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 May 4, 1996
Commission File Number 0-19517
The Bon-Ton Stores, Inc.
2801 East Market Street
York, Pennsylvania, 17402
(717) 757-7660
State ofIncorporation: 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 May 28, 1996 there were 8,348,923 shares of Common Stock, $0.01 par
value, and 2,989,853 shares of Class A Common Stock, par value $0.01,
outstanding.
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>
May 4, February 3,
1996 1996
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 10,653 $ 6,941
Trade and other accounts receivable, net of allowance for doubtful
accounts of $2,953 and $3,113 in fiscal 1996 and fiscal 1995,
respectively 22,604 17,445
Merchandise inventories 168,692 141,741
Income taxes receivable 7,800 8,549
Prepaid expenses and other current assets 16,869 13,562
---------- ----------
Total current assets 226,618 188,238
PROPERTY, FIXTURES AND EQUIPMENT at cost, less accumulated
depreciation and amortization 117,887 120,874
OTHER ASSETS 22,490 22,061
---------- ----------
Total assets $ 366,995 $ 331,173
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 60,139 $ 55,168
Accrued payroll and benefits 7,064 7,954
Accrued expenses 25,201 32,969
Current portion of long-term debt 298 295
Current portion of obligations under capital leases 331 325
Deferred income taxes 1,089 769
---------- ----------
Total current liabilities 94,122 97,480
LONG-TERM DEBT, less current maturities 166,006 125,069
OBLIGATIONS UNDER CAPITAL LEASES, less current maturities 2,738 2,824
DEFERRED INCOME TAXES 745 420
OTHER LONG-TERM LIABILITIES 1,288 1,206
---------- ----------
Total liabilities 264,899 226,999
---------- ----------
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 1996
and 1995, respectively 30 30
Additional paid-in capital 58,184 58,197
Deferred compensation (1,637) (1,774)
Retained earnings 45,436 47,638
---------- ----------
Total shareholders' equity 102,096 104,174
---------- ----------
Total liabilities and shareholders' equity $ 366,995 $ 331,173
========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated statements.
THE BON-TON STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
---------------------------------
May 4, April 29,
1996 1995
------------ ------------
<S> <C> <C>
NET SALES $ 129,320 $ 126,094
OTHER INCOME, NET 522 404
---------- ----------
129,842 126,498
---------- ----------
COSTS AND EXPENSES:
Costs of merchandise sold 80,518 76,358
Selling, general and administrative 46,615 48,907
Depreciation and amortization 3,048 2,786
---------- ----------
130,181 128,051
---------- ----------
Loss from operations (339) (1,553)
INTEREST EXPENSE, NET 3,097 1,794
---------- ----------
LOSS BEFORE INCOME TAXES (3,436) (3,347)
INCOME TAX BENEFIT (1,237) (1,204)
---------- ----------
NET LOSS $ (2,199) $ (2,143)
========== ==========
PER SHARE AMOUNTS:
Net loss per share $ (0.20) $ (0.19)
========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING 11,062 11,001
========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated statements.
THE BON-TON STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
---------------------------------
May 4, April 29,
1996 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (2,199) $ (2,143)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 3,048 2,786
Changes in operating assets and liabilities, net (22,493) (25,842)
---------- ----------
Net cash used in operating activities (21,644) (25,199)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net (504) (16,472)
Proceeds from sale of property, fixtures and equipment --- 81
Purchase of accounts receivable --- (30,138)
Net proceeds from Accounts Receivable Facility (15,000) 15,000
---------- ----------
Net cash used in investing activities (15,504) (31,529)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt and capital lease obligations (42,140) (33,128)
Proceeds from issuance of long-term debt 83,000 89,000
Exercised stock options --- 595
---------- ----------
Net cash provided by financing activities 40,860 56,467
---------- ----------
Net increase (decrease) in cash and cash equivalents 3,712 (261)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 6,941 1,732
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 10,653 $ 1,471
========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated statements.
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 68 retail department stores located in Pennsylvania, New
York, Maryland, West Virginia, New Jersey and Georgia.
1. BASIS OF PRESENTATION:
The accompanying unaudited consolidated financial statements include
the 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>
THIRTEEN WEEKS ENDED
--------------------------
May 4, April 29,
1996 1995
----------- -----------
<S> <C> <C>
Interest cost incurred $ 3,154 $ 1,988
Interest income (57) (29)
Capitalized interest, net --- (165)
--------- ---------
Interest expense, net $ 3,097 $ 1,794
========= =========
Interest paid $ 2,874 $ 1,745
========= =========
</TABLE>
4. FINANCIAL ACCOUNTING STANDARDS NO. 121:
During the first quarter of 1996, the Company adopted Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of".
The effect of adoption was immaterial to the financial statements.
5. MORTGAGE FINANCING AGREEMENT:
The Company announced, as of May 17, 1996, the completion of a $22.5
million, 20 year mortgage financing, secured by its four stores in
Rochester, New York. The proceeds were used to repay $10.6 million of the
Company's bank term loan and the balance will be used to fund ongoing
working capital needs.
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 quarter presented:
<TABLE>
<CAPTION>
Percent of Net Sales
-------------------------------
Thirteen Thirteen
Weeks Ended Weeks Ended
May 4, 1996 April 29, 1995
----------- -----------
<S> <C> <C>
Net sales 100.0% 100.0%
Other income, net 0.4 0.3
------ ------
100.4 100.3
Costs and expenses:
Costs of merchandise sold 62.3 60.6
Selling, general and administrative 36.0 38.8
Depreciation and amortization 2.4 2.2
------ ------
Loss from operations (0.3) (1.3)
Interest expense, net 2.4 1.4
------ ------
Loss before income taxes (2.7) (2.7)
Income tax benefit (1.0) (1.0)
------ ------
Net loss (1.7)% (1.7)%
====== ======
</TABLE>
THIRTEEN WEEKS ENDED MAY 4, 1996 COMPARED TO THIRTEEN WEEKS ENDED
APRIL 29, 1995
NET SALES. Net sales of $129,320,000 in the thirteen
weeks ended May 4, 1996 increased 2.6% from $126,094,000 in
the same period for the prior year. Comparable store sales
increased 2.0% for the period. The Company's Shoes and
Intimate areas, with increases of 23.8% and 8.6%,
respectively, constituted the majority of the comparable
store increase. Home, Accessories, Juniors, Womens and
Petites followed closely in sale increases. Although the
Company was pleased with the increase in the first quarter
because it represented a significant turnaround from same
store sales trend for the fourth quarter, it was disappointed
with March/April sale results. Better sales were expected in
March because of an earlier Easter but sales were negatively
impacted by the unseasonably cold weather.
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 first quarter from 0.3%
of net sales in the comparable prior year period. This
increase was principally due to the expansion of our leased
departments into additional existing locations and into the
Rochester and Elmira locations.
COSTS AND EXPENSES. Gross profit as a percentage of net
sales decreased by 1.7% to 37.7% in the thirteen weeks ended
May 4, 1996 from 39.4% in the comparable prior year period.
The decreased 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 was a result of the Company's
aggressive response to competition as well as reacting
to the inclement weather which caused weaker sales during the
current year period.
Selling, general and administrative expenses were lower
in the first quarter of fiscal 1996 both in dollars and as a
percentage of net sales, decreasing to 36.0% of net sales
from 38.8% of net sales in last year's first quarter. The
rate decrease was primarily attributable to the expense
control efforts of the Company, at both store and corporate
levels.
Depreciation and amortization increased to 2.4% of net
sales in the thirteen weeks ended May 4, 1996 from 2.2% in
the comparable prior year period. The increase was primarily
a result of fiscal 1995 asset additions of the four Rochester
and Elmira stores.
LOSS FROM OPERATIONS. The loss from operations for the
first quarter of fiscal 1996 amounted to $339,000 or 0.3% of
net sales as compared to loss from operations of $1,553,000
or 1.3% of net sales in the same prior year period. The
decrease in loss from operations for the period was
attributable to the reduction in selling, general and
administrative expenses.
The Company sells its receivables through its accounts
receivable purchase facility to provide an additional financing
tool. If the results of operations were restated without this
facility, the selling, general and administrative expenses would
have been lower by $2,078,000 in the first quarter of 1996 and by
$1,518,000 in the first quarter of 1995. The lower selling, general
and administrative expenses would have been offset by a corresponding
increase in interest expense for both periods. This would have
resulted in income from operations of $1,739,000 in the first
quarter of 1996 and a loss from operations of $35,000 for the
corresponding prior year period.
INTEREST EXPENSE, NET. Net interest expense increased
to 2.4% of net sales in the thirteen weeks ended May 4, 1996,
compared to 1.4% of net sales in the thirteen weeks ended
April 29, 1995. This increase was a result of the increase
in borrowing levels to fund the Company's continued growth.
NET LOSS. The net loss for the first quarter of fiscal 1996
amounted to $2,199,000 as compared the to net loss of $2,143,000
in the comparable prior year period. Due to the seasonal nature of
the Company's business, the results for the current year
first quarter are not necessarily indicative of the results
that may be achieved for the full 1996 fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
The following table summarizes material measures of the
Company's liquidity and capital resources:
<TABLE>
<CAPTION>
May 4, April 29,
1996 1995
------------- -------------
<S> <C> <C>
Working capital $ 132,496,000 $ 104,401,000
Current ratio 2.41:1 2.13:1
Total debt to total
capitalization .62:1 .51:1
Available lines of credit $ 1,050,000 $ 18,000,000
</TABLE>
The Company announced, as of May 17, 1996, completion of a
$22.5 million, 20 year mortgage financing. (See Note 5)
In the thirteen weeks ended May 4, 1996 and April 29,
1995, net cash used in operating activities amounted to
$21,644,000 and $25,199,000, respectively. The net operating
outflows in the first quarter of fiscal 1996 primarily
resulted from increases in working capital over year-end
levels. The major component of the increase in working
capital was higher levels of merchandise inventories to
support the direction of the marketing plan. Increased
levels of merchandise inventories were partially offset by an
increase in accounts payable. Additional working capital
requirements also included a decrease in accrued expenses.
Net cash used in investing activities amounted to
$15,504,000 and $31,529,000 in the thirteen weeks ended May
4, 1996 and April 29, 1995, respectively. Cash outflows in
the current year were primarily attributable to reduced
proceeds of borrowings related to a portion of the Company's
proprietary credit card receivables.
Net cash provided by financing activities amounted to
$40,860,000 and $56,467,000 in the thirteen weeks ended May
4, 1996 and April 29, 1995, respectively. The net cash provided
by financing activities in the current year first quarter was
primarily attributable to net borrowings under the Company's
revolving credit and term loan facilities.
The Company anticipates that its cash flow from operations,
supplemented by borrowings under its revolving credit facility and
proceeds from its accounts receivable purchase facility, will be
sufficient to satisfy its operating cash requirements in the
foreseeable future.
"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 are not limited to, uncertainties affecting
retail in general such as consumer confidence and demand for
soft goods; risks relating to leverage and debt service; and
competition within the primary markets in which the
Company's stores are located; and the need for, and costs
associated with, store renovations and other capital
expenditures.
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: June 11, 1996 BY: /s/ Michael L. Gleim
------------------ -----------------------
Michael L. Gleim
Vice Chairman,
Chief Operating Officer,
Acting 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 May 4, 1996 and the Condensed
Consolidated Statement of Income for the thirteen weeks ended May 4, 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> 3-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-END> MAY-04-1996
<CASH> 10,653
<SECURITIES> 0
<RECEIVABLES> 25,557
<ALLOWANCES> 2,953
<INVENTORY> 168,692
<CURRENT-ASSETS> 226,618
<PP&E> 179,187
<DEPRECIATION> 61,300
<TOTAL-ASSETS> 366,995
<CURRENT-LIABILITIES> 94,122
<BONDS> 168,744
0
0
<COMMON> 113
<OTHER-SE> 101,983
<TOTAL-LIABILITY-AND-EQUITY> 366,995
<SALES> 129,320
<TOTAL-REVENUES> 129,842
<CGS> 80,518
<TOTAL-COSTS> 130,181
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,097
<INCOME-PRETAX> (3,436)
<INCOME-TAX> (1,237)
<INCOME-CONTINUING> (2,199)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,199)
<EPS-PRIMARY> (0.20)
<EPS-DILUTED> (0.20)
</TABLE>
