SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarter ended August 3, 1996
Commission File Number 0-19517
The Bon-Ton Stores, Inc.
2801 East Market Street
York, Pennsylvania, 17402
(717) 757-7660
State of Incorporation: Pennsylvania
I.R.S. Employer Identification No.: 23-2835229
The registrant (1) has filed all reports required to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
and (2) has been subject to such filing requirements for the past 90 days.
As of August 30, 1996 there were 8,348,923 shares of Common Stock, par
value $.01, and 2,989,853 shares of Class A Common Stock, par value $0.01,
outstanding.
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
THE BON-TON STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
August 3, February 3,
1996 1996
(Unaudited)
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 10,237 $ 6,941
Trade and other accounts receivable, net of
allowance for doubtful accounts of $3,000 and
$3,113 in fiscal 1996 and 1995, respectively 17,444 17,445
Merchandise inventories 176,553 141,741
Prepaid expenses and other current assets 17,712 13,562
Income taxes receivable --- 8,549
--------- ---------
Total current assets 221,946 188,238
PROPERTY, FIXTURES AND EQUIPMENT at cost,
less accumulated depreciation and amortization 118,369 120,874
OTHER ASSETS 20,896 22,061
DEFERRED INCOME TAXES 432 ---
--------- ---------
Total assets $ 361,643 $ 331,173
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 61,864 $ 55,168
Accrued payroll and benefits 7,032 7,954
Accrued expenses 23,539 32,969
Current portion of long-term debt 713 295
Current portion of obligations under capital leases 338 325
Deferred income taxes 3,120 769
--------- ---------
Total current liabilities 96,606 97,480
LONG-TERM DEBT, less current maturities 160,847 125,069
OBLIGATIONS UNDER CAPITAL LEASES, less current maturities 2,650 2,824
OTHER LONG-TERM LIABILITIES 1,271 1,206
DEFERRED INCOME TAXES --- 420
--------- ---------
Total liabilities 261,374 226,999
--------- ---------
SHAREHOLDERS' EQUITY:
Common Stock-authorized 40,000,000 shares at $.01 par
value; issued and outstanding shares of 8,348,923
and 8,351,083 in 1996 and 1995, respectively 83 83
Class A Common Stock-authorized 20,000,000 shares at
$.01 par value; issued and outstanding shares of
2,989,853 in 1995 and 1994, respectively 30 30
Additional paid-in capital 58,184 58,197
Deferred compensation (1,511) (1,774)
Retained earnings 43,483 47,638
--------- ---------
Total shareholders' equity 100,269 104,174
--------- ---------
Total liabilities and shareholders' equity $ 361,643 $ 331,173
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated statements.
<PAGE>
THE BON-TON STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
-------------------------- --------------------------
Aug 3, July 29, Aug 3, July 29,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET SALES $ 130,740 $ 128,422 $ 260,060 $ 254,515
OTHER INCOME, NET 500 413 1,022 818
----------- ----------- ----------- -----------
131,240 128,835 261,082 255,333
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Costs of merchandise sold 81,276 79,258 161,794 155,616
Selling, general and administrative 46,172 48,057 92,787 96,964
Depreciation and amortization 3,025 2,854 6,073 5,640
----------- ----------- ----------- -----------
130,473 130,169 260,654 258,220
----------- ----------- ----------- -----------
Income (loss) from operations 767 (1,334) 428 (2,887)
INTEREST EXPENSE, NET 3,801 1,832 6,898 3,626
----------- ----------- ----------- -----------
LOSS BEFORE INCOME TAXES (3,034) (3,166) (6,470) (6,513)
INCOME TAX BENEFIT (1,088) (1,139) (2,325) (2,343)
----------- ----------- ----------- -----------
NET LOSS ($1,946) ($2,027) ($4,145) ($4,170)
=========== =========== =========== ===========
Net loss per share $ (.18) $ (.18) $ (.37) $ (.38)
=========== =========== =========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 11,064 11,057 11,063 11,029
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated statements.
<PAGE>
THE BON-TON STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED
-------------------------
August 3, July 29,
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (4,145) $ (4,170)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 6,073 5,639
Changes in operating assets and liabilities, net (10,815) (18,855)
----------- -----------
Net cash used in operating activities (8,887) (17,386)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net (3,854) (21,647)
Proceeds from sale of property, fixtures and equip. 2 215
Purchase of accounts receivable --- (30,138)
Net proceeds from Accounts Receivable Facility (20,000) 15,000
----------- -----------
Net cash used in investing activities (23,852) (36,570)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt and capital lease
obligations (108,365) (177,259)
Proceeds from issuance of long-term debt 121,000 233,000
Proceeds from mortgages on Rochester properties 23,400 ---
Exercised stock options --- 646
----------- -----------
Net cash provided by financing activities 36,035 56,387
Net increase (decrease) in cash equivalents 3,296 2,431
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 6,941 1,732
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 10,237 $ 4,163
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated statements.
<PAGE>
THE BON-TON STORES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share amounts)
The Bon-Ton Stores, Inc., a Pennsylvania corporation, was incorporated
on January 31, 1996 as a result of the Company's Plan of Division and
currently operates 69 retail department stores primarily located in
Pennsylvania, New York, Maryland, West Virginia, New Jersey and Georgia.
1. BASIS OF PRESENTATION:
The accompanying unaudited consolidated financial statements include
accounts of The Bon-Ton Stores, Inc., and its wholly-owned subsidiaries
(the "Company"). 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 the
information and footnotes required by generally accepted accounting
principles. In the opinion of management, all adjustments (primarily
consisting of normal recurring accruals) considered necessary for a fair
presentation for interim periods have been included. The Company's
business is seasonal in nature and the results of operations for the
interim periods presented are not necessarily indicative of the results for
the full fiscal year. It is suggested that these consolidated financial
statements be read in conjunction with the financial statements and the
notes thereto included in the Company's latest annual report on Form 10-K.
2. PER SHARE AMOUNTS:
Per share amounts were computed by dividing the corresponding net
income or loss amounts by the weighted average number of common shares and
common share equivalents outstanding. Common share equivalents represent
stock options and restricted stock grants computed using the treasury stock
method and are included in the weighted average shares reported on the
income statement when the effect is dilutive.
3. INTEREST COSTS:
Interest and debt costs were:
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED
-----------------------
August 3, July 29,
1996 1995
---------- ----------
<S> <C> <C>
Interest cost incurred $ 7,003 $ 4,290
Interest income (83) (312)
Capitalized interest, net (22) (352)
---------- ----------
Interest expense, net $ 6,898 $ 3,626
========== ==========
Interest paid $ 5,448 $ 4,480
========== ==========
</TABLE>
<PAGE>
THE BON-TON STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
The following table summarizes the changes in selected operating
indicators, illustrating the relationships of various income and expense
items to net sales for each period presented:
<TABLE>
<CAPTION>
PERCENT OF NET SALES
---------------------------------------------
THIRTEEN TWENTY-SIX
WEEKS ENDED WEEKS ENDED
--------------------- ---------------------
August 3, July 29, August 3, July 29,
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Other income, net 0.4 0.3 0.4 0.3
--------- --------- --------- ---------
100.4 100.3 100.4 100.3
Costs and expenses:
Costs and merchandise sold 62.2 61.7 62.2 61.1
Selling, general and
administrative 35.3 37.4 35.7 38.1
Depreciation and amortization 2.3 2.2 2.3 2.2
--------- --------- --------- ---------
Income (loss) from operations 0.6 (1.0) 0.2 (1.1)
Interest expense, net 2.9 1.4 2.7 1.4
--------- --------- --------- ---------
Loss before income taxes (2.3) (2.5) (2.5) (2.5)
Income tax benefit (0.8) (0.9) (0.9) (0.9)
--------- --------- --------- ---------
Net loss (1.5%) (1.6%) (1.6%) (1.6%)
========= ========= ========= =========
</TABLE>
<PAGE>
THE BON-TON STORES, INC. AND SUBSIDIARIES
Thirteen Weeks Ended August 3, 1996 Compared to Thirteen Weeks Ended
July 29, 1995
NET SALES. Net sales were $130,740,000 for the thirteen weeks ended
August 3, 1996, an increase of 1.8% from $128,422,000 for the same period
last year. Comparable store sales decreased 0.5% for the period. The
Shoes and Home categories with increases of 25.7% and 17.4% respectively,
continue to record sales increases greater than Company average.
OTHER INCOME, NET. Net other income, which consists primarily of
income from leased departments, increased to 0.4% of net sales in the
second quarter of 1996 versus 0.3% of net sales in the comparable period
last year. The increase was principally due to the expansion of our leased
departments into additional existing locations and into the new Rochester
and Elmira locations.
COSTS AND EXPENSES. Gross profit as a percentage of net sales
decreased by 0.5 percentage points to 37.8% for the thirteen weeks ended
August 3, 1996 from 38.3% for the comparable period last year. The decline
in margin rate was primarily attributable to higher markdowns resulting
from increased promotional activity and an increase in the shrinkage
reserve rate. The increased promotional activity reflected the Company's
response to competitive pricing and a sell through program to liquidate
Spring and Summer inventory.
Selling, general and administrative expenses were lower in the second
quarter of fiscal 1996 when expressed in dollars and as a percent of net
sales, decreasing to 35.3% of net sales from 37.4% of net sales in the
second quarter of 1995. The rate decrease primarily reflects the expense
control efforts of the Company at both the store and corporate levels.
Depreciation and amortization increased to 2.3% of net sales for the
thirteen weeks ended August 3, 1996 from 2.2% in the comparable period
last year. The increase was primarily a result of the addition of four
stores in late 1995.
INCOME (LOSS) FROM OPERATIONS. Income from operations for the second
quarter of 1996 was $767,000 or 0.6% of net sales compared to a loss from
operations of $1,334,000 or 1.0% of net sales in the comparable period last
year. The improvement for the period was primarily attributable to the
reduction in selling, general and administrative expenses.
The Company sells receivables through its accounts receivable purchase
facility to provide additional working capital. The pro-forma effects, as
if the Company had on-balance sheet financing, would have reduced selling,
general and administrative expenses by $1,404,000 in the second quarter of
1996 and by $1,597,000 in the second quarter of 1995. The lower selling
general and administrative expenses would have been offset by a
corresponding increase in interest expense for both periods. The net
result of the pro-forma reclassification would reflect income from
operations of $2,171,000 in the second quarter of 1996 and of $263,000 for
the corresponding period last year.
<PAGE>
THE BON-TON STORES, INC. AND SUBSIDIARIES
INTEREST EXPENSE, NET. Net interest expense increased to 2.9% of net
sales for the thirteen weeks ended August 3, 1996 compared to 1.4% of net
sales for the thirteen weeks ended July 29, 1995. The increase reflected
the additional borrowing needed to fund the Company's continued growth.
NET LOSS. The net loss for the second quarter of fiscal 1996 amounted
to $1,946,000 as compared to a net loss of $2,027,000 for the comparable
period last year. Due to the seasonal nature of the Company's business,
the results for the current year second quarter are not necessarily
indicative of the results that may be achieved for the full fiscal year of
1996.
Twenty-Six Weeks Ended August 3, 1996 Compared to Twenty-Six Weeks Ended
July 29, 1995
NET SALES. Net sales increased 2.2% to $260,060,000 for the twenty-
six week period ended August 3, 1996 from $254,515,000 for the comparable
period last year. Sales on a comparable store basis increased 0.7% during
the period. The Shoes, Home and Intimate Apparel categories constituted a
majority of the comparable store sales increase.
OTHER INCOME, NET. Net other income, which consisted primarily of
income from leased departments, increased to 0.4% of net sales in the
current year period from 0.3% for the comparable period last year. The
increase was due primarily to the expansion of our leased departments into
additional existing locations and into the new Rochester and Elmira
locations.
COSTS AND EXPENSES. Gross profit as a percent of net sales decreased
by 1.1 percentage points to 37.8% for the twenty-six weeks ended August 3,
1996 from 38.9% for the comparable period last year. The decrease in
margin primarily reflected the increased promotional activity and an
increase in the shrinkage reserve rate.
Selling, general and administrative expenses decreased to 35.7% of net
sales for the current year from 38.1% for the comparable period last year.
The rate decrease was primarily attributable to expense control efforts at
both store and corporate levels, which began in the first quarter of 1996.
Depreciation and amortization expense increased to 2.3% for the twenty-
six weeks ended August 3, 1996 from 2.2% for the comparable period last
year. The increase was primarily due to the addition of the Rochester and
Elmira stores in fiscal 1995.
INCOME (LOSS) FROM OPERATIONS. Income from operations for the twenty-
six weeks ended August 3, 1996 was $428,000 or 0.2% of net sales compared
to a loss from operations of $2,887,000 or 1.1% of net sales in the same
period last year. The improvement was primarily attributable to a decrease
in selling, general and administrative expenses partially offset by lower
gross margin.
The Company sells its receivables through its accounts receivable
purchase facility to provide additional working capital. The pro-forma
effects, as if the Company had on-balance sheet financing, would have
reduced selling, general and administrative expenses by $3,482,000 for the
twenty-six weeks ended August 3,1996 and by $3,115,000 for the comparable
period last year. The lower selling general and administrative expenses
would have been offset by a corresponding increase in interest expense for
both periods. The pro-forma reclassification would have reflected income
from operations of $3,910,000 for the current year period and $228,000 for
the comparable period last year.
<PAGE>
THE BON-TON STORES, INC. AND SUBSIDIARIES
INTEREST EXPENSE, NET. Net interest expense increased to 2.7% of net
sales for the twenty-six week period ended August 3, 1996 from 1.4% of net
sales for the comparable period last year. The increase reflects the
additional borrowing needed to fund the Company's continued growth.
NET LOSS. The net loss for the twenty-six weeks ended August 3, 1996
amounted to $4,145,000 or 1.6% of net sales as compared to a net loss of
$4,170,000 or 1.6% of net sales for the comparable period last year. Due
to the seasonality of the Company's business, the results of the current
period are not necessarily indicative of the results that may be achieved
for the full fiscal year of 1996.
LIQUIDITY AND CAPITAL RESOURCES
The following table summarizes material measures of the Company's
liquidity and capital resources:
<TABLE>
<CAPTION>
August 3, 1996 July 29, 1995
-------------- --------------
<S> <C> <C>
Working Capital $ 125,340,000 $ 100,859,000
Current Ratio 2.30:1 2.29:1
Total Debt to Total
Capitalization .62:1 .51:1
Available Lines of Credit $19,250,000 $48,000,000
</TABLE>
For the twenty-six weeks ended August 3, 1996, net cash used in
operating activities amounted to $8,887,000 as compared to $17,386,000 for
the comparable period last year. The net operating cash outflows for the
twenty-six weeks ended August 3, 1996 primarily reflects the increase in
working capital over year end levels. The major cause for the increase in
working capital was higher levels of merchandise inventories needed to
support the inventory intensification initiative. The increased level of
merchandise inventories was partially offset by an increase in accounts
payable as well as a decrease in accounts receivable excluding the effect
of reduced proceeds from the accounts receivable facility mentioned below.
Additional working capital requirements also included a decrease in accrued
expenses.
Net cash used in investing activities amounted to $23,852,000 for the
twenty-six weeks ended August 3, 1996, compared to cash used in investing
activities of $36,570,000 for the comparable period last year. The net
outflow in the twenty-six week period ended August 3, 1996 was primarily
due to reduced proceeds from the sale of proprietary credit card
receivables.
Net cash provided by financing activities amounted to $36,035,000 for
the twenty-six week period ended August 3, 1996 as compared to cash
provided by financing activities of $56,387,000 for the comparable period
last year. The net increase in the current year primarily reflected the
net borrowings under the Company's revolving credit facility and completion
of mortgage financing on the Rochester properties.
The Company anticipates that its cash flow from operations,
supplemented by borrowings under its revolving credit facility, will be
sufficient to satisfy its operating cash requirements in the foreseeable
future.
<PAGE>
"Safe Harbor" Statement
Certain information included in this 10-Q contains statements that are
forward looking. Such forward-looking information involves important risks
and uncertainties that could significantly affect anticipated results in
the future, including, but not limited to, uncertainties affecting retail
in general, such as consumer confidence and demand for soft goods; risks
relating to leverage and debt service; competition within primary markets
in which the Company's stores are located; and the need for, and costs
associated with, store renovations and other capital expenditures.
Pursuant to the requirements of the Securities and 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: September 12, 1996 BY: /s/ Michael L. Gleim
------------------- ----------------------------
Michael L. Gleim
Vice Chairman &
Chief Operating Officer
DATE: September 12, 1996 BY: /s/ James H. Baireuther
------------------- ----------------------------
James H. Baireuther
Senior Vice President,
Chief Financial Officer and
Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Consolidated Balance Sheet as of August 3, 1996 and the Condensed
Consolidated Statement of Income for the twenty-six weeks ended August 3, 1996
(Unaudited) and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000878079
<NAME> BON TON STORES INC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-END> AUG-03-1996
<CASH> 10,237
<SECURITIES> 0
<RECEIVABLES> 20,444
<ALLOWANCES> 3,000
<INVENTORY> 176,553
<CURRENT-ASSETS> 221,946
<PP&E> 182,519
<DEPRECIATION> 64,150
<TOTAL-ASSETS> 361,643
<CURRENT-LIABILITIES> 96,606
<BONDS> 163,497
0
0
<COMMON> 113
<OTHER-SE> 100,156
<TOTAL-LIABILITY-AND-EQUITY> 361,643
<SALES> 260,060
<TOTAL-REVENUES> 261,082
<CGS> 161,794
<TOTAL-COSTS> 260,654
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,898
<INCOME-PRETAX> (6,470)
<INCOME-TAX> (2,325)
<INCOME-CONTINUING> (4,145)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,145)
<EPS-PRIMARY> (.37)
<EPS-DILUTED> (.37)
</TABLE>
