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 April 28, 2012 |
|
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 x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, 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 x 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. (Check one):
Large accelerated filer o |
|
Accelerated filer x |
|
|
|
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 x
As of May 25, 2012, there were 17,094,837 shares of Common Stock, $.01 par value, and 2,951,490 shares of Class A Common Stock, $.01 par value, outstanding.
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE BON-TON STORES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands except share and per share data) |
|
April 28, |
|
January 28, |
| ||
(Unaudited) |
|
2012 |
|
2012 |
| ||
Assets |
|
|
|
|
| ||
Current assets: |
|
|
|
|
| ||
Cash and cash equivalents |
|
$ |
14,295 |
|
$ |
14,272 |
|
Merchandise inventories |
|
718,295 |
|
699,504 |
| ||
Prepaid expenses and other current assets |
|
75,391 |
|
69,032 |
| ||
Total current assets |
|
807,981 |
|
782,808 |
| ||
Property, fixtures and equipment at cost, net of accumulated depreciation and amortization of $756,491 and $743,312 at April 28, 2012 and January 28, 2012, respectively |
|
661,788 |
|
677,133 |
| ||
Deferred income taxes |
|
12,871 |
|
12,385 |
| ||
Intangible assets, net of accumulated amortization of $53,934 and $51,975 at April 28, 2012 and January 28, 2012, respectively |
|
117,193 |
|
119,165 |
| ||
Other long-term assets |
|
24,993 |
|
26,712 |
| ||
Total assets |
|
$ |
1,624,826 |
|
$ |
1,618,203 |
|
|
|
|
|
|
| ||
Liabilities and Shareholders Equity |
|
|
|
|
| ||
Current liabilities: |
|
|
|
|
| ||
Accounts payable |
|
$ |
218,375 |
|
$ |
205,492 |
|
Accrued payroll and benefits |
|
36,080 |
|
31,636 |
| ||
Accrued expenses |
|
139,584 |
|
162,855 |
| ||
Current maturities of long-term debt |
|
7,118 |
|
8,066 |
| ||
Current maturities of obligations under capital leases |
|
3,979 |
|
4,365 |
| ||
Deferred income taxes |
|
17,146 |
|
16,231 |
| ||
Total current liabilities |
|
422,282 |
|
428,645 |
| ||
|
|
|
|
|
| ||
Long-term debt, less current maturities |
|
872,733 |
|
814,271 |
| ||
Obligations under capital leases, less current maturities |
|
55,730 |
|
56,677 |
| ||
Other long-term liabilities |
|
182,309 |
|
187,003 |
| ||
Total liabilities |
|
1,533,054 |
|
1,486,596 |
| ||
|
|
|
|
|
| ||
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 17,456,204 and 17,081,376 at April 28, 2012 and January 28, 2012, respectively |
|
175 |
|
171 |
| ||
Class A Common Stock authorized 20,000,000 shares at $0.01 par value; issued and outstanding shares of 2,951,490 at April 28, 2012 and January 28, 2012 |
|
30 |
|
30 |
| ||
Treasury stock, at cost 337,800 shares at April 28, 2012 and January 28, 2012 |
|
(1,387 |
) |
(1,387 |
) | ||
Additional paid-in capital |
|
155,716 |
|
155,400 |
| ||
Accumulated other comprehensive loss |
|
(72,760 |
) |
(74,356 |
) | ||
Retained earnings |
|
9,998 |
|
51,749 |
| ||
Total shareholders equity |
|
91,772 |
|
131,607 |
| ||
Total liabilities and shareholders equity |
|
$ |
1,624,826 |
|
$ |
1,618,203 |
|
The accompanying notes are an integral part of these consolidated financial statements.
THE BON-TON STORES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
THIRTEEN |
| ||||
|
|
WEEKS ENDED |
| ||||
(In thousands except per share data) |
|
April 28, |
|
April 30, |
| ||
(Unaudited) |
|
2012 |
|
2011 |
| ||
|
|
|
|
|
| ||
Net sales |
|
$ |
640,771 |
|
$ |
649,881 |
|
Other income |
|
13,526 |
|
14,600 |
| ||
|
|
654,297 |
|
664,481 |
| ||
|
|
|
|
|
| ||
Costs and expenses: |
|
|
|
|
| ||
Costs of merchandise sold |
|
421,216 |
|
419,267 |
| ||
Selling, general and administrative |
|
228,240 |
|
222,039 |
| ||
Depreciation and amortization |
|
22,187 |
|
24,513 |
| ||
Amortization of lease-related interests |
|
1,183 |
|
1,195 |
| ||
Loss from operations |
|
(18,529 |
) |
(2,533 |
) | ||
Interest expense, net |
|
20,573 |
|
23,305 |
| ||
Loss on extinguishment of debt |
|
1,169 |
|
9,450 |
| ||
|
|
|
|
|
| ||
Loss before income taxes |
|
(40,271 |
) |
(35,288 |
) | ||
Income tax provision |
|
509 |
|
700 |
| ||
|
|
|
|
|
| ||
Net loss |
|
$ |
(40,780 |
) |
$ |
(35,988 |
) |
|
|
|
|
|
| ||
Per share amounts |
|
|
|
|
| ||
Basic: |
|
|
|
|
| ||
Net loss |
|
$ |
(2.23 |
) |
$ |
(2.01 |
) |
|
|
|
|
|
| ||
Diluted: |
|
|
|
|
| ||
Net loss |
|
$ |
(2.23 |
) |
$ |
(2.01 |
) |
The accompanying notes are an integral part of these consolidated financial statements.
THE BON-TON STORES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
|
|
THIRTEEN |
| ||||
|
|
WEEKS ENDED |
| ||||
(In thousands) |
|
April 28, |
|
April 30, |
| ||
(Unaudited) |
|
2012 |
|
2011 |
| ||
|
|
|
|
|
| ||
Net loss |
|
$ |
(40,780 |
) |
$ |
(35,988 |
) |
Other comprehensive income, net of tax: |
|
|
|
|
| ||
Amortization of pension and postretirement benefit plans |
|
1,596 |
|
503 |
| ||
Amortization of cash flow derivatives |
|
|
|
452 |
| ||
Other comprehensive income |
|
1,596 |
|
955 |
| ||
Comprehensive loss |
|
$ |
(39,184 |
) |
$ |
(35,033 |
) |
The accompanying notes are an integral part of these consolidated financial statements.
THE BON-TON STORES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
THIRTEEN |
| ||||
|
|
WEEKS ENDED |
| ||||
(In thousands) |
|
April 28, |
|
April 30, |
| ||
(Unaudited) |
|
2012 |
|
2011 |
| ||
Cash flows from operating activities: |
|
|
|
|
| ||
Net loss |
|
$ |
(40,780 |
) |
$ |
(35,988 |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
| ||
Depreciation and amortization |
|
22,187 |
|
24,513 |
| ||
Amortization of lease-related interests |
|
1,183 |
|
1,195 |
| ||
Share-based compensation expense |
|
1,369 |
|
1,258 |
| ||
(Gain) loss on sale of property, fixtures and equipment |
|
(3,210 |
) |
6 |
| ||
Reclassifications of accumulated other comprehensive loss |
|
1,596 |
|
955 |
| ||
Loss on extinguishment of debt |
|
1,169 |
|
9,450 |
| ||
Amortization of deferred financing costs |
|
2,171 |
|
2,124 |
| ||
Amortization of deferred gain on sale of proprietary credit card portfolio |
|
(603 |
) |
(603 |
) | ||
Deferred income tax provision |
|
428 |
|
419 |
| ||
Changes in operating assets and liabilities: |
|
|
|
|
| ||
Increase in merchandise inventories |
|
(18,791 |
) |
(21,520 |
) | ||
(Increase) decrease in prepaid expenses and other current assets |
|
(6,359 |
) |
14,881 |
| ||
(Increase) decrease in other long-term assets |
|
(596 |
) |
678 |
| ||
Increase in accounts payable |
|
23,754 |
|
22,571 |
| ||
Decrease in accrued payroll and benefits and accrued expenses |
|
(12,609 |
) |
(31,318 |
) | ||
Increase in income taxes payable |
|
|
|
367 |
| ||
Decrease in other long-term liabilities |
|
(4,378 |
) |
(1,815 |
) | ||
Net cash used in operating activities |
|
(33,469 |
) |
(12,827 |
) | ||
|
|
|
|
|
| ||
Cash flows from investing activities: |
|
|
|
|
| ||
Capital expenditures |
|
(14,288 |
) |
(7,843 |
) | ||
Proceeds from sale of property, fixtures and equipment |
|
8,257 |
|
15 |
| ||
Net cash used in investing activities |
|
(6,031 |
) |
(7,828 |
) | ||
|
|
|
|
|
| ||
Cash flows from financing activities: |
|
|
|
|
| ||
Payments on long-term debt and capital lease obligations |
|
(106,061 |
) |
(214,689 |
) | ||
Proceeds from issuance of long-term debt |
|
161,216 |
|
244,684 |
| ||
Cash dividends paid |
|
(961 |
) |
|
| ||
Restricted shares forfeited in lieu of payroll taxes |
|
(1,067 |
) |
(3,555 |
) | ||
Proceeds from stock options exercised |
|
18 |
|
324 |
| ||
Deferred financing costs paid |
|
|
|
(5,861 |
) | ||
Decrease in book overdraft balances |
|
(13,622 |
) |
(2,991 |
) | ||
Net cash provided by financing activities |
|
39,523 |
|
17,912 |
| ||
|
|
|
|
|
| ||
Net increase (decrease) in cash and cash equivalents |
|
23 |
|
(2,743 |
) | ||
|
|
|
|
|
| ||
Cash and cash equivalents at beginning of period |
|
14,272 |
|
16,339 |
| ||
|
|
|
|
|
| ||
Cash and cash equivalents at end of period |
|
$ |
14,295 |
|
$ |
13,596 |
|
The accompanying notes are an integral part of these consolidated financial statements.
THE BON-TON STORES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
| |||||||
|
|
|
|
Class A |
|
|
|
Additional |
|
Other |
|
|
|
|
| |||||||
(In thousands except per share data) |
|
Common |
|
Common |
|
Treasury |
|
Paid-in |
|
Comprehensive |
|
Retained |
|
|
| |||||||
(Unaudited) |
|
Stock |
|
Stock |
|
Stock |
|
Capital |
|
Loss |
|
Earnings |
|
Total |
| |||||||
BALANCE AT JANUARY 28, 2012 |
|
$ |
171 |
|
$ |
30 |
|
$ |
(1,387 |
) |
$ |
155,400 |
|
$ |
(74,356 |
) |
$ |
51,749 |
|
$ |
131,607 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net loss |
|
|
|
|
|
|
|
|
|
|
|
(40,780 |
) |
(40,780 |
) | |||||||
Other comprehensive income |
|
|
|
|
|
|
|
|
|
1,596 |
|
|
|
1,596 |
| |||||||
Dividends to shareholders, $0.05 per share |
|
|
|
|
|
|
|
|
|
|
|
(971 |
) |
(971 |
) | |||||||
Restricted shares forfeited in lieu of payroll taxes |
|
(2 |
) |
|
|
|
|
(1,065 |
) |
|
|
|
|
(1,067 |
) | |||||||
Proceeds from stock options exercised |
|
|
|
|
|
|
|
18 |
|
|
|
|
|
18 |
| |||||||
Share-based compensation expense |
|
6 |
|
|
|
|
|
1,363 |
|
|
|
|
|
1,369 |
| |||||||
BALANCE AT APRIL 28, 2012 |
|
$ |
175 |
|
$ |
30 |
|
$ |
(1,387 |
) |
$ |
155,716 |
|
$ |
(72,760 |
) |
$ |
9,998 |
|
$ |
91,772 |
|
The accompanying notes are an integral part of these consolidated financial statements.
THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share data)
(Unaudited)
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. The Bon-Ton Stores, Inc. operates, through its subsidiaries, 272 stores in 23 states in the Northeast, Midwest and upper Great Plains under the Bon-Ton, Bergners, Boston Store, Carson Pirie Scott, Elder-Beerman, Herbergers 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 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 Companys 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 Companys Annual Report on Form 10-K for the fiscal year ended January 28, 2012.
All references to the first quarter of 2012 and the first quarter of 2011 are to the thirteen weeks ended April 28, 2012 and April 30, 2011, respectively. All references to 2012 are to the fifty-three weeks ending February 2, 2013; references to 2011 are to the fifty-two weeks ended January 28, 2012.
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 managements 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.
Previously 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, while eliminating the option to report other comprehensive income and its components in the statement of changes in equity. The provisions of ASU 2011-05 were adopted in the first quarter of 2012. The adoption of ASU 2011-05 did not impact the Companys consolidated financial position, results of operations or cash flows as it required only a change in the format of presentation.
THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share data)
(Unaudited)
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 on fair value measurements and disclosures. The amendments (1) clarify the FASBs 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 provisions of ASU 2011-04 were adopted in the first quarter of 2012. The adoption of ASU 2011-04 did not have a material impact on the Companys consolidated financial statements.
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 in the first quarter in each of 2012 and 2011:
|
|
THIRTEEN |
| ||||
|
|
WEEKS ENDED |
| ||||
|
|
April 28, |
|
April 30, |
| ||
|
|
2012 |
|
2011 |
| ||
|
|
|
|
|
| ||
Basic Loss Per Common Share |
|
|
|
|
| ||
Net loss |
|
$ |
(40,780 |
) |
$ |
(35,988 |
) |
Less: Income allocated to participating securities |
|
|
|
|
| ||
Net loss available to common shareholders |
|
$ |
(40,780 |
) |
$ |
(35,988 |
) |
|
|
|
|
|
| ||
Weighted average common shares outstanding |
|
18,287,395 |
|
17,943,590 |
| ||
|
|
|
|
|
| ||
Basic loss per common share |
|
$ |
(2.23 |
) |
$ |
(2.01 |
) |
|
|
|
|
|
| ||
Diluted Loss Per Common Share |
|
|
|
|
| ||
Net loss |
|
$ |
(40,780 |
) |
$ |
(35,988 |
) |
Less: Income allocated to participating securities |
|
|
|
|
| ||
Net loss available to common shareholders |
|
$ |
(40,780 |
) |
$ |
(35,988 |
) |
|
|
|
|
|
| ||
Weighted average common shares outstanding |
|
18,287,395 |
|
17,943,590 |
| ||
Common shares issuable - stock options |
|
|
|
|
| ||
Weighted average common shares outstanding assuming dilution |
|
18,287,395 |
|
17,943,590 |
| ||
|
|
|
|
|
| ||
Diluted loss per common share |
|
$ |
(2.23 |
) |
$ |
(2.01 |
) |
Due to the Companys net loss position, weighted average unvested restricted shares (participating securities) of 1,475,536 and 1,345,724 for the first quarter in each of 2012 and 2011, 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 968,943 and 1,022,812 for the first quarter in each of 2012 and 2011, respectively, were excluded from the calculation of diluted EPS as they would have been antidilutive. Certain of these stock option shares were excluded solely
THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share data)
(Unaudited)
due to the Companys net loss position. Had the Company reported net income for the first quarter in each of 2012 and 2011, these shares would have had an effect of 93,769 and 317,738 dilutive shares, respectively, for purposes of calculating diluted EPS.
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 Companys own assumptions.
The carrying values of the Companys 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 and estimated fair value of the Companys long-term debt, including current maturities but excluding capital leases, as of April 28, 2012 are as follows:
|
|
|
|
|
|
Fair Value Measurements Using |
| |||||||||
|
|
Carrying Value |
|
Total |
|
Quoted Prices |
|
Significant |
|
Significant |
| |||||
Senior notes |
|
$ |
464,000 |
|
$ |
383,960 |
|
$ |
383,960 |
|
$ |
|
|
$ |
|
|
Mortgage facilities |
|
231,781 |
|
235,650 |
|
|
|
|
|
235,650 |
| |||||
Senior secured credit facility |
|
184,070 |
|
184,070 |
|
|
|
|
|
184,070 |
| |||||
Total |
|
$ |
879,851 |
|
$ |
803,680 |
|
$ |
383,960 |
|
$ |
|
|
$ |
419,720 |
|
The carrying value and estimated fair value of the Companys long-term debt, including current maturities but excluding capital leases, as of January 28, 2012 are as follows:
|
|
|
|
|
|
Fair Value Measurements Using |
| |||||||||
|
|
Carrying Value |
|
Total |
|
Quoted Prices |
|
Significant |
|
Significant |
| |||||
Senior notes |
|
$ |
464,000 |
|
$ |
298,180 |
|
$ |
298,180 |
|
$ |
|
|
$ |
|
|
Mortgage facilities |
|
238,902 |
|
244,026 |
|
|
|
|
|
244,026 |
| |||||
Senior secured credit facility |
|
119,435 |
|
119,435 |
|
|
|
|
|
119,435 |
| |||||
Total |
|
$ |
822,337 |
|
$ |
661,641 |
|
$ |
298,180 |
|
$ |
|
|
$ |
363,461 |
|
THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share data)
(Unaudited)
The Level 3 fair value estimates are determined by a discounted cash flow analysis utilizing a discount rate the Company believes is appropriate and would be used by market participants. There was no change in the valuation technique used to determine the Level 3 fair value estimates.
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 Companys 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).
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.
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.
The following table summarizes the effect of the expired interest rate swaps on the consolidated statement of operations and AOCI, after being de-designated on December 4, 2009:
THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share data)
(Unaudited)
|
|
Location of Loss |
|
Amount of |
|
Location of Loss |
|
Amount of |
| ||
13 Weeks Ended April 30, 2011 |
|
Interest expense, net |
|
$ |
452 |
|
Interest expense, net |
|
$ |
56 |
|
5. SUPPLEMENTAL BALANCE SHEET INFORMATION
Prepaid expenses and other current assets were comprised of the following:
|
|
April 28, |
|
January 28, |
| ||
|
|
2012 |
|
2012 |
| ||
Prepaid expenses |
|
$ |
34,534 |
|
$ |
27,913 |
|
Other receivables |
|
40,857 |
|
41,119 |
| ||
Total |
|
$ |
75,391 |
|
$ |
69,032 |
|
6. SUPPLEMENTAL CASH FLOW INFORMATION
The following supplemental cash flow information is provided for the periods reported:
|
|
THIRTEEN |
| ||||
|
|
WEEKS ENDED |
| ||||
|
|
April 28, |
|
April 30, |
| ||
|
|
2012 |
|
2011 |
| ||
|
|
|
|
|
| ||
Cash paid for: |
|
|
|
|
| ||
Interest, net of amounts capitalized |
|
$ |
30,299 |
|
$ |
37,629 |
|
Income taxes, net of refunds received |
|
45 |
|
333 |
| ||
|
|
|
|
|
| ||
Non-cash investing and financing activities: |
|
|
|
|
| ||
Property, fixtures and equipment included in accrued expenses |
|
$ |
4,110 |
|
$ |
2,142 |
|
Declared dividends to shareholders included in accrued expenses |
|
971 |
|
947 |
|
7. EXIT OR DISPOSAL ACTIVITIES
The following table summarizes exit or disposal activities during the first quarter of 2012 related to targeted reductions in administrative and support functions and store closings in 2012 and 2011:
THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share data)
(Unaudited)
|
|
Termination |
|
Other Costs |
|
Total |
| |||
Balance as of January 28, 2012 |
|
$ |
612 |
|
$ |
|
|
$ |
612 |
|
Provision |
|
2,755 |
|
352 |
|
3,107 |
| |||
Payments |
|
(1,664 |
) |
(352 |
) |
(2,016 |
) | |||
Balance as of April 28, 2012 |
|
$ |
1,703 |
|
$ |
|
|
$ |
1,703 |
|
The above provision was 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 qualified defined benefit pension plan and various non-qualified supplemental pension plans (collectively, the Pension Plans). Net periodic benefit expense for the Pension Plans includes the following (income) and expense components:
|
|
THIRTEEN |
| ||||
|
|
WEEKS ENDED |
| ||||
|
|
April 28, |
|
April 30, |
| ||
|
|
2012 |
|
2011 |
| ||
Interest cost |
|
$ |
2,116 |
|
$ |
2,373 |
|
Expected return on plan assets |
|
(2,157 |
) |
(2,359 |
) | ||
Recognition of net actuarial loss |
|
1,690 |
|
628 |
| ||
Net periodic benefit expense |
|
$ |
1,649 |
|
$ |
642 |
|
During the first quarter of 2012, contributions of $3,001 were made to the Pension Plans. The Company anticipates contributing an additional $14,786 to fund the Pension Plans in 2012 for an annual total of $17,787.
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 for the Postretirement Benefit Plan includes the following (income) and expense components:
|
|
THIRTEEN |
| ||||
|
|
WEEKS ENDED |
| ||||
|
|
April 28, |
|
April 30, |
| ||
|
|
2012 |
|
2011 |
| ||
Interest cost |
|
$ |
35 |
|
$ |
45 |
|
Recognition of net actuarial gain |
|
(94 |
) |
(125 |
) | ||
Net periodic benefit income |
|
$ |
(59 |
) |
$ |
(80 |
) |
During the first quarter of 2012, the Company contributed $48 to fund the Postretirement Benefit Plan, and anticipates contributing an additional $563 in 2012 for a net annual total of $611.
THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share data)
(Unaudited)
9. LONG-TERM DEBT
On April 2, 2012, in connection with the sale of two of its stores located in Rochester, New York, the Company prepaid its outstanding indebtedness of $5,374 under related mortgage loan agreements. The Company was required to pay an additional $1,026 due to the early termination. In addition, $143 of unamortized deferred financing fees related to the mortgage agreements was accelerated on the date of termination. The required additional payment and accelerated deferred financing fees were recognized in loss on extinguishment of debt.
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 2011 and the first quarter of 2012 on all of the Companys net deferred tax assets. The Companys deferred tax asset valuation allowance totaled $163,815 and $147,148 at April 28, 2012 and January 28, 2012, respectively.
Given the Companys valuation allowance position, no tax benefit was recognized on the Companys loss before income taxes in the first quarter in each of 2012 and 2011. The income tax provision of $509 and $700 recorded in the first quarter in each of 2012 and 2011, respectively, reflects certain state income tax expense and recognition of deferred tax liabilities associated with indefinite-lived assets.
As a result of the deferred tax asset valuation allowance maintained throughout 2011 and the first quarter of 2012, the changes recognized within other comprehensive income in the first quarter in each of 2012 and 2011 were recorded on a gross basis.
As of April 28, 2012, it is reasonably possible that gross unrecognized tax benefits could decrease by $214 within the next 12 months due to the expiration of certain statutes of limitations.
11. CONTINGENCIES
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 Companys financial position, results of operations or liquidity.
12. 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 10¼% Senior Notes due 2014 (the Senior Notes), of which $464,000 aggregate principal amount was outstanding as of April 28, 2012. The Senior Notes are guaranteed on a senior unsecured basis by the Company and by each of the Companys subsidiaries, other than the Issuer, that is an Obligor under the Companys 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
THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share data)
(Unaudited)
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 Companys guarantor and non-guarantor subsidiaries as of April 28, 2012 and January 28, 2012 and for the first quarter in each of 2012 and 2011 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.
THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share data)
(Unaudited)
The Bon-Ton Stores, Inc.
Condensed Consolidating Balance Sheet
April 28, 2012
|
|
Bon-Ton |
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
(Parent |
|
|
|
Guarantor |
|
Non-Guarantor |
|
Consolidating |
|
Company |
| ||||||
|
|
Company) |
|
Issuer |
|
Subsidiaries |
|
Subsidiaries |
|
Eliminations |
|
Consolidated |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash and cash equivalents |
|
$ |
1 |
|
$ |
3,706 |
|
$ |
10,588 |
|
$ |
|
|
$ |
|
|
$ |
14,295 |
|
Merchandise inventories |
|
|
|
345,563 |
|
372,732 |
|
|
|
|
|
718,295 |
| ||||||
Prepaid expenses and other current assets |
|
|
|
66,953 |
|
8,281 |
|
416 |
|
(259 |
) |
75,391 |
| ||||||
Total current assets |
|
1 |
|
416,222 |
|
391,601 |
|
416 |
|
(259 |
) |
807,981 |
| ||||||
Property, fixtures and equipment at cost, net |
|
|
|
178,475 |
|
223,640 |
|
259,673 |
|
|
|
661,788 |
| ||||||
Deferred income taxes |
|
|
|
3,956 |
|
8,915 |
|
|
|
|
|
12,871 |
| ||||||
Intangible assets, net |
|
|
|
39,426 |
|
77,767 |
|
|
|
|
|
117,193 |
| ||||||
Investment in and advances to affiliates |
|
91,771 |
|
495,761 |
|
202,122 |
|
2,274 |
|
(791,928 |
) |
|
| ||||||
Other long-term assets |
|
|
|
20,238 |
|
1,209 |
|
3,546 |
|
|
|
24,993 |
| ||||||
Total assets |
|
$ |
91,772 |
|
$ |
1,154,078 |
|
$ |
905,254 |
|
$ |
265,909 |
|
$ |
(792,187 |
) |
$ |
1,624,826 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Liabilities and Shareholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Accounts payable |
|
$ |
|
|
$ |
218,375 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
218,375 |
|
Accrued payroll and benefits |
|
|
|
24,514 |
|
11,566 |
|
|
|
|
|
36,080 |
| ||||||
Accrued expenses |
|
|
|
59,787 |
|
78,929 |
|
1,127 |
|
(259 |
) |
139,584 |
| ||||||
Current maturities of long-term debt and obligations under capital leases |
|
|
|
1,129 |
|
2,850 |
|
7,118 |
|
|
|
11,097 |
| ||||||
Deferred income taxes |
|
|
|
6,964 |
|
10,182 |
|
|
|
|
|
17,146 |
| ||||||
Total current liabilities |
|
|
|
310,769 |
|
103,527 |
|
8,245 |
|
(259 |
) |
422,282 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Long-term debt and obligations under capital leases, less current maturities |
|
|
|
654,977 |
|
48,823 |
|
224,663 |
|
|
|
928,463 |
| ||||||
Other long-term liabilities |
|
|
|
126,323 |
|
54,481 |
|
1,505 |
|
|
|
182,309 |
| ||||||
Total liabilities |
|
|
|
1,092,069 |
|
206,831 |
|
234,413 |
|
(259 |
) |
1,533,054 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Shareholders equity |
|
91,772 |
|
62,009 |
|
698,423 |
|
31,496 |
|
(791,928 |
) |
91,772 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total liabilities and shareholders equity |
|
$ |
91,772 |
|
$ |
1,154,078 |
|
$ |
905,254 |
|
$ |
265,909 |
|
$ |
(792,187 |
) |
$ |
1,624,826 |
|
THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share data)
(Unaudited)
The Bon-Ton Stores, Inc.
Condensed Consolidating Balance Sheet
January 28, 2012
|
|
Bon-Ton |
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
(Parent |
|
|
|
Guarantor |
|
Non-Guarantor |
|
Consolidating |
|
Company |
| ||||||
|
|
Company) |
|
Issuer |
|
Subsidiaries |
|
Subsidiaries |
|
Eliminations |
|
Consolidated |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash and cash equivalents |
|
$ |
1 |
|
$ |
3,741 |
|
$ |
10,530 |
|
$ |
|
|
$ |
|
|
$ |
14,272 |
|
Merchandise inventories |
|
|
|
352,442 |
|
347,062 |
|
|
|
|
|
699,504 |
| ||||||
Prepaid expenses and other current assets |
|
|
|
56,496 |
|
12,379 |
|
547 |
|
(390 |
) |
69,032 |
| ||||||
Total current assets |
|
1 |
|
412,679 |
|
369,971 |
|
547 |
|
(390 |
) |
782,808 |
| ||||||
Property, fixtures and equipment at cost, net |
|
|
|
181,002 |
|
228,965 |
|
267,166 |
|
|
|
677,133 |
| ||||||
Deferred income taxes |
|
|
|
3,769 |
|
8,616 |
|
|
|
|
|
12,385 |
| ||||||
Intangible assets, net |
|
|
|
40,358 |
|
78,807 |
|
|
|
|
|
119,165 |
| ||||||
Investment in and advances to affiliates |
|
131,606 |
|
474,697 |
|
216,969 |
|
1,103 |
|
(824,375 |
) |
|
| ||||||
Other long-term assets |
|
|
|
22,168 |
|
1,189 |
|
3,355 |
|
|
|
26,712 |
| ||||||
Total assets |
|
$ |
131,607 |
|
$ |
1,134,673 |
|
$ |
904,517 |
|
$ |
272,171 |
|
$ |
(824,765 |
) |
$ |
1,618,203 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Liabilities and Shareholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Accounts payable |
|
$ |
|
|
$ |
205,492 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
205,492 |
|
Accrued payroll and benefits |
|
|
|
22,743 |
|
8,893 |
|
|
|
|
|
31,636 |
| ||||||
Accrued expenses |
|
|
|
75,503 |
|
85,736 |
|
2,006 |
|
(390 |
) |
162,855 |
| ||||||
Current maturities of long-term debt and obligations under capital leases |
|
|
|
1,568 |
|
2,797 |
|
8,066 |
|
|
|
12,431 |
| ||||||
Deferred income taxes |
|
|
|
6,581 |
|
9,650 |
|
|
|
|
|
16,231 |
| ||||||
Total current liabilities |
|
|
|
311,887 |
|
107,076 |
|
10,072 |
|
(390 |
) |
428,645 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Long-term debt and obligations under capital leases, less current maturities |
|
|
|
590,557 |
|
49,555 |
|
230,836 |
|
|
|
870,948 |
| ||||||
Other long-term liabilities |
|
|
|
130,082 |
|
55,444 |
|
1,477 |
|
|
|
187,003 |
| ||||||
Total liabilities |
|
|
|
1,032,526 |
|
212,075 |
|
242,385 |
|
(390 |
) |
1,486,596 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Shareholders equity |
|
131,607 |
|
102,147 |
|
692,442 |
|
29,786 |
|
(824,375 |
) |
131,607 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total liabilities and shareholders equity |
|
$ |
131,607 |
|
$ |
1,134,673 |
|
$ |
904,517 |
|
$ |
272,171 |
|
$ |
(824,765 |
) |
$ |
1,618,203 |
|
THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share data)
(Unaudited)
The Bon-Ton Stores, Inc.
Condensed Consolidating Statement of Operations
Thirteen Weeks Ended April 28, 2012
|
|
Bon-Ton |
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
(Parent |
|
|
|
Guarantor |
|
Non-Guarantor |
|
Consolidating |
|
Company |
| ||||||
|
|
Company) |
|
Issuer |
|
Subsidiaries |
|
Subsidiaries |
|
Eliminations |
|
Consolidated |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net sales |
|
$ |
|
|
$ |
278,398 |
|
$ |
362,373 |
|
$ |
|
|
$ |
|
|
$ |
640,771 |
|
Other income |
|
|
|
4,941 |
|
8,585 |
|
|
|
|
|
13,526 |
| ||||||
|
|
|
|
283,339 |
|
370,958 |
|
|
|
|
|
654,297 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Costs of merchandise sold |
|
|
|
183,847 |
|
237,369 |
|
|
|
|
|
421,216 |
| ||||||
Selling, general and administrative |
|
|
|
103,736 |
|
135,030 |
|
(3,541 |
) |
(6,985 |
) |
228,240 |
| ||||||
Depreciation and amortization |
|
|
|
8,315 |
|
11,042 |
|
2,830 |
|
|
|
22,187 |
| ||||||
Amortization of lease-related interests |
|
|
|
529 |
|
654 |
|
|
|
|
|
1,183 |
| ||||||
(Loss) income from operations |
|
|
|
(13,088 |
) |
(13,137 |
) |
711 |
|
6,985 |
|
(18,529 |
) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Intercompany rental and royalty income |
|
|
|
|
|
|
|
6,985 |
|
(6,985 |
) |
|
| ||||||
Equity in losses of subsidiaries |
|
(40,271 |
) |
(13,088 |
) |
|
|
|
|
53,359 |
|
|
| ||||||
Interest expense, net |
|
|
|
(14,095 |
) |
(2,640 |
) |
(3,838 |
) |
|
|
(20,573 |
) | ||||||
Loss on extinguishment of debt |
|
|
|
|
|
|
|
(1,169 |
) |
|
|
(1,169 |
) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
(Loss) income before income taxes |
|
(40,271 |
) |
(40,271 |
) |
(15,777 |
) |
2,689 |
|
53,359 |
|
(40,271 |
) | ||||||
Income tax provision |
|
509 |
|
509 |
|
242 |
|
|
|
(751 |
) |
509 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net (loss) income |
|
$ |
(40,780 |
) |
$ |
(40,780 |
) |
$ |
(16,019 |
) |
$ |
2,689 |
|
$ |
54,110 |
|
$ |
(40,780 |
) |
The Bon-Ton Stores, Inc.
Condensed Consolidating Statement of Comprehensive (Loss) Income
Thirteen Weeks Ended April 28, 2012
|
|
Bon-Ton |
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
(Parent |
|
|
|
Guarantor |
|
Non-Guarantor |
|
Consolidating |
|
Company |
| ||||||
|
|
Company) |
|
Issuer |
|
Subsidiaries |
|
Subsidiaries |
|
Eliminations |
|
Consolidated |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net (loss) income |
|
$ |
(40,780 |
) |
$ |
(40,780 |
) |
$ |
(16,019 |
) |
$ |
2,689 |
|
$ |
54,110 |
|
$ |
(40,780 |
) |
Other comprehensive income, net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Amortization of pension and postretirement benefit plans |
|
1,596 |
|
1,596 |
|
|
|
|
|
(1,596 |
) |
1,596 |
| ||||||
Other comprehensive income |
|
1,596 |
|
1,596 |
|
|
|
|
|
(1,596 |
) |
1,596 |
| ||||||
Comprehensive (loss) income |
|
$ |
(39,184 |
) |
$ |
(39,184 |
) |
$ |
(16,019 |
) |
$ |
2,689 |
|
$ |
52,514 |
|
$ |
(39,184 |
) |
THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share data)
(Unaudited)
The Bon-Ton Stores, Inc.
Condensed Consolidating Statement of Operations
Thirteen Weeks Ended April 30, 2011
|
|
Bon-Ton |
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
(Parent |
|
|
|
Guarantor |
|
Non-Guarantor |
|
Consolidating |
|
Company |
| ||||||
|
|
Company) |
|
Issuer |
|
Subsidiaries |
|
Subsidiaries |
|
Eliminations |
|
Consolidated |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net sales |
|
$ |
|
|
$ |
282,229 |
|
$ |
367,652 |
|
$ |
|
|
$ |
|
|
$ |
649,881 |
|
Other income |
|
|
|
6,030 |
|
8,570 |
|
|
|
|
|
14,600 |
| ||||||
|
|
|
|
288,259 |
|
376,222 |
|
|
|
|
|
664,481 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Costs of merchandise sold |
|
|
|
181,973 |
|
237,294 |
|
|
|
|
|
419,267 |
| ||||||
Selling, general and administrative |
|
|
|
100,977 |
|
129,809 |
|
25 |
|
(8,772 |
) |
222,039 |
| ||||||
Depreciation and amortization |
|
|
|
9,286 |
|
12,287 |
|
2,940 |
|
|
|
24,513 |
| ||||||
Amortization of lease-related interests |
|
|
|
617 |
|
578 |
|
|
|
|
|
1,195 |
| ||||||
Loss from operations |
|
|
|
(4,594 |
) |
(3,746 |
) |
(2,965 |
) |
8,772 |
|
(2,533 |
) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Intercompany rental and royalty income |
|
|
|
|
|
1,585 |
|
7,187 |
|
(8,772 |
) |
|
| ||||||
Equity in losses of subsidiaries |
|
(35,288 |
) |
(4,918 |
) |
|
|
|
|
40,206 |
|
|
| ||||||
Interest expense, net |
|
|
|
(16,326 |
) |
(2,975 |
) |
(4,004 |
) |
|
|
(23,305 |
) | ||||||
Loss on extinguishment of debt |
|
|
|
(9,450 |
) |
|
|
|
|
|
|
(9,450 |
) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
(Loss) income before income taxes |
|
(35,288 |
) |
(35,288 |
) |
(5,136 |
) |
218 |
|
40,206 |
|
(35,288 |
) | ||||||
Income tax provision |
|
700 |
|
700 |
|
365 |
|
|
|
(1,065 |
) |
700 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net (loss) income |
|
$ |
(35,988 |
) |
$ |
(35,988 |
) |
$ |
(5,501 |
) |
$ |
218 |
|
$ |
41,271 |
|
$ |
(35,988 |
) |
The Bon-Ton Stores, Inc.
Condensed Consolidating Statement of Comprehensive (Loss) Income
Thirteen Weeks Ended April 30, 2011
|
|
Bon-Ton |
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
(Parent |
|
|
|
Guarantor |
|
Non-Guarantor |
|
Consolidating |
|
Company |
| ||||||
|
|
Company) |
|
Issuer |
|
Subsidiaries |
|
Subsidiaries |
|
Eliminations |
|
Consolidated |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net (loss) income |
|
$ |
(35,988 |
) |
$ |
(35,988 |
) |
$ |
(5,501 |
) |
$ |
218 |
|
$ |
41,271 |
|
$ |
(35,988 |
) |
Other comprehensive income, net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Amortization of pension and postretirement benefit plans |
|
503 |
|
503 |
|
|
|
|
|
(503 |
) |
503 |
| ||||||
Amortization of cash flow derivatives |
|
452 |
|
452 |
|
|
|
|
|
(452 |
) |
452 |
| ||||||
Other comprehensive income |
|
955 |
|
955 |
|
|
|
|
|
(955 |
) |
955 |
| ||||||
Comprehensive (loss) income |
|
$ |
(35,033 |
) |
$ |
(35,033 |
) |
$ |
(5,501 |
) |
$ |
218 |
|
$ |
40,316 |
|
$ |
(35,033 |
) |
THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share data)
(Unaudited)
The Bon-Ton Stores, Inc.
Condensed Consolidating Statement of Cash Flows
Thirteen Weeks Ended April 28, 2012
|
|
Bon-Ton |
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
(Parent |
|
|
|
Guarantor |
|
Non-Guarantor |
|
Consolidating |
|
Company |
| ||||||
|
|
Company) |
|
Issuer |
|
Subsidiaries |
|
Subsidiaries |
|
Eliminations |
|
Consolidated |
| ||||||
Net cash provided by (used in) operating activities |
|
$ |
2,028 |
|
$ |
(39,340 |
) |
$ |
4,911 |
|
$ |
891 |
|
$ |
(1,959 |
) |
$ |
(33,469 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Capital expenditures |
|
|
|
(10,106 |
) |
(4,182 |
) |
|
|
|
|
(14,288 |
) | ||||||
Intercompany investing activity |
|
(18 |
) |
(1 |
) |
|
|
|
|
19 |
|
|
| ||||||
Proceeds from sale of property, fixtures and equipment |
|
|
|
14 |
|
9 |
|
8,234 |
|
|
|
8,257 |
| ||||||
Net cash (used in) provided by investing activities |
|
(18 |
) |
(10,093 |
) |
(4,173 |
) |
8,234 |
|
19 |
|
(6,031 |
) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Payments on long-term debt and capital lease obligations |
|
|
|
(97,235 |
) |
(680 |
) |
(8,146 |
) |
|
|
(106,061 |
) | ||||||
Proceeds from issuance of long-term debt |
|
|
|
161,216 |
|
|
|
|
|
|
|
161,216 |
| ||||||
Intercompany financing activity |
|
|
|
(961 |
) |
|
|
(979 |
) |
1,940 |
|
|
| ||||||
Cash dividends paid |
|
(961 |
) |
|
|
|
|
|
|
|
|
(961 |
) | ||||||
Restricted shares forfeited in lieu of payroll taxes |
|
(1,067 |
) |
|
|
|
|
|
|
|
|
(1,067 |
) | ||||||
Proceeds from stock options exercised |
|
18 |
|
|
|
|
|
|
|
|
|
18 |
| ||||||
Decrease in book overdraft balances |
|
|
|
(13,622 |
) |
|
|
|
|
|
|
(13,622 |
) | ||||||
Net cash (used in) provided by financing activities |
|
(2,010 |
) |
49,398 |
|
(680 |
) |
(9,125 |
) |
1,940 |
|
39,523 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net (decrease) increase in cash and cash equivalents |
|
|
|
(35 |
) |
58 |
|
|
|
|
|
23 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash and cash equivalents at beginning of period |
|
1 |
|
3,741 |
|
10,530 |
|
|
|
|
|
14,272 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash and cash equivalents at end of period |
|
$ |
1 |
|
$ |
3,706 |
|
$ |
10,588 |
|
$ |
|
|
$ |
|
|
$ |
14,295 |
|
THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share data)
(Unaudited)
The Bon-Ton Stores, Inc.
Condensed Consolidating Statement of Cash Flows
Thirteen Weeks Ended April 30, 2011
|
|
Bon-Ton |
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
(Parent |
|
|
|
Guarantor |
|
Non-Guarantor |
|
Consolidating |
|
Company |
| ||||||
|
|
Company) |
|
Issuer |
|
Subsidiaries |
|
Subsidiaries |
|
Eliminations |
|
Consolidated |
| ||||||
Net cash provided by (used in) operating activities |
|
$ |
3,555 |
|
$ |
(20,267 |
) |
$ |
5,170 |
|
$ |
3,831 |
|
$ |
(5,116 |
) |
$ |
(12,827 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Capital expenditures |
|
|
|
(5,605 |
) |
(2,238 |
) |
|
|
|
|
(7,843 |
) | ||||||
Intercompany investing activity |
|
(324 |
) |
|
|
|
|
|
|
324 |
|
|
| ||||||
Proceeds from sale of property, fixtures and equipment |
|
|
|
4 |
|
11 |
|
|
|
|
|
15 |
| ||||||
Net cash used in investing activities |
|
(324 |
) |
(5,601 |
) |
(2,227 |
) |
|
|
324 |
|
(7,828 |
) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Payments on long-term debt and capital lease obligations |
|
|
|
(212,308 |
) |
(631 |
) |
(1,750 |
) |
|
|
(214,689 |
) | ||||||
Proceeds from issuance of long-term debt |
|
|
|
244,684 |
|
|
|
|
|
|
|
244,684 |
| ||||||
Intercompany financing activity |
|
|
|
|
|
(2,711 |
) |
(2,081 |
) |
4,792 |
|
|
| ||||||
Restricted shares forfeited in lieu of payroll taxes |
|
(3,555 |
) |
|
|
|
|
|
|
|
|
(3,555 |
) | ||||||
Proceeds from stock options exercised |
|
324 |
|
|
|
|
|
|
|
|
|
324 |
| ||||||
Deferred financing costs paid |
|
|
|
(5,861 |
) |
|
|
|
|
|
|
(5,861 |
) | ||||||
Decrease in book overdraft balances |
|
|
|
(2,991 |
) |
|
|
|
|
|
|
(2,991 |
) | ||||||
Net cash (used in) provided by financing activities |
|
(3,231 |
) |
23,524 |
|
(3,342 |
) |
(3,831 |
) |
4,792 |
|
17,912 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net decrease in cash and cash equivalents |
|
|
|
(2,344 |
) |
(399 |
) |
|
|
|
|
(2,743 |
) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash and cash equivalents at beginning of period |
|
1 |
|
5,841 |
|
10,497 |
|
|
|
|
|
16,339 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash and cash equivalents at end of period |
|
$ |
1 |
|
$ |
3,497 |
|
$ |
10,098 |
|
$ |
|
|
$ |
|
|
$ |
13,596 |
|
13. SUBSEQUENT EVENTS
On May 22, 2012, the Company declared a quarterly cash dividend of $0.05 per share on shares of Class A common stock and common stock, payable August 1, 2012 to shareholders of record as of July 13, 2012.
On June 4, 2012, the Company announced the commencement of an offer to certain eligible note holders to exchange its outstanding 10¼% Senior Notes due 2014 (the Old Notes) for newly issued 105/8% Second Lien Senior Secured Notes due 2017 (the New Notes) upon the terms and conditions set forth in the Confidential Offering Memorandum and Consent Solicitation Statement dated June 4, 2012 (the Exchange Offer). The New Notes will be secured by a second-priority lien on substantially all of the current and future assets of the Company and will mature on July 15, 2017. There is no minimum amount of Old Notes that must be tendered in the Exchange Offer. The Exchange Offer will expire on July 3, 2012, unless extended.
THE BON-TON STORES, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For purposes of the following discussion, references to the first quarter of 2012 and the first quarter of 2011 are to the thirteen-week periods ended April 28, 2012 and April 30, 2011, respectively. References to 2012 are to the fifty-three week period ending February 2, 2013; references to 2011 are to the fifty-two week period ended January 28, 2012. 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 272 stores in 23 states in the Northeast, Midwest and upper Great Plains under the Bon-Ton, Bergners, Boston Store, Carson Pirie Scott, Elder-Beerman, Herbergers and Younkers nameplates and, in the Detroit, Michigan area, under the Parisian nameplate, encompassing a total of approximately 25 million square feet.
We operate in the department store segment of the U.S. retail industry, a highly competitive environment. The department store industry continues to evolve in response to consolidation among merchandise vendors as well as 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.
First Quarter Summary and 2012 Guidance
Our first quarter performance was disappointing in both top- and bottom-line results. Weak sales, particularly in April, prompted aggressive markdowns, which resulted in the erosion of gross margin in the period. We are taking actions to address our operating performance and are focused on strategies to accelerate sales growth and improve our financial results. Initiatives include the continued refinement of our merchandise assortment, reallocation of selling space to higher growth merchandise categories, renewed focus on our smaller markets, enhancements to our marketing programs, growth in sales and profitability in our online operations and improved efficiencies in our operating structure. We have enacted reductions in administrative and support functions that are expected to reduce expenses in excess of $30 million on an annualized basis, with estimated cost savings of $20 million in 2012.
On May 17, 2012, we revised our (loss) earnings per diluted share guidance to a range of $(0.95) to $0.50 and provided the following assumptions with respect to our revised fiscal 2012 guidance:
· a comparable store sales performance ranging from a decrease of 1.5% to an increase of 1%;
· a gross margin rate ranging from even with to 50 basis points higher than the 2011 rate of 36.0%;
· a $7 million to $12 million increase in SG&A expense from the 2011 expense of $936.1 million (including the expense reductions noted above, related severance costs and the addition of the 53rd week in 2012);
· a tax rate of 39%;
· capital expenditures not to exceed $70 million, net of external contributions; and
· an estimated 19 million to 20 million average diluted shares outstanding.
We are finding cost pressures on our inventory have moderated since their peak in 2011. In our private brands, where we have greater control over the production and manufacturing of merchandise, we will continue to diversify production to lower cost markets. We expect slight cost reductions on our second
quarter deliveries, and we anticipate cost decreases of approximately five to ten percent in fall 2012 from fall 2011.
Earnings per share guidance does not reflect any (non-cash) income tax benefit of reducing the valuation allowance currently recorded for deferred tax assets. The amount of such adjustment, if any, cannot be determined until our 2012 results are final.
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 |
| ||
|
|
WEEKS ENDED |
| ||
|
|
April 28, |
|
April 30, |
|
|
|
2012 |
|
2011 |
|
Net sales |
|
100.0 |
% |
100.0 |
% |
Other income |
|
2.1 |
|
2.2 |
|
|
|
102.1 |
|
102.2 |
|
Costs and expenses: |
|
|
|
|
|
Costs of merchandise sold |
|
65.7 |
|
64.5 |
|
Selling, general and administrative |
|
35.6 |
|
34.2 |
|
Depreciation and amortization |
|
3.5 |
|
3.8 |
|
Amortization of lease-related interests |
|
0.2 |
|
0.2 |
|
Loss from operations |
|
(2.9 |
) |
(0.4 |
) |
Interest expense, net |
|
3.2 |
|
3.6 |
|
Loss on extinguishment of debt |
|
0.2 |
|
1.5 |
|
Loss before income taxes |
|
(6.3 |
) |
(5.4 |
) |
Income tax provision |
|
0.1 |
|
0.1 |
|
Net loss |
|
(6.4 |
)% |
(5.5 |
)% |
First Quarter of 2012 Compared with First Quarter of 2011
Net sales: Net sales in the first quarter of 2012 were $640.8 million, a decrease of $9.1 million or 1.4% as compared with $649.9 million of net sales in the first quarter of 2011. Comparable store net sales decreased 1.3% in the period as we were unable to sustain our initial momentum from warmer than normal temperatures early in the quarter that aided sales. Additionally, while a major promotional event, which had been shifted to the end of April this year from February last year, exceeded the prior years results, we believe poor execution of promotional campaigns earlier in April suppressed sales until the event, hampering sales for the month. Investments in our eCommerce business resulted in significantly higher eCommerce sales in the period.
The best performing merchandise categories in the first quarter of 2012 were Footwear, Hard Home (included in Home) and Cosmetics. Footwear sales benefited from continued strategic capital investment for expansion and remodels in certain stores; we will similarly employ capital in additional stores in 2012 and have identified other locations at which the footwear assortment will be expanded. Hard Home achieved success in sales of small electronics and basic housewares. Cosmetics sales increases were driven by strength in womens and mens fragrances and treatment lines.
Moderate Sportswear and the special-size areas of Petites and Womens (all included in Womens Apparel) performed poorly in the first quarter of 2012 as sales in these merchandise categories were adversely impacted by reduced levels of inventory in traditional product. We had focused our efforts in 2011 on developing a stronger updated business and, while the updated categories are performing well, our results suggest a more balanced mix of traditional and updated goods is optimal. We have responded with an aggressive pursuit of traditional product, including opening price points, to recapture sales and we believe new receipts at month-end April and second quarter deliveries will strengthen our inventory position in these merchandise categories.
Other income: Other income, which includes income from revenues received under our credit card program agreement, leased departments and other customer revenues, was $13.5 million, or 2.1% of net sales, in the first quarter of 2012 as compared with $14.6 million, or 2.2% of net sales, in the first quarter of 2011. The decrease primarily reflects reduced revenues from our proprietary credit card operations.
Costs and expenses: Gross margin in the first quarter of 2012 was $219.6 million as compared with $230.6 million in the comparable prior year period. The $11.1 million decrease reflects both reductions in sales volume and gross margin rate. Gross margin as a percentage of net sales decreased 120 basis points to 34.3% in the first quarter of 2012 from 35.5% in the same period last year. The decrease is largely due to increased net markdowns in response to slow sales in the period.
SG&A expense in the first quarter of 2012 was $228.2 million as compared with $222.0 million in the first quarter of 2011, an increase of $6.2 million. The increase is largely the result of higher store expenses, marketing expenditures, insurance costs, retirement benefits and severance costs related to targeted reductions in administrative and support functions, partially offset by a $3.2 million gain on the sale of two of our stores in Rochester, New York. The current year expense rate increased 150 basis points to 35.6% of net sales, compared with 34.2% in the same period last year.
Depreciation and amortization expense and amortization of lease-related interests decreased $2.3 million, to $23.4 million, in the first quarter of 2012 from $25.7 million in the first quarter of 2011, primarily due to a reduced asset base.
Interest expense, net: Net interest expense was $20.6 million, or 3.2% of net sales, in the first quarter of 2012, compared with $23.3 million, or 3.6% of net sales, in the first quarter of 2011. The $2.7 million decrease primarily reflects reduced borrowing levels and lower borrowing rates.
Loss on extinguishment of debt: In the first quarter of 2012, we recorded a $1.2 million loss on extinguishment of debt related to the prepayment of mortgage debt associated with the sale of two of our stores in Rochester, New York. 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 second lien term loan and the amendment of our revolving credit facility.
Income tax provision: The effective income tax rate in the first quarter in each of 2012 and 2011 largely reflects the Companys valuation allowance position against all net deferred tax assets. The income tax provision of $0.5 million and $0.7 million recorded in the first quarter in each of 2012 and 2011, respectively, reflects certain state income tax expense and recognition of deferred tax liabilities associated with indefinite-lived assets.
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 |
| ||||
|
|
WEEKS ENDED |
| ||||
(In thousands) |
|
April 28, |
|
April 30, |
| ||
(Unaudited) |
|
2012 |
|
2011 |
| ||
|
|
|
|
|
| ||
EBITDA |
|
$ |
4,841 |
|
$ |
23,175 |
|
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 companys 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 net loss as presented in our consolidated statements of operations (prepared in accordance with GAAP) to EBITDA:
|
|
THIRTEEN |
| ||||
|
|
WEEKS ENDED |
| ||||
(In thousands) |
|
April 28, |
|
April 30, |
| ||
(Unaudited) |
|
2012 |
|
2011 |
| ||
|
|
|
|
|
| ||
Net loss |
|
$ |
(40,780 |
) |
$ |
(35,988 |
) |
Adjustments: |
|
|
|
|
| ||
Income tax provision |
|
509 |
|
700 |
| ||
Loss on extinguishment of debt |
|
1,169 |
|
9,450 |
| ||
Interest expense, net |
|
20,573 |
|
23,305 |
| ||
Depreciation and amortization |
|
22,187 |
|
24,513 |
| ||
Amortization of lease-related interests |
|
1,183 |
|
1,195 |
| ||
|
|
|
|
|
| ||
EBITDA |
|
$ |
4,841 |
|
$ |
23,175 |
|
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 $625.0 million senior secured 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 our senior notes (March 15, 2014) and the mortgage loan facility (March 6, 2016).
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 April 2, 2012, in connection with the sale of two of our stores located in Rochester, New York, we prepaid outstanding indebtedness of $5.4 million under related mortgage loan agreements. We were required to pay an additional $1.0 million due to the early termination. In addition, $0.1 million of unamortized deferred financing fees related to the mortgage agreements was accelerated on the date of termination. The required additional payment and accelerated deferred financing fees were recognized in loss on extinguishment of debt.
At April 28, 2012, we had $14.3 million in cash and cash equivalents and $400.3 million available under our Second Amended Revolving Credit Facility (before taking into account the minimum borrowing availability covenant under such facility). The excess availability compares well with the $411.3 million available as of the comparable prior year period, particularly in light of our using approximately $27 million of available funds to repurchase $46.0 million principal amount of senior notes in the fourth quarter of 2011. 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.
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.
Cash provided by (used in) our operating, investing and financing activities is summarized as follows:
|
|
THIRTEEN |
| ||||
|
|
WEEKS ENDED |
| ||||
|
|
April 28, |
|
April 30, |
| ||
(Dollars in millions) |
|
2012 |
|
2011 |
| ||
|
|
|
|
|
| ||
Operating activities |
|
$ |
(33.5 |
) |
$ |
(12.8 |
) |
Investing activities |
|
(6.0 |
) |
(7.8 |
) | ||
Financing activities |
|
39.5 |
|
17.9 |
| ||
Net cash used in operating activities was $33.5 million and $12.8 million in the first quarter in each of 2012 and 2011, respectively. The increase in cash outflow in the current year primarily reflects a decline in
business performance, resulting in an increase in the current year loss. The first quarter of 2012 also reflects increased working capital requirements, primarily due to increased period-end accounts receivable resulting from a major promotional event in the last week of April in the current year (held in February in 2011), partially offset by favorable changes in accrued expenses.
Net cash used in investing activities in the current year primarily reflects capital expenditures for store renovations to support our strategic initiatives and information technology. Capital expenditures totaled $14.3 million and $7.8 million in the first quarter in each of 2012 and 2011, respectively; these expenditures do not reflect reductions for external contributions of $0.2 million in the first quarter of 2012. We anticipate our 2012 capital expenditures will not exceed $72.5 million (which does not reflect external contributions of $2.5 million, reducing budgeted net capital investments to $70.0 million). Cash flows from investing activities in the first quarter of 2012 were also impacted by proceeds of $8.3 million from the sale of property, fixtures and equipment, including proceeds from the sale of the two Rochester, New York stores.
Net cash provided by financing activities was $39.5 million and $17.9 million in the first quarter in each of 2012 and 2011, respectively. The change primarily reflects increased net borrowings due to increased cash requirements for current year operating activities and a decreased book overdraft balance, partially offset by reduced cash needs for investing activities and financing fees.
Aside from planned capital expenditures, the Companys primary cash requirements will be to service debt and finance working capital increases during peak selling seasons.
On May 1, 2012, we paid a quarterly cash dividend of $0.05 per share on shares of Class A common stock and common stock to shareholders of record as of April 13, 2012. Additionally, on May 22, 2012, we declared a quarterly cash dividend of $0.05 per share, payable August 1, 2012 to shareholders of record as of July 13, 2012. Our Board of Directors may consider dividends in subsequent periods as it deems appropriate.
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.
As of January 28, 2012, approximately 32% of our inventories were valued using a first-in, first-out cost basis and approximately 68% 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 $37.2 million as of April 28, 2012 and January 28, 2012. 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. 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. To the extent the reimbursements are for specific, incremental and identifiable advertising or payroll costs incurred to sell the vendors products and do not exceed the costs incurred, they are recognized as a reduction of SG&A expense. 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.
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 $4.3 million and $3.8 million at April 28, 2012 and January 28, 2012, 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.
We evaluate our deferred tax assets each reporting period, including assessment of the Companys cumulative income or loss over the prior three-year period, to determine if valuation allowances are required. With respect to our reviews during 2011, 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 review in the first quarter of 2012, 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 $163.8 million and $147.1 million at April 28, 2012 and January 28, 2012, 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 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 $661.8 million and $677.1 million at April 28, 2012 and January 28, 2012, 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.
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 $117.2 million and $119.2 million at April 28, 2012 and January 28, 2012, respectively. Our intangible assets at April 28, 2012 are principally comprised of $56.2 million of lease interests that relate to below-market-rate leases and $61.0 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 April 28, 2012, trade names and private label brand names of $51.4 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 non-qualified defined benefit supplementary pension plan to certain key executives. Through acquisitions, we acquired a qualified defined benefit pension plan and assumed the liabilities of non-qualified defined benefit 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 plans assets.
The discount rate assumption is evaluated annually. We utilize the Citibank Pension Discount Curve to develop the discount rate assumption. A single constant discount rate is developed based on the expected timing of the benefit payments.
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, 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. Losses of asset values of the defined benefit pension plan may require us to fund obligations earlier than we forecasted in order to meet minimum federal government requirements, which would have a negative impact on cash flows from 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, would, will, plan, expect, believe, 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 Companys 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, including initiatives to reduce expenses and improve efficiency; operational disruptions; unsuccessful marketing initiatives; the failure to successfully implement our key strategies, including initiatives to improve our merchandising, marketing and operations; adverse outcomes in litigation; 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 Companys ability to favorably adjust the valuation allowance on deferred tax assets; and the financial condition of mall operators. Additional factors that could cause the Companys actual results to differ from those contained in these forward-looking statements are discussed in greater detail under Item 1A of the Companys Form 10-K filed with the Securities and Exchange Commission.
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 38 of our 2011 Annual Report on Form 10-K. There have been no material changes in our exposures, risk management strategies, or hedging positions since January 28, 2012.
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 Commissions 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
There were no changes to our internal controls over financial reporting that occurred during the thirteen weeks ended April 28, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II: OTHER INFORMATION
ITEM 6. EXHIBITS
(a) The following exhibits are filed pursuant to the requirements of Item 601 of Regulation S-K:
10.1 |
|
Employment Agreement with Anthony Buccina (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on April 30, 2012) |
31.1* |
|
Certification of Brendan L. Hoffman |
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 April 28, 2012, filed on June 6, 2012, formatted in XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Loss, (iv) Consolidated Statements of Cash Flows, (v) Consolidated Statement of Shareholders Equity and (vi) 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. |
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 6, 2012 |
|
BY: |
/s/ Brendan L. Hoffman | ||
|
|
|
Brendan L. Hoffman | |||
|
|
|
President and | |||
|
|
|
Chief Executive Officer | |||
|
|
|
| |||
DATE: |
June 6, 2012 |
|
BY: |
/s/ Keith E. Plowman | ||
|
|
|
Keith E. Plowman | |||
|
|
|
Executive Vice President, | |||
|
|
|
Chief Financial Officer and | |||
|
|
|
Principal Accounting Officer | |||
EXHIBIT 31.1
CERTIFICATION OF BRENDAN L. HOFFMAN
I, Brendan L. Hoffman, certify that:
1) I have reviewed this Quarterly Report on Form 10-Q of The Bon-Ton Stores, Inc.;
2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4) The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5) The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
DATE: June 6, 2012 |
By: |
/s/ Brendan L. Hoffman |
|
|
Brendan L. Hoffman |
|
|
President and Chief |
|
|
Executive Officer and Director |
EXHIBIT 31.2
CERTIFICATION OF KEITH E. PLOWMAN
I, Keith E. Plowman, certify that:
1) I have reviewed this Quarterly Report on Form 10-Q of The Bon-Ton Stores, Inc.;
2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4) The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5) The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
DATE: June 6, 2012 |
By: |
/s/ Keith E. Plowman |
|
|
Keith E. Plowman |
|
|
Executive Vice President, |
|
|
Chief Financial Officer and |
|
|
Principal Accounting Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of The Bon-Ton Stores, Inc. on Form 10-Q for the period ended April 28, 2012, as filed with the Securities and Exchange Commission (the Report), each of the undersigned officers of The Bon-Ton Stores, Inc., certifies pursuant to 18 U.S.C. Section 1350, that, to his respective knowledge:
1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of The Bon-Ton Stores, Inc.
DATE: June 6, 2012 |
By: |
/s/ Brendan L. Hoffman |
|
Brendan L. Hoffman | |
|
President and Chief | |
|
Executive Officer and Director | |
|
|
|
|
|
|
|
By: |
/s/ Keith E. Plowman |
|
Keith E. Plowman | |
|
Executive Vice President, | |
|
Chief Financial Officer and | |
|
Principal Accounting Officer |
A signed original of this written statement has been provided to The Bon-Ton Stores, Inc. and will be retained by The Bon-Ton Stores, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
:.O@-(S=S.KQTU<\_K_NVC.F:N,<71M;[_YW\DW5T-
MS;A*RVJ8B3#'(EZH56 'OEF33*U$/52UQ!0'@SEP:KS/=OUA!V@/]`?
MZ$_3]:?;KJ=$/(H32ED;J>YF?A6E_[*B5#1.4EYY*TY)S".=/,_>%,7Y8CJ<
M\OBG./C@1\=LM2SCF<3$&+L^X>6^WM2[6JZ6M5PLS`U3ZM&)J/ZUN#)K`5_V
M]'T1974#XT>K;?;Z77[IT33T-];3$NT3U;9$);!PRGZ71KS>%V^DU6,7Z&TK
ME"B'\17!R$K_!4FTJ/C&1=W+*U4&=$18KR336!R2L:D8W-L"<+-Z;Y.5NI&+
M8F]\-?QDN3K;ZO?R`I,"$H5JM655UQ:EVK9?MO+";36!#$7:L*]0@LF,#GLU
M4*0-1=J:@',]`^32FQUJCNVL*-*&(FUZT0R#B13JAL&DV8,)BK2A2)LFW%(R
M\UXRQ*-(F[QXA\>DB\Q`U;7WF)I830I%VD`KT`I%VF0PLR8>&?9CHDA;0Q)^
M4 !&X2;*XSSECRWC,OY%R&HGB16EII#6;AW!OM5TJA@R.SW!F:_@Q0@Z`_T
M!_I3@_ZT'+/;1RX8]`?Z`_W1;^,O]`?Z`_V!_B`S%!H$#8(&R:A!;6M@]FRD
M"!][/21[*2H%%^EX&8YMKKN9LI[<_3]X.93<+K")?Y?O
M+&_T/V3W_FH=@+OI9)+MN'+]GV@SN^^V!3!8'%OG]+BGW_*W=ZPX(<5MUN
M?_*RUJ'OW]F8114MRUF-*^Y1?Z#*$@.;LET/V9#>/^O(4F2@]*WV=_^XO?UV
M^=OE]?WY-Z9=W\ZO+RZ-N_^XO+PWKJY_N?G^V_G]U
5?7D.R^6639#Z`#Z/8`W=_<
M<.K&KS+!KN:E_?=!MS3?P*C6,(&1+UUJDUP=F"ZE@:;QZ36&3B`;R,;H7'ON
M6_$A6_K
^IO(W9!DM)8U%J;5;!XMUQ:&^72
MEL#21[FT_
$W=>GWKQEN3;SQQ077;G23.V3K'K!@V`#EJWJ>!9
MWVZ;3J^>5!1M"YX!;7+FVVDW@2T_VH+N`<>MX@TP/GP'DC3%_*KDH=C)V]K*T.&P**
MT'(5C:V!EA<,*)[4ZX;;5#3@4L0/FFN2](7]._<,YJPJQ7,VC*<8D
MCIYH0J-0G@"A-!%U!-2KR8U6,;+>:Y67*@W&@#%@#!@#QC2;,4Y7HE(^8(RL
MC"EI)[**C$$=-S`'8\U^!9/-5NW#S8&56V3)%)*KE@L(H_]T1IJ
ADS,N)\V6HE(K
M3&4O70:D>EK[H3871:M'PI3$<[CF;RM,([A_),:7*#R]CT+C+HUBDIB+A[P*
MO;,/TPJ4>^2+*/1)F!#?8*_$=D
FD0(@:]0"^,7J71ZS*@8QJZ*8W"NND%UQ#DTHM
-2S\[O>S?[5J]?G_M\;??8+4I7W-G[MY]R1K,OG$=A=Z^AK#L?F_5
M#N_?81V(L]#5_*N7+WF
^L-EWMERE5F*^X8'P;1TY14
M-$\,"J6BA?=ZO8W_&/7P!$][\M_?)]
5>[>$-(4
M$B;2KK&0!P'8*,VKW2S!M@'A`D^Q@*)[CU8;$X267ZGO*,<"&''LGBIBFZ)>
MRS!-W*MDV-;3K_T`^3/RX.%4WDVG\0TO(I9D"F!5'QOP-CXCAA$O1]0"!L:-`#N=+6H;"W6FP9%
M)%8ZSC,9LRB#4=4M,2!!LSTV)D",N8.GX+;9J%+#BD$6I]83@2OQ2[M3MDBU
M%J@Z4BA!A_D$7Z3JZ-'`N]-UJJ9QRW4T.\`*.27$#;D]`%GOERO,#4T:H.N+
M7+^
&['9<8868?TH\W*&\`4==O%:JEL[/+:1
MB2@GWQJGY`)KZONX;4^EYJKBK'2?CMMN5F*]C]LZ9XN2VF*47MT(&?X[IYP(
M-Z-<>D24*YA@^;)X`?*XFN>^;&+N90-H@1VMD70%6(%R,TB8&1(2I5<"'46@
M]RB)=*<`>J2LV.F2\N7PM'=Y;8FQ+O:@W`W:K"R\#@R\#@A>$.F]ENIVZL&F
M)J(<8&B<6L7I^AP[]U1JKBK.2O=I[+Q9B?4>.SMGBW*C[(XLRK'6>'K#DMD]
MX7-Y-$)T6-5UZB3,N6H-N4_2U9$PEZ2XVN^^=&,;E1B@M78T;'G,R\4@]$-N
M^0"'*`+2=,8PTC8G4`RP=0E>#$6=2V<[Q(28@7(47?J?9
M@[S15GA[Q3CHKH)-U;16+MS5O!Q"^RG)+=&\MW$H!Q.-23#@92NPO&JI`]7+
M5=MMB%T?L-I..[Q/[UC=KH8UQN.S-K%6,XKFV.SVFDF'@['^FT'HT5=T<3
M&?MC_$AXQ(,I(&!:+:Z-KVF+OQC2.9;,=LAG-P)ES,UF!>!U+