications of other comprehensive loss
    2,714       5,858  
Loss on extinguishment of debt
    9,450        
Amortization of deferred financing costs
    6,506       6,959  
Amortization of deferred gain on sale of proprietary credit card portfolio
    (1,810 )     (1,811 )
Deferred income tax (benefit) provision
    (1,968 )     1,181  
Changes in operating assets and liabilities:
               
Increase in merchandise inventories
    (274,511 )     (261,201 )
Decrease in prepaid expenses and other current assets
    11,934       13,208  
Decrease in other long-term assets
    786       2,669  
Increase in accounts payable
    201,994       177,341  
Decrease in accrued payroll and benefits and accrued expenses
    (25,691 )     (10,577 )
(Decrease) increase in income taxes payable
    (95 )     193  
Increase (decrease) in other long-term liabilities
    5,986       (4 )
 
           
Net cash used in operating activities
    (73,437 )     (42,990 )
 
           
 
               
Cash flows from investing activities:
               
Capital expenditures
    (51,069 )     (36,048 )
Proceeds from sale of property, fixtures and equipment
    2,386       77  
 
           
Net cash used in investing activities
    (48,683 )     (35,971 )
 
           
 
Cash flows from financing activities:
               
Payments on long-term debt and capital lease obligations
    (469,952 )     (433,534 )
Proceeds from issuance of long-term debt
    590,440       512,285  
Cash dividends paid
    (1,910 )      
Restricted shares forfeited in lieu of payroll taxes
    (3,584 )     (4,082 )
Proceeds from stock options exercised
    398        
Deferred financing costs paid
    (5,931 )     (717 )
Increase in book overdraft balances
    9,128       4,453  
 
           
Net cash provided by financing activities
    118,589       78,405  
 
           
Net decrease in cash and cash equivalents
    (3,531 )     (556 )
 
               
Cash and cash equivalents at beginning of period
    16,339       18,922  
 
           
 
               
Cash and cash equivalents at end of period
  $ 12,808     $ 18,366  
 
           
The accompanying notes are an integral part of these consolidated financial statements.

 

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THE BON-TON STORES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
                                                         
                                    Accumulated              
                                    Other     (Accumulated        
            Class A             Additional     Compre-     Deficit)        
(In thousands except per share data)   Common     Common     Treasury     Paid-in     hensive     Retained        
(Unaudited)   Stock     Stock     Stock     Capital     Loss     Earnings     Total  
BALANCE AT JANUARY 29, 2011
  $ 165     $ 30     $ (1,387 )   $ 153,331     $ (36,498 )   $ 67,711     $ 183,352  
 
                                         
Comprehensive loss (Note 12):
                                                       
Net loss
                                  (90,323 )     (90,323 )
Pension and postretirement benefit plans
                            1,507             1,507  
Cash flow derivatives, net of $3,224 tax benefit
                            (2,018 )           (2,018 )
 
                                         
Total comprehensive loss
                                                    (90,834 )
 
                                                       
Dividends to shareholders, $0.15 per share
                                  (2,872 )     (2,872 )
Restricted shares forfeited in lieu of payroll taxes
    (2 )                 (3,582 )                 (3,584 )
Proceeds from stock options exercised
    1                   397                   398  
Share-based compensation expense
    7                   3,988                   3,995  
 
                                         
BALANCE AT OCTOBER 29, 2011
  $ 171     $ 30     $ (1,387 )   $ 154,134     $ (37,009 )   $ (25,484 )   $ 90,455  
 
                                         
The accompanying notes are an integral part of these consolidated financial statements.

 

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Table of Contents

THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share data)
1. BASIS OF PRESENTATION
The Bon-Ton Stores, Inc., a Pennsylvania corporation, was incorporated on January 31, 1996 as the successor of a company incorporated on January 31, 1929. As of October 29, 2011, The Bon-Ton Stores, Inc. operated, through its subsidiaries, 275 stores in 23 states in the Northeast, Midwest and upper Great Plains under the Bon-Ton, Bergner’s, Boston Store, Carson Pirie Scott, Elder-Beerman, Herberger’s and Younkers nameplates and, in the Detroit, Michigan area, under the Parisian nameplate. The Bon-Ton Stores, Inc. conducts its operations through one business segment.
The accompanying unaudited consolidated financial statements include the accounts of The Bon-Ton Stores, Inc. and its wholly owned subsidiaries (collectively, “the Company”). Variable interest entities are consolidated where it has been determined the Company is the primary beneficiary of those entities’ operations. All intercompany transactions and balances have been eliminated in consolidation.
The unaudited consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q and do not include all information and footnotes required in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States. In the opinion of management, all adjustments considered necessary for a fair presentation of interim periods have been included. The Company’s business is seasonal in nature and results of operations for the interim periods presented are not necessarily indicative of results for the full fiscal year. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 29, 2011.
For purposes of the following discussion, references to the “first quarter of 2011” and the “first quarter of 2010” are to the 13 weeks ended April 30, 2011 and May 1, 2010, respectively. References to the “third quarter of 2011” and the “third quarter of 2010” are to the 13 weeks ended October 29, 2011 and October 30, 2010, respectively. References to “fiscal 2011” are to the 52 weeks ending January 28, 2012; references to “fiscal 2010” are to the 52 weeks ended January 29, 2011.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires that management make estimates and assumptions about future events. These estimates and assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and the reported amounts of revenues and expenses. Such estimates include those related to merchandise returns, inventories, long-lived assets, intangible assets, insurance reserves, contingencies, litigation and assumptions used in the calculation of income taxes and retirement and other post-employment benefits, among others. These estimates and assumptions are based on management’s best estimates and judgments. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. Management adjusts such estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in estimates resulting from further changes in the economic environment will be reflected in the financial statements in future periods.
Recently Adopted Accounting Standards
In January 2010, the Financial Accounting Standards Board issued Accounting Standards Update No. 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements (“ASU 2010-06”), which requires disclosures regarding recurring or nonrecurring fair value measurements. The Company adopted certain required provisions of ASU 2010-06 in the first quarter of 2010. In the first quarter of 2011, the Company adopted the remaining provision of ASU 2010-06 requiring companies to provide information on purchases, sales, issuances and settlements on a gross basis in the reconciliation of Level 3 fair value measurements. As the Company has no financial assets or liabilities carried at fair value and measured on a recurring basis categorized as a Level 3 fair value measurement, there are no additional disclosure requirements applicable to the Company (see Note 3).

 

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THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share data)
2. PER-SHARE AMOUNTS
The following table presents a reconciliation of net loss and weighted average shares outstanding used in basic and diluted earnings (loss) per share (“EPS”) calculations for each period presented:
                                 
    THIRTEEN     THIRTY-NINE  
    WEEKS ENDED     WEEKS ENDED  
    October 29,     October 30,     October 29,     October 30,  
    2011     2010     2011     2010  
Basic Loss Per Common Share
                               
Net loss
  $ (22,035 )   $ (6,274 )   $ (90,323 )   $ (63,546 )
Less: Income allocated to participating securities
                       
 
                       
Net loss available to common shareholders
  $ (22,035 )   $ (6,274 )   $ (90,323 )   $ (63,546 )
 
                       
 
                               
Weighted average common shares outstanding
    18,151,401       17,627,630       18,068,224       17,646,088  
 
                       
 
                               
Basic loss per common share
  $ (1.21 )   $ (0.36 )   $ (5.00 )   $ (3.60 )
 
                       
 
                               
Diluted Loss Per Common Share
                               
Net loss
  $ (22,035 )   $ (6,274 )   $ (90,323 )   $ (63,546 )
Less: Income allocated to participating securities
                       
 
                       
Net loss available to common shareholders
  $ (22,035 )   $ (6,274 )   $ (90,323 )   $ (63,546 )
 
                       
 
                               
Weighted average common shares outstanding
    18,151,401       17,627,630       18,068,224       17,646,088  
Common shares issuable — stock options
                       
 
                       
Weighted average common shares outstanding assuming dilution
    18,151,401       17,627,630       18,068,224       17,646,088  
 
                       
 
                               
Diluted loss per common share
  $ (1.21 )   $ (0.36 )   $ (5.00 )   $ (3.60 )
 
                       
Due to the Company’s net loss position, weighted average unvested restricted shares (participating securities) of 1,409,442 and 1,373,480 for the third quarter in each of 2011 and 2010, respectively, and 1,392,840 and 1,241,438 for the 39 weeks ended October 29, 2011 and October 30, 2010, respectively, were not considered in the calculation of net loss available to common shareholders used for both basic and diluted EPS.
In addition, weighted average stock option shares (non-participating securities) of 973,659 and 1,056,322 for the third quarter in each of 2011 and 2010, respectively, and 993,475 and 1,059,750 for the 39 weeks ended October 29, 2011 and October 30, 2010, respectively, were excluded from the calculation of diluted EPS as they would have been antidilutive. Certain of these stock option shares were excluded solely due to the Company’s net loss position. Had the Company reported net income for the third quarter in each of 2011 and 2010, these shares would have had an effect of 64,413 and 204,653 dilutive shares, respectively, for purposes of calculating diluted EPS. Had the Company reported net income for the 39 weeks ended October 29, 2011 and October 30, 2010, these shares would have had an effect of 197,051 and 243,487 dilutive shares, respectively, for purposes of calculating diluted EPS.

 

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THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share data)
3. FAIR VALUE MEASUREMENTS
Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures (“ASC 820”) defines fair value and establishes a framework for measuring fair value. ASC 820 establishes fair value hierarchy levels that prioritize the inputs used in valuations determining fair value. Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 inputs are primarily quoted prices for similar assets or liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs based on the Company’s own assumptions.
Prior to their maturity on July 14, 2011, the Company held two interest rate swap contracts required to be measured at fair value on a recurring basis (see Note 4). The fair values of these interest rate swap contracts were derived from discounted cash flow analysis utilizing an interest rate yield curve that was readily available to the public or could be derived from information available in publicly quoted markets. Therefore, the Company had categorized these interest rate swap contracts as a Level 2 fair value measurement. There was no change in the valuation technique used to determine the fair value of the interest rate swap contracts.
The interest rate swap contracts liability comprised the entirety of the Company’s financial assets and liabilities carried at fair value and measured on a recurring basis. The carrying value of the interest rate swap contracts liability prior to their maturity on July 14, 2011 is as follows:
                                 
                    Significant        
            Quoted Prices     Other     Significant  
            in Active     Observable     Unobservable  
            Markets     Inputs     Inputs  
    Carrying Value     (Level 1)     (Level 2)     (Level 3)  
January 29, 2011
  $ 2,288     $     $ 2,288     $  
The carrying values of the Company’s cash and cash equivalents, accounts payable and financial instruments reported within prepaid expenses and other current assets and other long-term assets approximate fair value. The carrying value of the Company’s long-term debt, including current maturities but excluding capital leases, was $992,257 and $863,665 at October 29, 2011 and January 29, 2011, respectively, and the estimated fair value was $940,803 and $869,539 at October 29, 2011 and January 29, 2011, respectively. The fair value estimate of the Company’s long-term debt is based on quoted market rates available to the Company or discounted cash flow analysis as appropriate.
4. INTEREST RATE DERIVATIVES
It is the policy of the Company to identify on a continuing basis the need for debt capital and evaluate financial risks inherent in funding the Company with debt capital. In conjunction with this ongoing review, the debt portfolio and hedging program of the Company is managed to: (1) reduce funding risk with respect to borrowings made or to be made by the Company to preserve the Company’s access to debt capital and provide debt capital as required for funding and liquidity purposes, and (2) control the aggregate interest rate risk of the debt portfolio. The Company has previously entered and may in the future enter into interest rate swap agreements to change the fixed/variable interest rate mix of the debt portfolio in order to maintain an appropriate balance of fixed-rate and variable-rate debt and to mitigate the impact of volatile interest rates. These derivatives are accounted for in accordance with ASC 815, Derivatives and Hedging (“ASC 815”).

 

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THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share data)
On the date the derivative instrument is entered into, the Company designates the derivative as a hedge of the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow hedge”). Changes in the fair value of a derivative that is designated as, and meets all required criteria for, a cash flow hedge are recorded in other comprehensive income or loss and reclassified into the statement of operations as the underlying hedged item affects earnings, such as when quarterly settlements are made on the hedged forecasted transaction. The portion of the change in fair value of a derivative associated with hedge ineffectiveness or the component of a derivative instrument excluded from the assessment of hedge effectiveness, if any, is recorded in the current statement of operations. Also, changes in the fair value of a derivative that is not designated as a hedge, if any, are entirely recorded in the statement of operations. The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedge transactions; this process includes relating all derivatives that are designated as cash flow hedges to specific balance sheet assets or liabilities. The Company also formally assesses, both at the inception of the hedge and on an ongoing basis, whether each derivative is highly effective in offsetting changes in cash flows of the hedged item. If it is determined that a derivative is not highly effective as a hedge, or if a derivative ceases to be a highly effective hedge, the Company will discontinue hedge accounting prospectively for the respective derivative. In addition, if the forecasted transaction is no longer probable of occurring, any amounts in accumulated other comprehensive income or loss (“AOCI”) related to the derivative are recorded in the statement of operations for the current period.
The Company had two interest rate swap contracts to effectively convert a portion of its variable-rate debt to fixed-rate debt, both of which were entered into on July 14, 2006 and expired on July 14, 2011. These contracts entailed the exchange of fixed-rate and floating-rate interest payments periodically over the life of the agreement. The floating-rate interest payments were based on three-month LIBOR rates. The following indicates the notional amounts and the range of fixed-rates associated with these expired interest rate swap contracts:
         
Fixed swaps (notional amount)
  $ 100,000  
Range of pay rate
    5.48%-5.49 %
The following table summarizes the fair value (see Note 3) and presentation of the interest rate swap contracts in the consolidated balance sheet prior to their expiration on July 14, 2011:
                         
    Balance Sheet Location     Derivative Assets     Derivative Liabilities  
January 29, 2011
  Accrued expenses     $     $ 2,288  
On December 4, 2009, the Company amended and restated its prior senior secured credit facility, at which time the Company de-designated and re-measured its two interest rate swaps and discontinued hedge accounting prospectively in accordance with ASC 815. Specifically, ASC 815 requires the immediate recognition of the expected cumulative ineffectiveness, with the remaining amount to remain in AOCI and be reclassified into the statement of operations as the originally hedged forecasted transactions affect the statement of operations. All changes in fair value after December 4, 2009 were recognized in interest expense.

 

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THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share data)
The following table summarizes the effect of the interest rate swaps on the consolidated statement of operations and AOCI, after being de-designated on December 4, 2009:
                                 
                            Amount of  
    Location of Loss     Amount of Loss             Loss  
    Reclassified from     Reclassified     Location of Loss     Recognized  
    AOCI to the     from AOCI to     Recognized in     in the  
    Statement of     the Statement of     the Statement of     Statement of  
    Operations     Operations     Operations     Operations  
13 Weeks Ended October 29, 2011
  Interest expense, net     $     Interest expense, net     $  
 
                       
13 Weeks Ended October 30, 2010
  Interest expense, net     $ 982     Interest expense, net     $ 245  
 
                       
39 Weeks Ended October 29, 2011
  Interest expense, net     $ 1,206     Interest expense, net     $ 93  
 
                       
39 Weeks Ended October 30, 2010
  Interest expense, net     $ 2,948     Interest expense, net     $ 1,088  
 
                       
Due to the interest rate swap contracts expiring on July 14, 2011, there is no remaining balance in AOCI related to the swaps.
5. SUPPLEMENTAL BALANCE SHEET INFORMATION
Prepaid expenses and other current assets were comprised of the following:
                 
    October 29,     January 29,  
    2011     2011  
Prepaid expenses
  $ 39,636     $ 28,367  
Other receivables
    26,847       50,051  
 
           
Total
  $ 66,483     $ 78,418  
 
           
6. SUPPLEMENTAL CASH FLOW INFORMATION
The following supplemental cash flow information is provided for the periods reported:
                 
    THIRTY-NINE  
    WEEKS ENDED  
    October 29,     October 30,  
    2011     2010  
Cash paid for:
               
Interest, net of amounts capitalized
  $ 78,743     $ 91,140  
Income taxes, net of refunds received
    690       (6,598 )
 
               
Non-cash investing and financing activities:
               
Property, fixtures and equipment included in accrued expenses
  $ 3,083     $ 2,358  
Assets acquired under capital leases
          1,724  
Declared dividends to shareholders included in accrued expenses
    962        

 

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THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share data)
7. EXIT OR DISPOSAL ACTIVITIES
The following table summarizes exit or disposal activities during the 39 weeks ended October 29, 2011 related to involuntary associate termination costs and other closing costs associated with the Company’s store closings in fiscal 2010; the lease termination costs associated with the relocation of a store in fiscal 2011; involuntary associate termination costs associated with the announced closings of a Bon-Ton store in York, Pennsylvania and an Elder-Beerman store in Dayton, Ohio in January 2012 and February 2012, respectively; and involuntary associate termination costs associated with the announced sale of the Company’s three Bon-Ton stores in Rochester, New York, two of which are scheduled for closing in March 2012 and the third slated for completion by March 2014:
                         
    Termination     Other        
    Benefits     Costs     Total  
Balance as of January 29, 2011
  $ 109     $ 88     $ 197  
Provision:
                       
Thirteen weeks ended April 30, 2011
    (10 )     922       912  
Thirteen weeks ended July 30, 2011
                 
Thirteen weeks ended October 29, 2011
    403             403  
Payments:
                       
Thirteen weeks ended April 30, 2011
    (99 )     (83 )     (182 )
Thirteen weeks ended July 30, 2011
                 
Thirteen weeks ended October 29, 2011
                 
 
                 
Balance as of October 29, 2011
  $ 403     $ 927     $ 1,330  
 
                 
The above provisions were included within selling, general and administrative expense.
8. EMPLOYEE DEFINED AND POSTRETIREMENT BENEFIT PLANS
The Company provides benefits to certain current and former associates who are eligible under a defined benefit pension plan and various supplemental pension plans (collectively, the “Pension Plans”). Net periodic benefit expense for the Pension Plans includes the following (income) and expense components:
                                 
    THIRTEEN     THIRTY-NINE  
    WEEKS ENDED     WEEKS ENDED  
    October 29,     October 30,     October 29,     October 30,  
    2011     2010     2011     2010  
Interest cost
  $ 2,373     $ 2,543     $ 7,120     $ 7,629  
Expected return on plan assets
    (2,359 )     (1,977 )     (7,076 )     (5,931 )
Recognition of net actuarial loss
    628       970       1,883       2,910  
 
                       
Net periodic benefit expense
  $ 642     $ 1,536     $ 1,927     $ 4,608  
 
                       
During the 39 weeks ended October 29, 2011, contributions of $636 were made to the Pension Plans. The Company anticipates contributing an additional $182 to fund the Pension Plans in fiscal 2011 for an annual total of $818.

 

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THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share data)
The Company also provides medical and life insurance benefits to certain former associates under a postretirement benefit plan (“Postretirement Benefit Plan”). Net periodic benefit (income) expense for the Postretirement Benefit Plan includes the following (income) and expense components:
                                 
    THIRTEEN     THIRTY-NINE  
    WEEKS ENDED     WEEKS ENDED  
    October 29,     October 30,     October 29,     October 30,  
    2011     2010     2011     2010  
Interest cost
  $ 45     $ 81     $ 136     $ 244  
Recognition of net actuarial gain
    (125 )           (375 )      
 
                       
Net periodic benefit (income) expense
  $ (80 )   $ 81     $ (239 )   $ 244  
 
                       
During the 39 weeks ended October 29, 2011, the Company contributed $253 to fund the Postretirement Benefit Plan, and anticipates contributing an additional $353 in fiscal 2011 for a net annual total of $606.
9. LONG-TERM DEBT
On January 31, 2011, the Company voluntarily prepaid its outstanding indebtedness under its Second Lien Loan and Security Agreement that provided for $75,000 of term loans expiring November 18, 2013 (the “Term Loan Facility”). As a result of such prepayment, the Term Loan Facility was terminated. As provided in the Term Loan Facility, the Company paid an early termination fee of $3,750 (5.0% of the principal amount repaid) and $14 in legal fees simultaneously with the prepayment of the outstanding indebtedness. In addition, $4,415 of unamortized deferred financing fees related to the facility was accelerated on the date of termination. Fees paid and deferred financing fees accelerated were recognized in loss on extinguishment of debt.
On March 21, 2011, The Bon-Ton Department Stores, Inc.; The Elder-Beerman Stores Corp.; Carson Pirie Scott II, Inc.; Bon-Ton Distribution, Inc.; and McRIL, LLC, as borrowers (the “Borrowers”), and the Company and certain other subsidiaries as obligors (together with the Borrowers and the Company, the “Obligors”) entered into a $625,000 senior secured asset-based Second Amended and Restated Loan and Security Agreement (the “Second Amended Revolving Credit Facility”) that expires on the earlier of (a) March 21, 2016 and (b) the date that is 60 days prior to the earlier of the maturity date of the senior unsecured notes and the mortgage loan facility. The Second Amended Revolving Credit Facility replaced the Company’s prior $675,000 revolving credit facility, which was scheduled to mature on June 4, 2013. The proceeds of the Second Amended Revolving Credit Facility were used to pay the outstanding balance under the pre-existing revolving credit facility and will be used for other general corporate purposes. Unamortized deferred financing fees of $1,271 related to the prior facility were accelerated on the date of the agreement and recognized in loss on extinguishment of debt.
All borrowings under the Second Amended Revolving Credit Facility are limited by amounts available pursuant to a borrowing base calculation, which is based on percentages of eligible inventory, real estate and credit card receivables, in each case subject to reductions for applicable reserves. Borrowings will be at either (1) adjusted LIBOR (based on the British Bankers Association per annum LIBOR Rate for an interest period selected by the Company) plus an applicable margin or (2) a base rate (based on the highest of (a) the Federal Funds Rate plus 0.5%, (b) the Bank of America prime rate, and (c) Adjusted LIBOR based on an interest period of one month plus 1.0%) plus the applicable margin. The applicable margin is determined based upon the excess availability under the Second Amended Revolving Credit Facility. The Borrowers are required to pay an unused line fee to the lenders for unused commitments at a rate of 0.375% to 0.50% per annum, based upon the unused portion of the total commitment under the Second Amended Revolving Credit Facility.

 

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THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share data)
The Second Amended Revolving Credit Facility is secured by a first priority security position on substantially all of the current and future assets of the Company, including, but not limited to, inventory, general intangibles, trademarks, equipment, certain real estate and proceeds from any of the foregoing, subject to certain exceptions and liens.
The financial covenant contained in the Second Amended Revolving Credit Facility requires that the minimum excess availability be an amount greater than or equal to the greater of (1) 10% of the lesser of: (a) the aggregate commitments at such time and (b) the aggregate borrowing base at such time and (2) $50,000. Other covenants continue the requirements of the prior revolving credit facility and require that the Company provide the lenders with certain financial statements, forecasts and other reports, borrowing base certificates and notices, and comply with various federal, state and local rules and regulations. In addition, there are certain limitations on the Obligors and their subsidiaries, including limitations on: any debt the Obligors may have in addition to the existing debt and the terms of that additional debt; acquisitions, joint ventures and investments; mergers and consolidations; dispositions of property; dividends by the Obligors or their subsidiaries (dividends paid may not exceed $10,000 in any year or $30,000 during the term of the agreement; however, additional dividends may be paid subject to meeting other requirements); transactions with affiliates; changes in the business or corporate structure of the Obligors or their subsidiaries; prepaying, redeeming or repurchasing certain debt; changes in accounting policies or reporting practices, unless required by generally accepted accounting principles; and speculative transactions.
As of October 29, 2011, the Company had borrowings of $241,595 under the Second Amended Revolving Credit Facility, with $379,514 of borrowing availability (before taking into account the minimum borrowing availability covenant).
10. INCOME TAXES
The provisions codified within ASC Topic 740, Income Taxes (“ASC 740”), require companies to assess whether valuation allowances should be established against their deferred tax assets based on consideration of all available evidence using a “more likely than not” standard. In accordance with ASC 740, the Company maintained a full valuation allowance throughout fiscal 2010 and the 39 weeks ended October 29, 2011 on all the Company’s net deferred tax assets. The Company’s deferred tax asset valuation allowance totaled $164,134 and $126,333 at October 29, 2011 and January 29, 2011, respectively.
Given the Company’s valuation allowance position, no tax benefit was recognized on the Company’s loss before income taxes in the 13 and 39 weeks ended October 29, 2011 and October 30, 2010. The income tax benefit of $971 recorded in the 39 weeks ended October 29, 2011 reflects a $3,224 benefit resulting from reclassifying from accumulated other comprehensive loss the residual tax effect associated with certain interest rate swap contracts which expired on July 14, 2011, partially offset by certain state income tax expense and recognition of deferred tax liabilities associated with indefinite-lived assets. The income tax provision of $474 recorded in the 39 weeks ended October 30, 2010 includes certain state income tax expense and recognition of deferred tax liabilities associated with indefinite-lived assets, partially offset by a $1,507 tax benefit resulting from recognition of uncertain tax positions due to a statute of limitations expiration.
As of October 29, 2011, it is reasonably possible that gross unrecognized tax benefits could decrease by $17 within the next 12 months due to the expiration of certain statutes of limitations.

 

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THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share data)
11. CONTINGENCIES
In October 2010, the Company became aware that a third-party it had contracted with as its agent to receive, monitor and pay utility bills for the Company’s properties was delinquent in its payment of the Company’s utility bills, despite timely receipt of funds from the Company. On November 3, 2010, the Company filed suit against this third-party agent, Utility Account Billing Services, Inc., and its affiliate Synergy Energy Holdings, LLC, in Supreme Court, State of New York, County of Erie. In June 2011, summary judgment was granted in favor of the Company for the full amount of the claim of $3,117, and the Company has initiated efforts to collect on that judgment. Additionally, the Company filed a claim with one of its insurance carriers, and in July 2011 entered into a settlement agreement with the insurance carrier, payment for which has been received. Per the settlement agreement, the insurance carrier will be reimbursed by the Company for collections from the judgment that exceed the difference between the full amount of the claim under the lawsuit and the insurance payment received.
The Company is party to legal proceedings and claims that arise during the ordinary course of business. In the opinion of management, the ultimate outcome of any such litigation and claims will not have a material adverse effect on the Company’s financial position, results of operations or liquidity.
12. COMPREHENSIVE LOSS
Comprehensive loss was determined as follows:
                                 
    THIRTEEN     THIRTY-NINE  
    WEEKS ENDED     WEEKS ENDED  
    October 29,     October 30,     October 29,     October 30,  
    2011     2010     2011     2010  
Net loss
  $ (22,035 )   $ (6,274 )   $ (90,323 )   $ (63,546 )
 
                               
Other comprehensive income (loss):
                               
Amortization of pension and postretirement benefit plans
    502       970       1,507       2,910  
Amortization of cash flow derivatives, net of tax benefit in the current year
          982       (2,018 )     2,948  
 
                       
Comprehensive loss
  $ (21,533 )   $ (4,322 )   $ (90,834 )   $ (57,688 )
 
                       
As a result of the deferred tax asset valuation allowance maintained throughout fiscal 2010 and the 39 weeks ended October 29, 2011, the changes recognized within other comprehensive income were recorded on a gross basis for all periods presented with regard to the pension and postretirement benefit plans and the 13 and 39 weeks ended October 30, 2010 with regard to the cash flow derivatives. The changes recognized within other comprehensive loss for the 39 weeks ended October 29, 2011 with regard to the cash flow derivatives are net of a $3,224 tax benefit resulting from the reclassification of the residual tax effect associated with certain interest rate swap contracts which expired on July 14, 2011 (see Note 10).

 

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THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share data)
13. GUARANTOR AND NON-GUARANTOR SUBSIDIARIES
On March 6, 2006, The Bon-Ton Department Stores, Inc. (the “Issuer”), a wholly owned subsidiary of the Company, entered into an Indenture with The Bank of New York, as trustee, under which the Issuer issued $510,000 aggregate principal amount of its 10-1/4% Senior Notes due 2014 (the “Senior Notes”). The Senior Notes are guaranteed on a senior unsecured basis by the Company and by each of the Company’s subsidiaries, other than the Issuer, that is an Obligor under the Company’s senior secured credit facility. Separate financial statements of the Company, the Issuer and such subsidiary guarantors are not presented because the guarantees by the Company and each wholly owned subsidiary guarantor are joint and several, full and unconditional, except for certain customary limitations. These customary limitations include releases of a guarantee (i) if the guarantor no longer guarantees other indebtedness of the Issuer; (ii) if there is a sale or other disposition of the capital stock of a guarantor and if such sale complies with the covenant regarding asset sales in the Indenture; and (iii) if the Company properly designates a subsidiary guarantor as an “unrestricted subsidiary” under the terms of the Indenture.
The condensed consolidating financial information for the Company, the Issuer and the Company’s guarantor and non-guarantor subsidiaries as of October 29, 2011 and January 29, 2011 and for the third quarter in each of 2011 and 2010 and the 39 weeks ended October 29, 2011 and October 30, 2010 as presented below has been prepared from the books and records maintained by the Company, the Issuer and the guarantor and non-guarantor subsidiaries. The condensed financial information may not necessarily be indicative of the results of operations or financial position had the guarantor and non-guarantor subsidiaries operated as independent entities. Certain intercompany revenues and expenses included in the subsidiary records are eliminated in consolidation. As a result of this activity, an amount due to/due from affiliates will exist at any time.

 

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THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share data)
The Bon-Ton Stores, Inc.
Condensed Consolidating Balance Sheet
October 29, 2011
                                                 
    Bon-Ton                                  
    (Parent             Guarantor     Non-Guarantor     Consolidating     Company  
    Company)     Issuer     Subsidiaries     Subsidiaries     Eliminations     Consolidated  
Assets
                                               
Current assets:
                                               
Cash and cash equivalents
  $ 1     $ 3,396     $ 9,411     $     $     $ 12,808  
Merchandise inventories
          491,282       465,553                   956,835  
Prepaid expenses and other current assets
          53,985       12,452       508       (462 )     66,483  
 
                                   
Total current assets
    1       548,663       487,416       508       (462 )     1,036,126  
 
                                   
Property, fixtures and equipment at cost, net
          180,418       228,711       269,892             679,021  
Deferred income taxes
          4,669       6,417                   11,086  
Intangible assets, net
          51,842       71,945                   123,787  
Investment in and advances to affiliates
    90,454       590,571       67,983       1,141       (750,149 )      
Other long-term assets
          24,429       1,183       3,400             29,012  
 
                                   
Total assets
  $ 90,455     $ 1,400,592     $ 863,655     $ 274,941     $ (750,611 )   $ 1,879,032  
 
                                   
 
                                               
Liabilities and Shareholders’ Equity
                                               
Current liabilities:
                                               
Accounts payable
  $     $ 389,182     $     $     $     $ 389,182  
Accrued payroll and benefits
          21,920       11,352                   33,272  
Accrued expenses
          68,364       80,800       2,056       (462 )     150,758  
Current maturities of long-term debt and obligations under capital leases
          2,175       2,746       7,311             12,232  
Deferred income taxes
          7,270       8,195                   15,465  
Income taxes payable
          28       14                   42  
 
                                   
Total current liabilities
          488,939       103,107       9,367       (462 )     600,951  
 
                                   
 
                                               
Long-term debt and obligations under capital leases, less current maturities
          758,928       50,274       233,351             1,042,553  
Other long-term liabilities
          90,463       53,158       1,452             145,073  
 
                                   
Total liabilities
          1,338,330       206,539       244,170       (462 )     1,788,577  
 
                                   
 
                                               
Shareholders’ equity
    90,455       62,262       657,116       30,771       (750,149 )     90,455  
 
                                   
 
Total liabilities and shareholders’ equity
  $ 90,455     $ 1,400,592     $ 863,655     $ 274,941     $ (750,611 )   $ 1,879,032  
 
                                   

 

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THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share data)
The Bon-Ton Stores, Inc.
Condensed Consolidating Balance Sheet
January 29, 2011
                                                 
    Bon-Ton                                  
    (Parent             Guarantor     Non-Guarantor     Consolidating     Company  
    Company)     Issuer     Subsidiaries     Subsidiaries     Eliminations     Consolidated  
Assets
                                               
Current assets:
                                               
Cash and cash equivalents
  $ 1     $ 5,841     $ 10,497     $     $     $ 16,339  
Merchandise inventories
          340,649       341,675                   682,324  
Prepaid expenses and other current assets
          65,500       12,752       628       (462 )     78,418  
 
                                   
Total current assets
    1       411,990       364,924       628       (462 )     777,081  
 
                                   
Property, fixtures and equipment at cost, net
          194,874       230,138       278,420             703,432  
Deferred income taxes
          3,705       5,882                   9,587  
Intangible assets, net
          54,954       75,126                   130,080  
Investment in and advances to affiliates
    183,351       480,419       208,096       316       (872,182 )      
Other long-term assets
          30,337       1,594       4,128             36,059  
 
                                   
Total assets
  $ 183,352     $ 1,176,279     $ 885,760     $ 283,492     $ (872,644 )   $ 1,656,239  
 
                                   
 
                                               
Liabilities and Shareholders’ Equity
                                               
Current liabilities:
                                               
Accounts payable
  $     $ 175,249     $     $     $     $ 175,249  
Accrued payroll and benefits
          37,796       7,973                   45,769  
Accrued expenses
          77,743       88,663       1,260       (462 )     167,204  
Current maturities of long-term debt and obligations under capital leases
          3,229       2,596       6,978             12,803  
Deferred income taxes
          5,748       6,961                   12,709  
Income taxes payable
          46       91                   137  
 
                                   
Total current liabilities
          299,811       106,284       8,238       (462 )     413,871  
 
                                   
 
                                               
Long-term debt and obligations under capital leases, less current maturities
          626,475       52,353       238,902             917,730  
Other long-term liabilities
          94,425       45,487       1,374             141,286  
 
                                   
Total liabilities
          1,020,711       204,124       248,514       (462 )     1,472,887  
 
                                   
 
                                               
Shareholders’ equity
    183,352       155,568       681,636       34,978       (872,182 )     183,352  
 
                                   
 
Total liabilities and shareholders’ equity
  $ 183,352     $ 1,176,279     $ 885,760     $ 283,492     $ (872,644 )   $ 1,656,239  
 
                                   

 

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THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share data)
The Bon-Ton Stores, Inc.
Condensed Consolidating Statement of Operations
Thirteen Weeks Ended October 29, 2011
                                                 
    Bon-Ton                                  
    (Parent             Guarantor     Non-Guarantor     Consolidating     Company  
    Company)     Issuer     Subsidiaries     Subsidiaries     Eliminations     Consolidated  
Net sales
  $     $ 286,513     $ 369,557     $     $     $ 656,070  
Other income
          6,048       8,450                   14,498  
 
                                   
 
          292,561       378,007                   670,568  
 
                                               
Costs and expenses:
                                               
Costs of merchandise sold
          179,528       231,175                   410,703  
Selling, general and administrative
          107,164       136,283       26       (8,617 )     234,856  
Depreciation and amortization
          8,870       11,608       2,793             23,271  
Amortization of lease-related interests
          617       578                   1,195  
 
                                   
(Loss) income from operations
          (3,618 )     (1,637 )     (2,819 )     8,617       543  
 
                                               
Other income (expense):
                                               
Intercompany rental and royalty income
                1,574       7,043       (8,617 )      
Equity in losses of subsidiaries
    (21,395 )     (2,537 )                 23,932        
Interest expense, net
          (15,240 )     (2,751 )     (3,947 )           (21,938 )
 
                                   
 
                                               
(Loss) income before income taxes
    (21,395 )     (21,395 )     (2,814 )     277       23,932       (21,395 )
Income tax provision
    640       640       320             (960 )     640  
 
                                   
 
Net (loss) income
  $ (22,035 )   $ (22,035 )   $ (3,134 )   $ 277     $ 24,892     $ (22,035 )
 
                                   

 

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THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share data)
The Bon-Ton Stores, Inc.
Condensed Consolidating Statement of Operations
Thirteen Weeks Ended October 30, 2010
                                                 
    Bon-Ton                                  
    (Parent             Guarantor     Non-Guarantor     Consolidating     Company  
    Company)     Issuer     Subsidiaries     Subsidiaries     Eliminations     Consolidated  
Net sales
  $     $ 303,955     $ 396,559     $     $     $ 700,514  
Other income
          6,803       9,620                   16,423  
 
                                   
 
          310,758       406,179                   716,937  
 
                                               
Costs and expenses:
                                               
Costs of merchandise sold
          187,748       245,104                   432,852  
Selling, general and administrative
          107,908       136,273       24       (8,783 )     235,422  
Depreciation and amortization
          9,662       12,342       2,794             24,798  
Amortization of lease-related interests
          647       484                   1,131  
 
                                   
Income (loss) from operations
          4,793       11,976       (2,818 )     8,783       22,734  
 
                                               
Other income (expense):
                                               
Intercompany rental and royalty income
                1,740       7,043       (8,783 )      
Equity in (losses) earnings of subsidiaries
    (5,613 )     10,127                   (4,514 )      
Interest expense, net
          (20,533 )     (3,750 )     (4,064 )           (28,347 )
 
                                   
 
                                               
(Loss) income before income taxes
    (5,613 )     (5,613 )     9,966       161       (4,514 )     (5,613 )
Income tax provision
    661       661       330             (991 )     661  
 
                                   
 
                                               
Net (loss) income
  $ (6,274 )   $ (6,274 )   $ 9,636     $ 161     $ (3,523 )   $ (6,274 )
 
                                   

 

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THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share data)
The Bon-Ton Stores, Inc.
Condensed Consolidating Statement of Operations
Thirty-Nine Weeks Ended October 29, 2011
                                                 
    Bon-Ton                                  
    (Parent             Guarantor     Non-Guarantor     Consolidating     Company  
    Company)     Issuer     Subsidiaries     Subsidiaries     Eliminations     Consolidated  
Net sales
  $     $ 827,197     $ 1,074,234     $     $     $ 1,901,431  
Other income
          17,703       25,185                   42,888  
 
                                   
 
          844,900       1,099,419                   1,944,319  
 
                                               
Costs and expenses:
                                               
Costs of merchandise sold
          523,997       679,891                   1,203,888  
Selling, general and administrative
          308,328       394,270       78       (25,995 )     676,681  
Depreciation and amortization
          28,275       37,202       8,528             74,005  
Amortization of lease-related interests
          1,851       1,733                   3,584  
 
                                   
Loss from operations
          (17,551 )     (13,677 )     (8,606 )     25,995       (13,839 )
 
                                               
Other income (expense):
                                               
Intercompany rental and royalty income
                4,649       21,346       (25,995 )      
Equity in losses of subsidiaries
    (91,294 )     (16,912 )                 108,206        
Interest expense, net
          (47,381 )     (8,693 )     (11,931 )           (68,005 )
Loss on extinguishment of debt
          (9,450 )                       (9,450 )
 
                                   
 
(Loss) income before income taxes
    (91,294 )     (91,294 )     (17,721 )     809       108,206       (91,294 )
Income tax (benefit) provision
    (971 )     (971 )     1,024             (53 )     (971 )
 
                                   
 
                                               
Net (loss) income
  $ (90,323 )   $ (90,323 )   $ (18,745 )   $ 809     $ 108,259     $ (90,323 )
 
                                   

 

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THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share data)
The Bon-Ton Stores, Inc.
Condensed Consolidating Statement of Operations
Thirty-Nine Weeks Ended October 30, 2010
                                                 
    Bon-Ton                                  
    (Parent             Guarantor     Non-Guarantor     Consolidating     Company  
    Company)     Issuer     Subsidiaries     Subsidiaries     Eliminations     Consolidated  
Net sales
  $     $ 855,121     $ 1,115,362     $     $     $ 1,970,483  
Other income
          18,126       26,159                   44,285  
 
                                   
 
          873,247       1,141,521                   2,014,768  
 
                                               
Costs and expenses:
                                               
Costs of merchandise sold
          530,153       694,190                   1,224,343  
Selling, general and administrative
          314,970       398,774       73       (26,319 )     687,498  
Depreciation and amortization
          30,509       38,391       8,638             77,538  
Amortization of lease-related interests
          1,970       1,454                   3,424  
 
                                   
(Loss) income from operations
          (4,355 )     8,712       (8,711 )     26,319       21,965  
 
                                               
Other income (expense):
                                               
Intercompany rental and royalty income
                4,973       21,346       (26,319 )      
Equity in (losses) earnings of subsidiaries
    (63,072 )     3,037                   60,035        
Interest expense, net
          (61,754 )     (11,001 )     (12,282 )           (85,037 )
 
                                   
 
(Loss) income before income taxes
    (63,072 )     (63,072 )     2,684       353       60,035       (63,072 )
Income tax provision
    474       474       984             (1,458 )     474  
 
                                   
 
Net (loss) income
  $ (63,546 )   $ (63,546 )   $ 1,700     $ 353     $ 61,493     $ (63,546 )
 
                                   

 

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THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share data)
The Bon-Ton Stores, Inc.
Condensed Consolidating Statement of Cash Flows
Thirty-Nine Weeks Ended October 29, 2011
                                                 
    Bon-Ton                                  
    (Parent             Guarantor     Non-Guarantor     Consolidating     Company  
    Company)     Issuer     Subsidiaries     Subsidiaries     Eliminations     Consolidated  
Net cash provided by (used in) operating activities
  $ 5,494     $ (106,126 )   $ 30,063     $ 10,235     $ (13,103 )   $ (73,437 )
 
                                   
 
                                               
Cash flows from investing activities:
                                               
Capital expenditures
          (25,368 )     (25,701 )                 (51,069 )
Intercompany investing activity
    (398 )     (4 )                 402        
Proceeds from sale of property, fixtures and equipment
          131       2,255                   2,386  
 
                                   
Net cash used in investing activities
    (398 )     (25,241 )     (23,446 )           402       (48,683 )
 
                                   
 
                                               
Cash flows from financing activities:
                                               
Payments on long-term debt and capital lease obligations
          (462,805 )     (1,929 )     (5,218 )           (469,952 )
Proceeds from issuance of long-term debt
          590,440                         590,440  
Intercompany financing activity
          (1,910 )     (5,774 )     (5,017 )     12,701        
Cash dividends paid
    (1,910 )                             (1,910 )
Restricted shares forfeited in lieu of payroll taxes
    (3,584 )                             (3,584 )
Proceeds from stock options exercised
    398                               398  
Deferred financing costs paid
          (5,931 )                       (5,931 )
Increase in book overdraft balances
          9,128                         9,128  
 
                                   
Net cash (used in) provided by financing activities
    (5,096 )     128,922       (7,703 )     (10,235 )     12,701       118,589  
 
                                   
 
                                               
Net decrease in cash and cash equivalents
          (2,445 )     (1,086 )                 (3,531 )
 
                                   
 
                                               
Cash and cash equivalents at beginning of period
    1       5,841       10,497                   16,339  
 
                                   
 
                                               
Cash and cash equivalents at end of period
  $ 1     $ 3,396     $ 9,411     $     $     $ 12,808  
 
                                   

 

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THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share data)
The Bon-Ton Stores, Inc.
Condensed Consolidating Statement of Cash Flows
Thirty-Nine Weeks Ended October 30, 2010
                                                 
    Bon-Ton                                  
    (Parent             Guarantor     Non-Guarantor     Consolidating     Company  
    Company)     Issuer     Subsidiaries     Subsidiaries     Eliminations     Consolidated  
Net cash provided by (used in) operating activities
  $ 4,082     $ (71,404 )   $ 25,495     $ 11,617     $ (12,780 )   $ (42,990 )
 
                                   
 
                                               
Cash flows from investing activities:
                                               
Capital expenditures
          (17,376 )     (18,672 )                 (36,048 )
Intercompany Investing activity
          (29 )                 29        
Proceeds from sale of property, fixtures and equipment
          46       31                   77  
 
                                   
Net cash used in investing activities
          (17,359 )     (18,641 )           29       (35,971 )
 
                                   
 
                                               
Cash flows from financing activities:
                                               
Payments on long-term debt and capital lease obligations
          (426,874 )     (1,790 )     (4,870 )           (433,534 )
Proceeds from issuance of long-term debt
          512,285                         512,285  
Intercompany financing activity
                (6,004 )     (6,747 )     12,751        
Restricted shares forfeited in lieu of payroll taxes
    (4,082 )                             (4,082 )
Deferred financing costs paid
          (717 )                       (717 )
Increase in book overdraft balances
          4,453                         4,453  
 
                                   
Net cash (used in) provided by financing activities
    (4,082 )     89,147       (7,794 )     (11,617 )     12,751       78,405  
 
                                   
 
Net increase (decrease) in cash and cash equivalents
          384       (940 )                 (556 )
 
                                               
Cash and cash equivalents at beginning of period
    1       9,962       8,959                   18,922  
 
                                   
 
                                               
Cash and cash equivalents at end of period
  $ 1     $ 10,346     $ 8,019     $     $     $ 18,366  
 
                                   
14. SUBSEQUENT EVENTS
On November 28, 2011 and November 29, 2011, the Company repurchased, in open market transactions, a total of $30,000 principal amount of the $510,000 aggregate principal outstanding of its 101/4% Senior Notes. The repurchase totaled $18,675, plus accrued interest of $628. In addition, unamortized deferred financing fees totaling $334 related to the Senior Notes were accelerated on the dates of the respective repurchases.
On December 6, 2011, the Company declared a quarterly cash dividend of $0.05 per share on shares of Class A common stock and common stock, payable February 1, 2012 to shareholders of record as of January 13, 2012.

 

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THE BON-TON STORES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
ITEM 2.  
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For purposes of the following discussion, references to the “first quarter of 2011” are to the 13 weeks ended April 30, 2011. References to the “third quarter of 2011” and the “third quarter of 2010” are to the 13 weeks ended October 29, 2011 and October 30, 2010, respectively. References to “2011” and “2010” are to the 39 weeks ended October 29, 2011 and October 30, 2010, respectively. References to “fiscal 2011” are to the 52-week period ending January 28, 2012; references to “fiscal 2010” are to the 52-week period ended January 29, 2011. References to “the Company,” “we,” “us,” and “our” refer to The Bon-Ton Stores, Inc. and its subsidiaries.
Overview
General
The Company, a Pennsylvania corporation, is one of the largest regional department store operators in the United States, offering a broad assortment of brand-name fashion apparel and accessories for women, men and children. Our merchandise offerings also include cosmetics, home furnishings and other goods. We currently operate 276 stores in 23 states in the Northeast, Midwest and upper Great Plains under the Bon-Ton, Bergner’s, Boston Store, Carson Pirie Scott, Elder-Beerman, Herberger’s and Younkers nameplates and, in the Detroit, Michigan area, under the Parisian nameplate, encompassing a total of approximately 26 million square feet.
We operate in the department store segment of the U.S. retail industry, a highly competitive and fragmented environment. The department store industry continues to evolve in response to the evolution of competitive retail formats — mass merchandisers, national chain retailers, specialty retailers and online retailers — and the advent of mobile technology and social media.
Fiscal 2011 Guidance
We have identified near-term opportunities for growth and resource optimization, as well as challenges, including general macroeconomic conditions that may affect our customers and our business. As the consumer environment remains uncertain, we are continuing to plan our business conservatively. On November 3, 2011, we revised our earnings per diluted share guidance to a range of $(0.65) to $0.25 and on November 17, 2011 provided the following assumptions with respect to our revised fiscal 2011 guidance:
   
a comparable store sales performance ranging from 3.3% to 1.6% below fiscal 2010 levels;
   
a gross margin rate 80 basis points lower than the fiscal 2010 rate of 37.6%;
   
a $10.0 million to $12.0 million reduction in SG&A expense from the fiscal 2010 expense of $942.7 million;
   
an immaterial tax impact;
   
capital expenditures not to exceed $70.0 million, net of external contributions; and
   
an estimated 18.0 million to 20.0 million average diluted shares outstanding.
Earnings per share guidance does not reflect the potential (non-cash) income tax benefit of reducing the valuation allowance currently recorded for deferred tax assets. The amount of adjustment, if any, cannot be determined until our fiscal 2011 results are final. Similarly, earnings per share guidance does not reflect the potential impairment of long-lived and intangible assets as, given the seasonality of our operations, impairment is not conclusive, in many cases, until the results for the fourth fiscal quarter are determined. In addition, the gain on the repurchase by the Company of $30.0 million of its 101/4% Senior Notes due March 15, 2014 (the “Senior Notes”) is not included in the earnings per share guidance (see Note 14).

 

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THE BON-TON STORES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Terminated and Amended Credit Facilities
On January 31, 2011, we voluntarily prepaid our outstanding indebtedness under our Second Lien Loan and Security Agreement that provided for $75.0 million of term loans expiring November 18, 2013 (the “Term Loan Facility”). As a result of such prepayment, the Term Loan Facility was terminated.
On March 21, 2011, we entered into a $625.0 million senior secured Second Amended and Restated Loan and Security Agreement that expires on the earlier of (a) March 21, 2016 and (b) the date that is 60 days prior to the earlier of the maturity date of the senior unsecured notes and the mortgage loan facility (the “Second Amended Revolving Credit Facility”). The Second Amended Revolving Credit Facility replaced our prior $675.0 million asset-based revolving credit facility (the “2009 Revolving Credit Facility”), which was scheduled to mature on June 4, 2013. The proceeds of the Second Amended Revolving Credit Facility were used to pay the outstanding balance under the 2009 Revolving Credit Facility and will be used for other general corporate purposes. The Second Amended Revolving Credit Facility implemented interest rate reductions and generally favorable revisions regarding the facility requirements and financial covenant. See Note 9 of the Notes to Consolidated Financial Statements for further discussion of the Second Amended Revolving Credit Facility.
Results of Operations
The following table summarizes changes in selected operating indicators of the Company, illustrating the relationship of various income and expense items to net sales for the respective periods presented (components may not add or subtract to totals due to rounding):
                                 
    THIRTEEN     THIRTY-NINE  
    WEEKS ENDED     WEEKS ENDED  
    October 29,     October 30,     October 29,     October 30,  
    2011     2010     2011     2010  
Net sales
    100.0 %     100.0 %     100.0 %     100.0 %
Other income
    2.2       2.3       2.3       2.2  
 
                       
 
    102.2       102.3       102.3       102.2  
 
                       
Costs and expenses:
                               
Costs of merchandise sold
    62.6       61.8       63.3       62.1  
Selling, general and administrative
    35.8       33.6       35.6       34.9  
Depreciation and amortization
    3.5       3.5       3.9       3.9  
Amortization of lease-related interests
    0.2       0.2       0.2       0.2  
 
                       
Income (loss) from operations
    0.1       3.2       (0.7 )     1.1  
Interest expense, net
    3.3       4.0       3.6       4.3  
Loss on extinguishment of debt
                0.5        
 
                       
Loss before income taxes
    (3.3 )     (0.8 )     (4.8 )     (3.2 )
Income tax provision (benefit)
    0.1       0.1       (0.1 )      
 
                       
Net loss
    (3.4) %     (0.9) %     (4.8) %     (3.2) %
 
                       
Third Quarter of 2011 Compared with Third Quarter of 2010
Net sales: Net sales in the third quarter of 2011 were $656.1 million, compared with $700.5 million in the third quarter of 2010, reflecting a decrease of 6.3%. Comparable store sales decreased 5.9%. Sales in merchandise categories with more traditional goods were particularly challenged, as our customer is expressing an unwillingness to accept price increases in these categories and a preference for updated styling. We have significantly expanded our stronger selling updated categories throughout our families of business to increase representation of these goods. In addition, certain changes in our marketing efforts did not drive sales as we had anticipated. Investments in our eCommerce business resulted in significantly higher eCommerce sales in the period.

 

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THE BON-TON STORES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Merchandise categories with sales increases in the third quarter of 2011 included Cosmetics, Hard Home (included in Home) and Footwear. Sales in Cosmetics were driven by strength in treatment lines, where new technology in skin care and makeup yielded positive results. Hard Home achieved success in sales of small electronics. Our strategic initiative of growing the update business yielded increased sales in Footwear, with favorable customer response to new vendor and style assortments. Additionally, Footwear performance at select stores in which square footage and updated assortments were recently expanded exceeded that of the Company.
The poorest performing categories in the period were Moderate Sportswear and Coats (both included in Women’s Apparel) and Furniture (included in Home). Difficult sales in Moderate Sportswear reflect our ongoing efforts to establish the proper balance of updated and traditional merchandise offerings. Unseasonably warm weather, which adversely impacted all cold-weather merchandise, and price increases in an important merchandise category contributed to the poor performance in Coats. We believe discretionary spending for big-ticket items remains under significant pressure, challenging the sales of Furniture, particularly higher-priced bedding.
Other income: Other income, which includes income from revenues received under a credit card program agreement with HSBC Bank Nevada, N.A., leased departments and other customer revenues, was $14.5 million in the third quarter of 2011 as compared with $16.4 million in the third quarter of 2010. The decrease is primarily due to reduced income associated with the Company’s proprietary credit card, which is largely a function of the reduced sales volume in the period.
Costs and expenses: Gross margin in the third quarter of 2011 decreased $22.3 million to $245.4 million as compared with $267.7 million in the comparable prior year period. The decrease is attributable to both reductions in sales volume and gross margin rate. Gross margin as a percentage of net sales decreased 80 basis points to 37.4% in the third quarter of 2011 from 38.2% in the same period last year, largely the result of an increased net markdown rate.
SG&A expense in the third quarter of 2011 was $234.9 million as compared with $235.4 million in the third quarter of 2010, a decrease of $0.6 million. The expense reduction is primarily due to ongoing cost control efforts and reduced incentive compensation accruals, partially offset by increased marketing expenditures. The current year SG&A expense rate increased 220 basis points to 35.8% of net sales from 33.6% in the comparable prior year period due to the reduced sales volume.
Depreciation and amortization expense and amortization of lease-related interests decreased $1.5 million to $24.5 million in the third quarter of 2011 from $25.9 million in the third quarter of 2010, primarily due to a reduced asset base.
Interest expense, net: Net interest expense was $21.9 million, or 3.3% of net sales, in the third quarter of 2011 as compared with $28.3 million, or 4.0% of net sales, in the third quarter of 2010. The $6.4 million decrease primarily reflects reduced borrowings and lower borrowing rates pursuant to the prepayment of our Term Loan Facility and the amendment of our 2009 Revolving Credit Facility.
Income tax provision: The effective income tax rate in the third quarter in each of 2011 and 2010 largely reflects the Company’s valuation allowance position against all net deferred tax assets. The net income tax provision of $0.6 million and $0.7 million in the third quarter in each of 2011 and 2010, respectively, was primarily due to certain state income tax expense and recognition of deferred tax liabilities associated with indefinite-lived assets.

 

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THE BON-TON STORES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
2011 Compared with 2010
Net sales: Net sales in 2011 were $1,901.4 million, compared with $1,970.5 million in 2010, a decrease of 3.5%. Comparable store sales decreased 3.0% in the 39 weeks. Sales in merchandise categories with more traditional goods were particularly challenged, as our customer is expressing a preference for updated styling. We have significantly expanded our stronger selling updated categories throughout our families of business to increase representation of these goods. Investments in our eCommerce business resulted in significantly higher eCommerce sales in the period.
The best performing merchandise categories in 2011 were Hard Home (included in Home), Cosmetics and Better Sportswear (included in Women’s Apparel). Increases in Hard Home were largely due to sales of luggage and small electronics. The introduction of innovative treatment products and new fragrances fueled the sales performance in Cosmetics. Better Sportswear sales increased due to favorable response to expanded offerings of trend-right fashions from key national and private brands.
The poorest performing categories in 2011 were Moderate Sportswear and Petites (both included in Women’s Apparel) and Juniors’ Apparel. Sales in Moderate Sportswear and Petites were adversely impacted by substantial inventory investment in traditional product from private brand as well as domestic resources, particularly in the spring season. Inventory investment in updated, modern product has been increased to better align with customer preference. The performance in Juniors’ Apparel reflects lower sales in tops.
Other income: Other income was $42.9 million in 2011 as compared with $44.3 million in 2010. The decrease primarily reflects reduced net income associated with our proprietary credit card program.
Costs and expenses: Gross margin in 2011 was $697.5 million as compared with $746.1 million in 2010, reflecting a decrease of $48.6 million. The decrease in gross margin dollars was due to the reduced sales volume and the decreased margin rate in the period. Gross margin as a percentage of net sales decreased 120 basis points to 36.7% in the current year from 37.9% last year, primarily due to increased net markdowns.
SG&A expense in 2011 was $676.7 million as compared with $687.5 million in 2010. The $10.8 million decrease was the result of continued cost control efforts, a favorable insurance receipt and reduced incentive compensation accruals, partially offset by increased marketing, eCommerce and private brand expenditures. The expense rate in 2011 increased 70 basis points to 35.6% of net sales due to the reduced sales volume.
Depreciation and amortization expense and amortization of lease-related interests decreased $3.4 million to $77.6 million in 2011, primarily due to a reduced asset base.
Interest expense, net: Net interest expense was $68.0 million, or 3.6% of net sales, in 2011 as compared with $85.0 million, or 4.3% of net sales, in 2010. The $17.0 million reduction is largely due to reduced borrowing levels and lower borrowing rates pursuant to the prepayment of our Term Loan Facility and the amendment of our 2009 Revolving Credit Facility.
Loss on extinguishment of debt: In the first quarter of 2011, we recorded a $9.5 million loss on extinguishment of debt for fees associated with the voluntary prepayment of our Term Loan Facility and the amendment of our 2009 Revolving Credit Facility.

 

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THE BON-TON STORES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Income tax (benefit) provision: The effective tax rate in each of 2011 and 2010 largely reflects the Company’s valuation allowance position against all net deferred tax assets. The $1.0 million income tax benefit in 2011 includes a $3.2 million benefit resulting from reclassifying from accumulated other comprehensive loss the residual tax effect associated with certain interest rate swap contracts which expired on July 14, 2011, partially offset by certain state income tax expense and recognition of deferred tax liabilities associated with indefinite-lived assets. The $0.5 million income tax provision in 2010 includes certain state income tax expense and recognition of deferred tax liabilities associated with indefinite-lived assets, partially offset by a $1.5 million benefit resulting from recognition of uncertain tax positions due to a statute of limitations expiration.
Non-GAAP Financial Measure EBITDA
We have prepared our consolidated financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”). In addition, the non-GAAP financial performance measure of EBITDA (defined as earnings before interest, income taxes, depreciation and amortization, including amortization of lease-related interests, and loss on extinguishment of debt) is as follows:
                                 
    THIRTEEN     THIRTY-NINE  
    WEEKS ENDED     WEEKS ENDED  
(In thousands)   October 29,     October 30,     October 29,     October 30,  
(Unaudited)   2011     2010     2011     2010  
EBITDA
  $ 25,009     $ 48,663     $ 63,750     $ 102,927  
We consider EBITDA to be an important supplemental measure of our performance. It is frequently used by securities analysts, investors and other interested parties to evaluate the performance of companies in our industry and by some investors to determine a company’s ability to service or incur debt. In addition, our management uses EBITDA internally to compare the profitability of our stores. EBITDA is not calculated in the same manner by all companies and, accordingly, is not necessarily comparable to similarly entitled measures of other companies and may not be an appropriate measure for performance relative to other companies. EBITDA should not be assessed in isolation from or construed as a substitute for net income or cash flows from operations, which are prepared in accordance with GAAP. EBITDA has limitations as an analytical tool and is not intended to represent, and should not be considered to be a more meaningful measure than, or an alternative to, measures of operating performance as determined in accordance with GAAP.
The following table reconciles EBITDA to net loss as presented in our consolidated statements of operations (prepared in accordance with GAAP):
                                 
    THIRTEEN     THIRTY-NINE  
    WEEKS ENDED     WEEKS ENDED  
(In thousands)   October 29,     October 30,     October 29,     October 30,  
(Unaudited)   2011     2010     2011     2010  
Net loss
  $ (22,035 )   $ (6,274 )   $ (90,323 )   $ (63,546 )
Adjustments:
                               
Income tax provision (benefit)
    640       661       (971 )     474  
Loss on extinguishment of debt
                9,450        
Interest expense, net
    21,938       28,347       68,005       85,037  
Depreciation and amortization
    23,271       24,798       74,005       77,538  
Amortization of lease-related interests
    1,195       1,131       3,584       3,424  
 
                       
EBITDA
  $ 25,009     $ 48,663     $ 63,750     $ 102,927  
 
                       

 

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THE BON-TON STORES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Seasonality
Our business, like that of most retailers, is subject to seasonal fluctuations, with the major portion of sales and income realized during the second half of each fiscal year, which includes the holiday season. Due to the fixed nature of certain costs, SG&A expense is typically higher as a percentage of net sales during the first half of each fiscal year. We typically finance working capital increases in the second half of each fiscal year through additional borrowings under our Second Amended Revolving Credit Facility.
Because of the seasonality of our business, results for any quarter are not necessarily indicative of results that may be achieved for a full fiscal year.
Liquidity and Capital Resources
On January 31, 2011, we utilized $75.0 million of excess availability under our 2009 Revolving Credit Facility to pay in full our Term Loan Facility, which was scheduled to mature on November 18, 2013. On March 21, 2011, we entered into a $625.0 million senior secured Second Amended Revolving Credit Facility that expires on the earlier of (a) March 21, 2016 and (b) the date that is 60 days prior to the earlier of the maturity date of the senior unsecured notes and the mortgage loan facility. The Second Amended Revolving Credit Facility replaced our prior $675.0 million 2009 Revolving Credit Facility, which was scheduled to mature on June 4, 2013. The proceeds of the Second Amended Revolving Credit Facility were used to pay the outstanding balance under the 2009 Revolving Credit Facility and will be used for other general corporate purposes. The Second Amended Revolving Credit Facility has interest rate reductions and generally favorable revisions regarding the facility requirements and financial covenant. See Note 9 of the Notes to Consolidated Financial Statements for further discussion of the Second Amended Revolving Credit Facility.
At October 29, 2011, we had $12.8 million in cash and cash equivalents and $379.5 million available under our Second Amended Revolving Credit Facility (before taking into account the minimum borrowing availability covenant under such facility). Excess availability was $461.6 million as of the comparable prior year period. As noted above, in early fiscal 2011 we reduced our revolving credit facility by $50.0 million (which impacts only October and November borrowing capacity) and paid in full our Term Loan Facility of $75.0 million, resulting in a planned reduction to our availability of $125.0 million.
Typically, cash flows from operations are impacted by the effect on sales of (1) consumer confidence, (2) weather in the geographic markets served by the Company, (3) general economic conditions and (4) competitive conditions existing in the retail industry. A downturn in any single factor or a combination of factors could have a material adverse impact upon our ability to generate sufficient cash flows to operate our business. While the current economic uncertainty affects our assessment of short-term liquidity, and while there can be no assurances, we consider our resources (cash flows from operations supplemented by borrowings under the Second Amended Revolving Credit Facility) adequate to satisfy our cash needs for at least the next 12 months.
Our primary sources of working capital are cash flows from operations and borrowings under our Second Amended Revolving Credit Facility, which provides for up to $625.0 million in borrowings (limited by amounts available pursuant to a borrowing base calculation). Our business follows a seasonal pattern; working capital fluctuates with seasonal variations, reaching its highest level in October or November to fund the purchase of merchandise inventories prior to the holiday season. The seasonality of our business historically provides greatest cash flow from operations during the holiday season, with fiscal fourth quarter net sales generating the strongest profits of our fiscal year. As holiday sales significantly reduce inventory levels, this reduction, combined with net income, historically provides us with strong cash flow from operations at the end of our fiscal year.

 

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THE BON-TON STORES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Cash provided by (used in) our operating, investing and financing activities is summarized as follows:
                 
    THIRTY-NINE  
    WEEKS ENDED  
    October 29,     October 30,  
(Dollars in millions)   2011     2010  
Operating activities
  $ (73.4 )   $ (43.0 )
Investing activities
    (48.7 )     (36.0 )
Financing activities
    118.6       78.4  
Net cash used in operating activities was $73.4 million and $43.0 million in 2011 and 2010, respectively. The increase in cash used in the current year primarily reflects a decline in business performance, resulting in an increase in the current year loss; this loss was partially offset by an adjustment for the loss on extinguishment of debt.
Net cash used in investing activities in the current year primarily reflects capital expenditures for store renovations, information technology, private brand fixtures and the expansion of a distribution center to support further growth of our eCommerce operations. Capital expenditures totaled $51.1 million and $36.0 million in 2011 and 2010, respectively; these expenditures do not reflect reductions for external contributions of $11.4 million and $4.6 million in 2011 and 2010, respectively. We anticipate our fiscal 2011 capital expenditures will not exceed $86.0 million (which does not reflect external contributions of $16.0 million, reducing forecasted net capital investments to $70.0 million), an increase over our fiscal 2010 capital expenditures of $46.3 million (which does not reflect external contributions of $6.8 million, reducing fiscal 2010 net capital investments to $39.5 million).
Net cash provided by financing activities was $118.6 million and $78.4 million in 2011 and 2010, respectively. The increase in net cash provided primarily reflects an increase in current year net borrowings due to increased cash used in operating activities, increased capital expenditures and financing fees incurred for the amendment of the Second Amended Revolving Credit Facility.
Aside from planned capital expenditures, the Company’s primary cash requirements will be to service debt and finance working capital increases during peak selling seasons.
As of October 29, 2011, our long-term debt included $510.0 million aggregate principal amount of 101/4% Senior Notes. In November 2011, we repurchased a total of $30.0 million principal amount of the outstanding balance of the Senior Notes (see Note 14). We may from time to time seek to repurchase additional outstanding Senior Notes through cash purchases in open market transactions, privately negotiated transactions or otherwise. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
We paid a quarterly cash dividend of $0.05 per share on shares of Class A common stock and common stock on May 2, 2011, August 1, 2011 and November 1, 2011 to shareholders of record as of April 15, 2011, July 15, 2011 and October 14, 2011, respectively. Additionally, a quarterly cash dividend of $0.05 per share was declared on December 6, 2011, payable February 1, 2012 to shareholders of record as of January 13, 2012. Our Board of Directors will consider dividends in subsequent periods as it deems appropriate.

 

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THE BON-TON STORES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Critical Accounting Policies
Our discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. Preparation of these financial statements required us to make estimates and judgments that affected reported amounts of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of our financial statements. Such estimates include those related to merchandise returns, inventories, long-lived assets, intangible assets, insurance reserves, contingencies, litigation and assumptions used in the calculation of income taxes and retirement and other post-employment benefits, among others. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and could potentially lead to materially different results under different assumptions and conditions. We believe our critical accounting policies are as described below:
Inventory
Inventories are stated at the lower of cost or market with cost determined by the retail inventory method. Under the retail inventory method, the valuation of inventories at cost and the resulting gross margin is derived by applying a calculated cost-to-retail ratio to the retail value of inventories. The retail inventory method is an averaging method that has been widely used in the retail industry. Use of the retail inventory method will result in valuing inventories at the lower of cost or market if markdowns are taken timely as a reduction of the retail value of inventories.
Inherent in the retail inventory method calculation are certain significant management judgments and estimates including, among others, merchandise markups, markdowns and shrinkage, which significantly impact both the ending inventory valuation at cost and the resulting gross margin. These significant estimates, coupled with the fact that the retail inventory method is an averaging process, can, under certain circumstances, result in individual inventory components with cost above related net realizable value. Factors that can lead to this result include applying the retail inventory method to a group of products that is not fairly uniform in terms of its cost, selling price relationship and turnover; or applying the retail inventory method to transactions over a period of time that include different rates of gross profit, such as those relating to seasonal merchandise. In addition, failure to take timely markdowns can result in an overstatement of inventory under the lower of cost or market principle. We believe the retail inventory method we use provides an inventory valuation that approximates cost and results in carrying inventory in the aggregate at the lower of cost or market.
We regularly review inventory quantities on-hand and record an adjustment for excess or old inventory based primarily on an estimated forecast of merchandise demand for the selling season. Demand for merchandise can fluctuate greatly. A significant increase in the demand for merchandise could result in a short-term increase in the cost of inventory purchases while a significant decrease in demand could result in an increase in the amount of excess inventory quantities on-hand. Additionally, estimates of merchandise demand may prove to be inaccurate, in which case we may have understated or overstated the adjustment required for excess or old inventory. If our inventory is determined to be overvalued in the future, we would be required to recognize such costs in costs of goods sold and reduce operating income at the time of such determination. Likewise, if inventory is later determined to be undervalued, we may have overstated the costs of goods sold in previous periods and would recognize additional operating income when such inventory is sold. Therefore, although every effort is made to ensure the accuracy of forecasts of merchandise demand, any significant unanticipated changes in demand or in economic conditions within our markets could have a significant impact on the value of our inventory and reported operating results.

 

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THE BON-TON STORES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
As of January 29, 2011, approximately 33% of our inventories were valued using a first-in, first-out cost basis and approximately 67% of our inventories were valued using a last-in, first-out (“LIFO”) cost basis. As is currently the case with many companies in the retail industry, our LIFO calculations yielded inventory increases in recent prior years due to deflation reflected in price indices used. The LIFO method values merchandise sold at the cost of more recent inventory purchases (which the deflationary indices indicated to be lower), resulting in the general inventory on-hand being carried at the older, higher costs. Given these higher values and the promotional retail environment, we have reduced the carrying value of our LIFO inventories to an estimated realizable value. These reductions totaled $46.1 million as of October 29, 2011 and January 29, 2011. Inherent in the valuation of inventories are significant management judgments and estimates regarding future merchandise selling costs and pricing. Should these estimates prove to be inaccurate, we may have overstated or understated our inventory carrying value. In such cases, operating results would ultimately be impacted.
Vendor Allowances
As is standard industry practice, allowances from merchandise vendors are received as reimbursement for charges incurred on marked-down merchandise. Vendor allowances are recorded when determined to be collectable and authorized by management. Allowances are credited to costs of goods sold, provided the allowance is: (1) for merchandise permanently marked down or sold, (2) not predicated on a future purchase, and (3) not predicated on a future increase in the purchase price from the vendor. If the aforementioned criteria are not met, the allowances are recorded as an adjustment to the cost of merchandise capitalized in inventory and reflected as a reduction of costs of merchandise sold when the related merchandise is sold.
Additionally, allowances are received from vendors in connection with cooperative advertising programs and for reimbursement of certain payroll expenses. These allowances are reviewed to ensure reimbursements are for specific, incremental and identifiable advertising or payroll costs incurred to sell the vendor’s products. If a vendor reimbursement exceeds the costs incurred, the excess reimbursement is recorded as a reduction of cost purchases from the vendor and reflected as a reduction of costs of merchandise sold when the related merchandise is sold. All other amounts are recognized as a reduction of the related advertising or payroll costs that have been incurred and reflected in SG&A expense.
Income Taxes
Significant management judgment is required in determining the provision for income taxes, deferred tax assets and liabilities, and the valuation allowance recorded against net deferred tax assets. The process involves summarizing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within the consolidated balance sheet. In addition, we are required to assess whether valuation allowances should be established against our deferred tax assets based on consideration of all available evidence using a “more likely than not” standard. To the extent a valuation allowance is established in a period, an expense must generally be recorded within the income tax provision in the statement of operations.
We reported net deferred tax liabilities of $4.4 million and $3.1 million at October 29, 2011 and January 29, 2011, respectively. In assessing the realizability of our deferred tax assets, we considered whether it is more likely than not that our deferred tax assets will be realized based upon all available evidence, including scheduled reversal of deferred tax liabilities, historical operating results, projected future operating results, tax carry-back availability and limitations pursuant to Section 382 of the Internal Revenue Code, among others. Significant weight is given to evidence that can be objectively verified. As a result, current or previous losses are given more weight than any projected future taxable income. In addition, a recent three-year historical cumulative loss is considered a significant element of negative evidence that is difficult to overcome.

 

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THE BON-TON STORES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
We evaluate our deferred tax assets each reporting period, including assessment of the Company’s cumulative income or loss over the prior three-year period, to determine if valuation allowances are required. With respect to our reviews during fiscal 2010, our three-year historical cumulative loss and the continuation of uncertain near-term economic conditions impeded our ability to rely on our projections of future taxable income in assessing valuation allowance requirements. As such, we concluded it was necessary to maintain a full valuation allowance on our net deferred tax assets. With respect to our three quarterly reviews in 2011, we concluded it was necessary to continue the position of a full valuation allowance on our net deferred tax assets.
Our deferred tax asset valuation allowance totaled $164.1 million and $126.3 million at October 29, 2011 and January 29, 2011, respectively. If actual results differ from these estimates or these estimates are adjusted in future periods, the valuation allowance may need to be adjusted, which could materially impact our financial position and results of operations. If sufficient positive evidence arises in the future indicating that all or a portion of the deferred tax assets meet the more likely than not standard for realization, the valuation allowance would be reduced accordingly in the period that such a conclusion is reached. If reduced, a maximum of $1.6 million of the valuation allowance reduction would result in an increase to paid in capital rather than an income tax benefit.
We recognize the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. Interpretations and guidance surrounding income tax laws and regulations change over time, and changes to our assumptions and judgments could materially impact our financial position and results of operations.
Long-lived Assets
Property, fixtures and equipment are recorded at cost and are depreciated on a straight-line basis over the estimated useful lives of such assets. Changes in our business model or capital strategy can result in the actual useful lives differing from estimates. In cases where we determined that the useful life of property, fixtures and equipment should be shortened, we depreciated the net book value in excess of the salvage value over the revised remaining useful life, thereby increasing depreciation expense. Factors such as changes in the planned use of fixtures or leasehold improvements could also result in shortened useful lives. Our net property, fixtures and equipment totaled $679.0 million and $703.4 million at October 29, 2011 and January 29, 2011, respectively.
We are required to test a long-lived asset for recoverability whenever events or changes in circumstances indicate that its carrying value may not be recoverable. Factors that could trigger an impairment review include the following:
   
Significant underperformance of stores relative to historical or projected future operating results,
   
Significant changes in the manner of our use of assets or overall business strategy, and
   
Significant negative industry or economic trends for a sustained period.
If the undiscounted cash flows associated with the asset are insufficient to support the recorded asset, an impairment loss is recognized for the amount (if any) by which the carrying amount of the asset exceeds the fair value of the asset. Cash flow estimates are based on historical results, adjusted to reflect our best estimate of future market and operating conditions. Estimates of fair value are determined through various techniques, including discounted cash flow models and market approaches, as considered necessary. Should cash flow estimates differ significantly from actual results, an impairment could arise and materially impact our financial position and results of operations. Given the seasonality of operations, impairment is not conclusive, in many cases, until after the holiday period in the fourth quarter is concluded.

 

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THE BON-TON STORES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Newly opened stores may take time to generate positive operating and cash flow results. Factors such as store type, store location, current marketplace awareness of private label brands, local customer demographic data and current fashion trends are all considered in determining the time-frame required for a store to achieve positive financial results. If conditions prove to be substantially different from expectations, the carrying value of new stores’ long-lived assets may ultimately become impaired.
Intangible Assets
Net intangible assets totaled $123.8 million and $130.1 million at October 29, 2011 and January 29, 2011, respectively. Our intangible assets at October 29, 2011 are principally comprised of $59.3 million of lease interests that relate to below-market-rate leases and $64.5 million associated with trade names, private label brand names and customer lists. The lease-related interests are being amortized using a straight-line method. The customer lists are being amortized using a declining-balance method. At October 29, 2011, trade names and private label brand names of $54.0 million have been deemed as having indefinite lives.
Intangible assets that have indefinite lives are reviewed for impairment at least annually or when events or changes in circumstances indicate the carrying value of these assets might exceed their current fair values. Fair value is determined using a discounted cash flow analysis, which requires certain assumptions and estimates regarding industry economic factors. Our policy is to conduct impairment testing based on our most current business plans, which reflect anticipated changes in the economy and the industry.
Should significant changes in the manner of our use of assets or overall business strategy, future results or economic events cause us to adjust our projected cash flows, future estimates of fair value may not support the carrying amount of these assets. If actual results prove inconsistent with our assumptions and judgments, we could be exposed to a material impairment charge.
Insurance Reserve Estimates
We use a combination of insurance and self-insurance for a number of risks, including workers’ compensation, general liability and employee-related health care benefits, a portion of which is paid by our associates. We determine the estimates for the liabilities associated with these risks by considering historical claims experience, demographic factors, severity factors and other actuarial assumptions. A change in claims frequency and severity of claims from historical experience as well as changes in state statutes and the mix of states in which we operate could result in a change to the required reserve levels.
Pension and Supplementary Retirement Plans
We provide an unfunded supplementary pension plan to certain key executives. Through acquisitions, we acquired a defined benefit pension plan and assumed the liabilities of supplementary pension plans and a postretirement benefit plan. Major assumptions used in accounting for these plans include the discount rate and the expected long-term rate of return on the defined benefit plan’s assets.
The discount rate assumption is evaluated annually. We utilize the Citibank Pension Discount Curve (“CPDC”) to develop the discount rate assumption. The CPDC is developed from a U.S. Treasury par curve that reflects the Treasury Coupon and Strips market. Option-adjusted spreads drawn from the double-A corporate bond sector are layered in to develop a double-A corporate par curve, from which the CPDC spot rates are developed. The CPDC spot rates are applied to expected benefit payments, from which a single constant discount rate can then be developed based on the expected timing of these benefit payments.

 

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THE BON-TON STORES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
We base our asset return assumption on current and expected allocations of assets, as well as a long-term view of expected returns on the plan asset categories. We assess the appropriateness of the expected rate of return on an annual basis and, when necessary, revise the assumption.
Changes in the assumptions regarding the discount rate and expected return on plan assets may result in materially different expense and liability amounts. Actuarial estimations may differ materially from actual results, reflecting many factors including changing market and economic conditions, changes in investment strategies, higher or lower withdrawal rates and longer or shorter life-spans of participants. In addition, while we are not required to make any mandatory contributions to the defined benefit pension plan in fiscal 2011, the funded status of this plan and the related cost reflected in our financial statements are affected by various factors that are subject to an inherent degree of uncertainty, particularly in the current economic environment. Under the Pension Protection Act of 2006, losses of asset values may necessitate increased funding of the defined benefit pension plan in the future to meet minimum federal government requirements. Downward pressure on the asset values of the defined benefit pension plan may require us to fund obligations earlier than we forecasted, which would have a negative impact on cash flows from operations.
Recently Issued Accounting Standards
In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-05, Presentation of Comprehensive Income (“ASU 2011-05”), which amends FASB Codification Topic 220 on comprehensive income disclosures. The new guidance allows an entity to present components of net income and other comprehensive income in one continuous statement, referred to as the statement of comprehensive income, or in two separate, but consecutive statements. The new guidance eliminates the current option to report other comprehensive income and its components in the statement of changes in equity. While the new guidance changes the presentation of comprehensive income, there are no changes to the components that are recognized in net income or other comprehensive income under current accounting guidance. This new guidance is effective for interim and annual periods beginning after December 15, 2011. We do not expect the adoption of ASU 2011-05 to have an impact on our consolidated financial position, results of operations or cash flows as it requires only a change in the format of presentation.
In May 2011, ASU No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS (“ASU 2011-04”), was issued, amending FASB Codification Topic 820 (“ASC 820”) on fair value measurements and disclosures. The amendments (1) clarify the Board’s intent regarding application of existing fair value measurement guidance, (2) revise certain measurement and disclosure requirements that change or modify a principle to achieve convergence with international accounting standards and (3) expand the information required to be disclosed with respect to fair value measurements categorized in Level 3 fair value measurements. The amendments to ASC 820 made by ASU 2011-04 are effective for interim and annual periods beginning after December 15, 2011. We do not expect the adoption of ASU 2011-04 to have a material impact on our consolidated financial statements.

 

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THE BON-TON STORES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Forward-Looking Statements
Certain information included in this report and other materials filed or to be filed by the Company with the Securities and Exchange Commission contain statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements, which may be identified by words such as “may,” “could,” “will,” “plan,” “expect,” “anticipate,” “estimate,” “project,” “intend” or other similar expressions, involve important risks and uncertainties that could significantly affect results in the future and, accordingly, such results may differ from those expressed in any forward-looking statements made by or on behalf of the Company. Factors that could cause such differences include, but are not limited to, risks related to retail businesses generally; a significant and prolonged deterioration of general economic conditions which could negatively impact the Company, including the potential write-down of the current valuation of intangible assets and deferred taxes; changes in the terms of the Company’s proprietary credit card program; potential increase in pension obligations; consumer spending patterns, debt levels, and the availability and cost of consumer credit; additional competition from existing and new competitors; inflation; deflation; changes in the costs of fuel and other energy and transportation costs; weather conditions that could negatively impact sales; uncertainties associated with expanding or remodeling existing stores; the ability to attract and retain qualified management; the dependence upon relationships with vendors and their factors; a data security breach or system failure; the ability to reduce or control SG&A expenses; the incurrence of unplanned capital expenditures; the ability to obtain financing for working capital, capital expenditures and general corporate purpose; the impact of new regulatory requirements including the Credit Card Accountability Responsibility and Disclosure Act of 2009 and the Health Care Reform Act; the inability or limitations on the Company’s ability to favorably adjust the valuation allowance on deferred tax assets; the financial condition of mall operators; Mr. Bergren’s continued willingness to serve as chief executive officer; and the successful search for a new chief executive officer. Additional factors that could cause the Company’s actual results to differ from those contained in these forward-looking statements are discussed in greater detail under Item 1A of the Company’s Form 10-K filed with the Securities and Exchange Commission.

 

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THE BON-TON STORES, INC.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk and Financial Instruments
Refer to disclosures contained on page 35 of our 2010 Annual Report on Form 10-K. There have been no material changes in our exposures, risk management strategies, or hedging positions since January 29, 2011.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in reports filed pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this report and, based on this evaluation, concluded that our disclosure controls and procedures are effective.
Changes in Internal Control over Financial Reporting
Except as discussed below, there were no changes to our internal control over financial reporting that occurred during the thirteen weeks ended October 29, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
The Company made certain changes to its internal control over financial reporting in connection with implementation of a new merchandise accounts payable computer system, which was implemented pursuant to the Company’s ongoing technology improvements. Management believes the new controls are effective.

 

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THE BON-TON STORES, INC.
PART II: OTHER INFORMATION
ITEM 6. EXHIBITS
     
10.1
  Sixth Amendment to Employment Agreement with Byron L. Bergren (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on November 15, 2011)
 
   
31.1*
  Certification of Byron L. Bergren
 
   
31.2*
  Certification of Keith E. Plowman
 
   
32.1**
  Certification Pursuant to Rules 13a-14(b) and 15d-14(b) of the Securities Exchange Act of 1934
 
   
101***
  The following financial statements from The Bon-Ton Stores, Inc.’s Quarterly Report on Form 10-Q for the quarter ended October 29, 2011, filed on December 7, 2011, formatted in XBRL:
 
  (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Cash Flows, (iv) Consolidated Statement of Shareholders’ Equity and (v) the Notes to Consolidated Financial Statements, tagged as blocks of text.
 
     
*  
Filed herewith.
 
**  
Furnished herewith.
 
***  
As provided in Rule 406T of Regulation S-T, these interactive data files are deemed furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.

 

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THE BON-TON 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.
           
    THE BON-TON STORES, INC.
 
 
DATE: December 7, 2011  BY:  /s/ Byron L. Bergren    
    Byron L. Bergren   
    President and Chief Executive Officer   
       
DATE: December 7, 2011  BY:  /s/ Keith E. Plowman    
    Keith E. Plowman   
    Executive Vice President, Chief Financial Officer and
Principal Accounting Officer 
 

 

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