<PAGE> 1
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 April 29, 2000 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 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
As of May 26, 2000 there were 12,264,597 shares of Common Stock, $0.01
par value, and 2,989,853 shares of Class A Common Stock, $0.01 par value,
outstanding.
<PAGE> 2
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE BON-TON STORES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
April 29, January 29,
(In thousands except share and per share data) 2000 2000
-------------------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 13,105 $ 10,807
Trade and other accounts receivable, net of allowance for doubtful accounts
of $2,454 and $3,167 at April 29, 2000 and January 29, 2000, respectively 23,915 27,782
Merchandise inventories 217,956 203,489
Prepaid expenses and other current assets 13,347 12,371
Deferred income taxes 648 1,926
-------------------------
Total current assets 268,971 256,375
-------------------------
PROPERTY, FIXTURES AND EQUIPMENT AT COST,
less accumulated depreciation and amortization 143,301 144,715
OTHER ASSETS 16,397 16,402
-------------------------
TOTAL ASSETS $ 428,669 $ 417,492
=========================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 65,090 $ 67,353
Accrued payroll and benefits 6,475 10,016
Accrued expenses 20,164 26,262
Current portion of long-term debt 695 682
Current portion of obligations under capital leases 451 442
Income taxes payable -- 9,832
-------------------------
Total current liabilities 92,875 114,587
-------------------------
LONG-TERM DEBT, LESS CURRENT MATURITIES 143,973 106,247
OBLIGATIONS UNDER CAPITAL LEASES, LESS CURRENT MATURITIES 1,315 1,431
DEFERRED INCOME TAXES 1,567 1,362
OTHER LONG-TERM LIABILITIES 3,117 3,174
-------------------------
TOTAL LIABILITIES 242,847 226,801
-------------------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common Stock - authorized 40,000,000 shares at $0.01 par value; issued and outstanding
shares of 12,264,597 and 12,276,860 at April 29, 2000 and January 29, 2000, respectively 123 123
Class A Common Stock - authorized 20,000,000 shares at $0.01 par value; issued
and outstanding shares of 2,989,853 at April 29, 2000 and January 29, 2000 30 30
Additional paid-in-capital 108,020 108,083
Deferred compensation (1,876) (2,172)
Retained earnings 79,525 84,627
-------------------------
Total shareholders' equity 185,822 190,691
-------------------------
Total liabilities and shareholders' equity $ 428,669 $ 417,492
=========================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
2
<PAGE> 3
THE BON-TON STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THIRTEEN
WEEKS ENDED
-------------------------
(In thousands except per share data) April 29, May 1,
(Unaudited) 2000 1999
-----------------------------------------------------------------------------------------
<S> <C> <C>
NET SALES $ 152,135 $ 142,399
OTHER INCOME, NET 572 517
-------------------------
152,707 142,916
-------------------------
COSTS AND EXPENSES:
Costs of merchandise sold 100,449 93,190
Selling, general and administrative 54,025 48,560
Depreciation and amortization 4,121 3,256
-------------------------
LOSS FROM OPERATIONS (5,888) (2,090)
INTEREST EXPENSE, NET 2,339 1,920
-------------------------
LOSS BEFORE INCOME TAXES (8,227) (4,010)
INCOME TAX BENEFIT (3,127) (1,524)
-------------------------
LOSS BEFORE EXTRAORDINARY ITEM (5,100) (2,486)
EXTRAORDINARY ITEM - loss on early extinguishment of debt,
net of income tax benefit of $232 -- (378)
-------------------------
NET LOSS $ (5,100) $ (2,864)
=========================
PER SHARE AMOUNTS:
BASIC:
Loss before extraordinary item $ (0.34) $ (0.17)
Effect of extraordinary item -- (0.02)
-------------------------
Net loss $ (0.34) $ (0.19)
=========================
BASIC SHARES OUTSTANDING 14,802 14,703
DILUTED:
Loss before extraordinary item $ (0.34) $ (0.17)
Effect of extraordinary item -- (0.02)
-------------------------
Net loss $ (0.34) $ (0.19)
=========================
DILUTED SHARES OUTSTANDING 14,802 14,703
</TABLE>
The accompanying notes are an integral part of these consolidated statements
3
<PAGE> 4
THE BON-TON STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THIRTEEN
WEEKS ENDED
-----------------------
(In thousands) April 29, May 1,
(Unaudited) 2000 1999
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (5,100) $ (2,864)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 4,121 3,256
Changes in operating assets and liabilities, net (25,857) (30,039)
-----------------------
Net cash used in operating activities $(26,836) $(29,647)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net (2,499) (9,252)
Proceeds from sale of property, fixtures and equipment -- 28
Proceeds from sale of accounts receivable, net (6,000) (3,000)
Payment for the acquisition of business, net of cash received -- (2,192)
-----------------------
Net cash used in investing activities (8,499) (14,416)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt and capital lease obligations (59,518) (51,713)
Proceeds from issuance of long-term debt 97,150 95,300
Exercised stock options 1 6
-----------------------
Net cash provided by financing activities 37,633 43,593
Net increase (decrease) in cash and cash equivalents 2,298 (470)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 10,807 10,607
-----------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 13,105 $ 10,137
=======================
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 2,534 $ 1,522
Income taxes paid $ 7,567 $ 7,286
</TABLE>
The accompanying notes are an integral part of these consolidated statements
4
<PAGE> 5
THE BON-TON STORES, INC. AND SUBSIDIARIES
The Bon-Ton Stores, Inc., a Pennsylvania corporation, was incorporated on
January 31, 1996 as the successor of a company established on January 31, 1929
and currently operates, as one business segment, 72 retail department stores
located in Pennsylvania, New York, New Jersey, Maryland, Connecticut,
Massachusetts, New Hampshire, Vermont and West Virginia.
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 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 these consolidated
financial statements be read in conjunction with the financial statements and
the notes thereto included in the Company's Annual Report on Form 10-K for the
fiscal year ended January 29, 2000 (the "1999 Annual Report").
2. PER SHARE AMOUNTS:
The presentation of earnings per share (EPS) requires a reconciliation of the
numerators and denominators used in the basic and diluted EPS calculations. The
numerator, net loss, is identical in both calculations. The following table
presents a reconciliation of the shares outstanding for the respective
calculations for each period presented on the accompanying Consolidated
Statements of Operations.
<TABLE>
<CAPTION>
April 29, May 1,
2000 1999
------------ ------------
<S> <C> <C>
Basic Calculation 14,802,000 14,703,000
Dilutive Securities ---
Restricted Shares - -
Options - -
-------------------------------
Diluted Calculation 14,802,000 14,703,000
-------------------------------
Antidilutive shares and options ---
Restricted Shares 457,000 563,000
Options 1,424,000 1,308,000
</TABLE>
Antidilutive shares and options, consisting of restricted shares and options to
purchase shares outstanding, were excluded from the computation of dilutive
securities due to the Company's net loss position in the first quarter of 2000
and 1999.
5
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THE BON-TON STORES, INC. AND SUBSIDIARIES
The following table reflects the approximate dilutive securities calculated
under the treasury stock method had the Company reported a profit for the first
quarter of 2000 and 1999.
<TABLE>
<CAPTION>
April 29, May 1,
2000 1999
-------- ------
<S> <C> <C>
Approximate Dilutive Securities ---
Restricted Shares - 92,000
Options - 54,000
</TABLE>
Options to purchase shares with exercise prices greater than the average market
price were excluded from the above table for the first quarter of 2000 and the
first quarter of 1999 in the approximate amounts of 1,424,000 and 853,000,
respectively, as they would have been antidilutive.
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 relationship of various income and expense items expressed as a
percentage of net sales for each period presented:
<TABLE>
<CAPTION>
THIRTEEN
WEEKS ENDED
--------------------
April 29, May 1,
2000 1999
------------------------------------------------------------------------------------
<S> <C> <C>
NET SALES 100.0% 100.0%
OTHER INCOME, NET 0.4 0.4
------------------
100.4 100.4
------------------
COSTS AND EXPENSES:
Costs of merchandise sold 66.0 65.4
Selling, general and administrative 35.5 34.1
Depreciation and amortization 2.7 2.3
------------------
LOSS FROM OPERATIONS (3.9) (1.5)
INTEREST EXPENSE, NET 1.5 1.3
------------------
LOSS BEFORE INCOME TAXES (5.4) (2.8)
INCOME TAX BENEFIT (2.1) (1.1)
------------------
LOSS BEFORE EXTRAORDINARY ITEM (3.4) (1.7)
EXTRAORDINARY ITEM - loss on early extinguishment of debt -- (0.3)
------------------
NET LOSS (3.4)% (2.0)%
==================
</TABLE>
THIRTEEN WEEKS ENDED APRIL 29, 2000 COMPARED TO THIRTEEN WEEKS ENDED MAY 1, 1999
For the purposes of the following discussions, all references to "first quarter
of 2000" and "first quarter of 1999" are to the Company's thirteen week period
ended April 29, 2000 and May 1, 1999, respectively.
6
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THE BON-TON STORES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - (Continued)
NET SALES. Net sales were $152.1 million for the thirteen weeks ended April 29,
2000, an increase of 6.8% to the same period last year. Comparable store sales
decreased 1.0% for the period, with coats, cosmetics, home, dresses, mens
sportswear/furnishings, childrens and womens achieving sales increases during
the quarter.
OTHER INCOME, NET. Net other income, which consisted mainly of income from
leased departments, remained constant at 0.4% of net sales in the first quarter
of 2000.
COSTS AND EXPENSES. Gross margin, in the first quarter of 2000, increased $2.5
million compared to the first quarter of 1999 reflecting the increase in sales,
offset by an increase in the ratio of markdowns to sales. Gross profit as a
percentage of net sales decreased 0.6 percentage points to 34.0% for the
thirteen week period ended April 29, 2000 from 34.6% for the comparable period
last year.
Selling, general and administrative expenses for the first quarter of 2000 were
$54.0 million, or 35.5% of net sales, as compared to $48.6 million, or 34.1% of
net sales, in the first quarter of 1999. The increase in the first quarter of
2000 was primarily attributable to the cost of operating six new stores,
including additional payroll costs; rent expense; utilities and insurance costs,
and a decrease in income from credit operations.
Depreciation and amortization increased to 2.7% of net sales in the first
quarter of 2000 from 2.3% of net sales in the first quarter of 1999. The
increase was primarily due to $46.5 million of fixed asset additions in fiscal
1999.
LOSS FROM OPERATIONS. The loss from operations in the first quarter of 2000
amounted to $5.9 million, or 3.9% of net sales, compared to a loss from
operations of $2.1 million, or 1.5% of net sales, in the first quarter of 1999.
The Company sells receivables through its accounts receivable facility to
provide additional working capital. On a pro-forma basis, if the Company had
on-balance sheet financing, it would have reduced selling, general and
administrative expenses by $2.2 million in the first quarter of 2000 and $1.7
million in the first quarter of 1999. 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 a loss from operations of $3.7 million in the
first quarter of 2000 and loss from operations of $0.4 million for the first
quarter of 1999.
INTEREST EXPENSE, NET. Net interest expense increased $0.4 million to $2.3
million, or 1.5% of net sales, in the first quarter of 2000 from $1.9 million,
or 1.3% of net sales, in the first quarter of 1999. The additional interest
expense was primarily attributable to increased average borrowing levels and
rates.
EXTRAORDINARY ITEM. The Company amended its revolving credit facility in the
first quarter of 1999. As a result of this transaction, the Company incurred an
extraordinary charge of $0.4 million, net of a $0.2 million income tax benefit.
NET LOSS. The net loss in the first quarter of 2000 amounted to $5.1 million
compared to a net loss of $2.9 million in the first quarter of 1999.
Due to the seasonal nature of the Company's business, the results for the
current period are not necessarily indicative of the results that may be
achieved for the full fiscal year of 2000.
7
<PAGE> 8
THE BON-TON STORES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - (continued)
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital requirements are currently met through a
combination of cash, borrowings under its revolving credit facility and proceeds
from its accounts receivable facility. The following table summarizes material
measures of the Company's liquidity and capital resources:
<TABLE>
<CAPTION>
April 29, May 1,
(Dollars in millions) 2000 1999
---------------------------------------------------------------------
<S> <C> <C>
Working capital $ 176.1 $ 163.1
Current ratio 2.90:1 2.91:1
Funded debt to total capitalization 0.44:1 0.40:1
Unused availability under lines of credit $ 38.6 $ 51.2
</TABLE>
For the thirteen weeks ended April 29, 2000, net cash used in operating
activities amounted to $26.8 million as compared to $29.6 million for the
comparable period last year. The reduction in net cash used in the first quarter
of 2000 as compared to the first quarter of 1999 was primarily attributable to
the smaller working capital requirements partially offset by the increase in the
Company's loss. The reduced working capital requirements relates to a decrease
in the cash required for accounts payable, partially offset by an increase in
merchandise inventories.
Net cash used in investing activities amounted to $8.5 million in the first
quarter of 2000 compared to $14.4 million for the comparable period last year.
The reduction in net cash used for the thirteen week period ended April 29, 2000
primarily reflects a decrease in capital expenditures, partially offset by a
reduction in the net proceeds from the sale of accounts receivable.
Net cash provided by financing activities amounted to $37.6 million for the
first quarter of 2000 compared to $43.6 million for the comparable period of
1999. The decrease in cash provided by financing activities in the first quarter
of 2000 was attributable to increased payments on the Company's long-term debt,
partially offset by advances from the Company's revolving credit facilities.
The Company anticipates its cash flow from operations, supplemented by
borrowings under its revolving credit facility and proceeds from its accounts
receivable facility, will be sufficient to satisfy its operating cash
requirements.
"SAFE HARBOR" STATEMENT
Certain information included in this report and other materials filed or to be
filed by the Company with the Securities and Exchange Commission contains
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," "will," "plan," "expect," "anticipate,"
"estimate," "project," "intend" or other similar expressions, involve important
risks and uncertainties that could significantly affect anticipated 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. These risks and
uncertainties include, 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; competition within markets in which the Company's
stores are located; and the need for, and costs associated with, store
renovations and other capital expenditures.
8
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THE BON-TON STORES, INC. AND SUBSIDIARIES
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not believe its interest rate risks, as described in its 1999
Annual Report, have changed materially.
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no material developments in any legal proceedings since the
Company's disclosure in its 1999 Annual Report.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed pursuant to the requirements of Item 601 of
Regulation S-K:
<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C>
10.1 First Amendment to Employment Agreement with Heywood
Wilansky
10.2 2000 Performance-Based Compensation Plan for Heywood
Wilansky
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K filed during the quarter.
None.
9
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THE BON-TON STORES, INC. AND SUBSIDIARIES
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 9, 2000 BY: /s/ Michael L. Gleim
------------------- -------------------------------
Michael L. Gleim
Vice Chairman and
Chief Operating Officer
DATE: June 9, 2000 BY: /s/ James H. Baireuther
------------------- -------------------------------
James H. Baireuther
Executive Vice President and
Chief Financial Officer
10
