12. GUARANTOR AND NON-GUARANTOR SUBSIDIARIES

Certain debt obligations of the Company, which constitute debt obligations of The Bon-Ton Department Stores, Inc. (the “Issuer”), are guaranteed by the Parent and by each of its subsidiaries, other than the Issuer, that is an obligor under the Company’s senior secured credit facility. Separate financial statements of the Parent, the Issuer and such subsidiary guarantors are not presented because the guarantees by the Parent and each wholly owned subsidiary guarantor are joint and several, full and unconditional, except for certain customary limitations which are applicable only to a subsidiary guarantor. These customary limitations include releases of a guarantee (1) if the subsidiary guarantor no longer guarantees other indebtedness of the Issuer; (2) if there is a sale or other disposition of the capital stock of a subsidiary guarantor and if such sale complies with the covenant regarding asset sales; and (3) if the subsidiary guarantor is properly designated as an “unrestricted subsidiary.”

The condensed consolidating financial information for the Parent, the Issuer and the guarantor and non-guarantor subsidiaries as of May 4, 2013 and February 2, 2013 and for the first quarter in each of 2013 and 2012 as presented below has been prepared from the books and records maintained by the Parent, 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.

On December 31, 2012, The Elder-Beerman Stores Corp. (a guarantor subsidiary) was merged with and into the Issuer, with the Issuer as the surviving corporation. Subsequently, the Issuer contributed three stores to Carson Pirie Scott II, Inc. (a guarantor subsidiary), which then contributed those same stores to McRIL, LLC (a guarantor subsidiary). For comparative purposes, the condensed consolidating financial information as presented below has been retrospectively adjusted as if the activity described above occurred at the beginning of each period presented.

The Bon-Ton Stores, Inc.

Condensed Consolidating Balance Sheet

May 4, 2013

					Guarantor		Non-Guarantor			Consolidating			Company
	Parent		Issuer		Subsidiaries		Subsidiaries			Eliminations			Consolidated

Assets
Current assets:
Cash and cash equivalents	$	1	$	3,207	$	5,809	$	—		$	—		$	9,017
Merchandise inventories	—		459,670		271,791		—			—			731,461
Prepaid expenses and other current assets	—		62,848		5,483		3,933			(651		)	71,613
Total current assets	1		525,725		283,083		3,933			(651		)	812,091
Property, fixtures and equipment at cost, net	—		219,160		174,363		248,667			—			642,190
Deferred income taxes	—		6,622		9,706		—			—			16,328
Intangible assets, net	—		35,805		72,875		—			—			108,680
Investment in and advances to (from) affiliates	84,792		378,507		316,549		(52		)	(779,796		)	—
Other long-term assets	—		16,352		472		1,080			—			17,904
Total assets	$	84,793	$	1,182,171	$	857,048	$	253,628		$	(780,447	)	$	1,597,193

Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	—	$	184,343	$	—	$	—		$	—		$	184,343
Accrued payroll and benefits	—		24,908		4,254		—			—			29,162
Accrued expenses	—		76,951		73,194		154			(651		)	149,648
Current maturities of long-term debt and obligations under capital leases	—		884		3,091		7,014			—			10,989
Deferred income taxes	—		10,395		11,625		—			—			22,020
Income taxes payable	—		—		32		—			—			32
Total current liabilities	—		297,481		92,196		7,168			(651		)	396,194

Long-term debt and obligations under capital leases, less current maturities	—		643,942		45,484		217,649			—			907,075
Other long-term liabilities	—		155,045		52,469		1,617			—			209,131
Total liabilities	—		1,096,468		190,149		226,434			(651		)	1,512,400

Shareholders’ equity	84,793		85,703		666,899		27,194			(779,796		)	84,793

Total liabilities and shareholders’ equity	$	84,793	$	1,182,171	$	857,048	$	253,628		$	(780,447	)	$	1,597,193

The Bon-Ton Stores, Inc.

Condensed Consolidating Balance Sheet

February 2, 2013

					Guarantor		Non-Guarantor			Consolidating			Company
	Parent		Issuer		Subsidiaries		Subsidiaries			Eliminations			Consolidated

Assets
Current assets:
Cash and cash equivalents	$	1	$	3,414	$	4,511	$	—		$	—		$	7,926
Merchandise inventories	—		493,780		264,620		—			—			758,400
Prepaid expenses and other current assets	—		62,855		4,414		3,910			(578		)	70,601
Total current assets	1		560,049		273,545		3,910			(578		)	836,927
Property, fixtures and equipment at cost, net	—		221,966		179,437		251,419			—			652,822
Deferred income taxes	—		6,216		8,794		—			—			15,010
Intangible assets, net	—		36,666		73,897		—			—			110,563
Investment in and advances to (from) affiliates	110,605		366,851		328,183		(52		)	(805,587		)	—
Other long-term assets	—		17,389		343		1,155			—			18,887
Total assets	$	110,606	$	1,209,137	$	864,199	$	256,432		$	(806,165	)	$	1,634,209

Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	—	$	193,898	$	—	$	—		$	—		$	193,898
Accrued payroll and benefits	—		26,899		5,511		—			—			32,410
Accrued expenses	—		86,686		79,350		78			(578		)	165,536
Current maturities of long-term debt and obligations under capital leases	—		69,874		3,034		6,903			—			79,811
Deferred income taxes	—		9,777		10,479		—			—			20,256
Income taxes payable	—		12		727		—			—			739
Total current liabilities	—		387,146		99,101		6,981			(578		)	492,650

Long-term debt and obligations under capital leases, less current maturities	—		555,532		46,279		219,531			—			821,342
Other long-term liabilities	—		155,208		52,815		1,588			—			209,611
Total liabilities	—		1,097,886		198,195		228,100			(578		)	1,523,603

Shareholders’ equity	110,606		111,251		666,004		28,332			(805,587		)	110,606

Total liabilities and shareholders’ equity	$	110,606	$	1,209,137	$	864,199	$	256,432		$	(806,165	)	$	1,634,209

The Bon-Ton Stores, Inc.

Condensed Consolidating Statement of Operations

Thirteen Weeks Ended May 4, 2013

							Guarantor			Non-Guarantor			Consolidating			Company
	Parent			Issuer			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	377,268		$	269,636		$	—		$	—		$	646,904
Other income	—			8,574			6,405			—			—			14,979
	—			385,842			276,041			—			—			661,883

Costs and expenses:
Costs of merchandise sold	—			247,477			174,111			—			—			421,588
Selling, general and administrative	—			137,463			95,216			30			(7,613		)	225,096
Depreciation and amortization	—			10,142			8,287			2,751			—			21,180
Amortization of lease-related interests	—			444			692			—			—			1,136
Loss from operations	—			(9,684		)	(2,265		)	(2,781		)	7,613			(7,117		)

Other income (expense):
Intercompany income	—			498			4,313			6,796			(11,607		)	—
Equity in (losses) income of subsidiaries	(26,185		)	1,509			—			—			24,676			—
Interest expense, net	—			(18,148		)	(920		)	(3,634		)	3,994			(18,708		)
Loss on extinguishment of debt	—			(360		)	—			—			—			(360		)

(Loss) income before income taxes	(26,185		)	(26,185		)	1,128			381			24,676			(26,185		)
Income tax provision	450			450			233			—			(683		)	450

Net (loss) income	$	(26,635	)	$	(26,635	)	$	895		$	381		$	25,359		$	(26,635	)

The Bon-Ton Stores, Inc.

Condensed Consolidating Statement of Comprehensive (Loss) Income

Thirteen Weeks Ended May 4, 2013

							Guarantor		Non-Guarantor		Consolidating			Company
	Parent			Issuer			Subsidiaries		Subsidiaries		Eliminations			Consolidated

Net (loss) income	$	(26,635	)	$	(26,635	)	$	895	$	381	$	25,359		$	(26,635	)
Other comprehensive income, net of tax:
Pension and postretirement benefit plans	1,551			1,551			—		—		(1,551		)	1,551
Comprehensive (loss) income	$	(25,084	)	$	(25,084	)	$	895	$	381	$	23,808		$	(25,084	)

The Bon-Ton Stores, Inc.

Condensed Consolidating Statement of Operations

Thirteen Weeks Ended April 28, 2012

							Guarantor			Non-Guarantor			Consolidating			Company
	Parent			Issuer			Subsidiaries			Subsidiaries			Eliminations			Consolidated

Net sales	$	—		$	368,710		$	272,061		$	—		$	—		$	640,771
Other income	—			7,011			6,515			—			—			13,526
	—			375,721			278,576			—			—			654,297

Costs and expenses:
Costs of merchandise sold	—			243,638			177,578			—			—			421,216
Selling, general and administrative	—			140,352			98,414			(3,541		)	(6,985		)	228,240
Depreciation and amortization	—			10,305			9,052			2,830			—			22,187
Amortization of lease-related interests	—			493			690			—			—			1,183
(Loss) income from operations	—			(19,067		)	(7,158		)	711			6,985			(18,529		)

Other income (expense):
Intercompany income	—			—			—			6,985			(6,985		)	—
Equity in losses of subsidiaries	(40,271		)	(6,612		)	—			—			46,883			—
Interest expense, net	—			(14,592		)	(2,143		)	(3,838		)	—			(20,573		)
Loss on extinguishment of debt	—			—			—			(1,169		)	—			(1,169		)

(Loss) income before income taxes	(40,271		)	(40,271		)	(9,301		)	2,689			46,883			(40,271		)
Income tax provision	509			509			233			—			(742		)	509

Net (loss) income	$	(40,780	)	$	(40,780	)	$	(9,534	)	$	2,689		$	47,625		$	(40,780	)

The Bon-Ton Stores, Inc.

Condensed Consolidating Statement of Comprehensive (Loss) Income

Thirteen Weeks Ended April 28, 2012

							Guarantor			Non-Guarantor		Consolidating			Company
	Parent			Issuer			Subsidiaries			Subsidiaries		Eliminations			Consolidated

Net (loss) income	$	(40,780	)	$	(40,780	)	$	(9,534	)	$	2,689	$	47,625		$	(40,780	)
Other comprehensive income, net of tax:
Pension and postretirement benefit plans	1,596			1,596			—			—		(1,596		)	1,596
Comprehensive (loss) income	$	(39,184	)	$	(39,184	)	$	(9,534	)	$	2,689	$	46,029		$	(39,184	)

The Bon-Ton Stores, Inc.

Condensed Consolidating Statement of Cash Flows

Thirteen Weeks Ended May 4, 2013

							Guarantor			Non-Guarantor			Consolidating			Company
	Parent			Issuer			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Net cash provided by operating activities	$	2,076		$	3,107		$	3,651		$	3,290		$	(2,177	)	$	9,947

Cash flows from investing activities:
Capital expenditures	—			(11,640		)	(1,616		)	—			—			(13,256		)
Intercompany investing activity	(518		)	(140		)	—			—			658			—
Proceeds from sale of property, fixtures and equipment	—			2			—			—			—			2
Net cash used in investing activities	(518		)	(11,778		)	(1,616		)	—			658			(13,254		)

Cash flows from financing activities:
Payments on long-term debt and capital lease obligations	—			(224,213		)	(737		)	(1,771		)	—			(226,721		)
Proceeds from issuance of long-term debt	—			243,632			—			—			—			243,632
Intercompany financing activity	—			—			—			(1,519		)	1,519			—
Restricted shares forfeited in lieu of payroll taxes	(2,076		)	—			—			—			—			(2,076		)
Proceeds from stock options exercised	518			—			—			—			—			518
Decrease in book overdraft balances	—			(10,955		)	—			—			—			(10,955		)
Net cash (used in) provided by financing activities	(1,558		)	8,464			(737		)	(3,290		)	1,519			4,398

Net (decrease) increase in cash and cash equivalents	—			(207		)	1,298			—			—			1,091

Cash and cash equivalents at beginning of period	1			3,414			4,511			—			—			7,926

Cash and cash equivalents at end of period	$	1		$	3,207		$	5,809		$	—		$	—		$	9,017

The Bon-Ton Stores, Inc.

Condensed Consolidating Statement of Cash Flows

Thirteen Weeks Ended April 28, 2012

							Guarantor			Non-Guarantor			Consolidating			Company
	Parent			Issuer			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	2,028		$	(37,850	)	$	3,421		$	891		$	(1,959	)	$	(33,469	)

Cash flows from investing activities:
Capital expenditures	—			(11,666		)	(2,622		)	—			—			(14,288		)
Intercompany investing activity	(18		)	(1		)	—			—			19			—
Proceeds from sale of property, fixtures and equipment	—			23			—			8,234			—			8,257
Net cash (used in) provided by investing activities	(18		)	(11,644		)	(2,622		)	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	—			(96		)	119			—			—			23

Cash and cash equivalents at beginning of period	1			4,695			9,576			—			—			14,272

Cash and cash equivalents at end of period	$	1		$	4,599		$	9,695		$	—		$	—		$	14,295