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

 

 

THE BON-TON STORES, INC.

2801 East Market Street

York, Pennsylvania 17402

(717) 757-7660

 

 

 

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):

 

 

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 31, 2013, there were 17,535,012 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)		May 4,			February 2,
(Unaudited)		2013			2013
Assets
Current assets:
Cash and cash equivalents		$	9,017		$	7,926
Merchandise inventories		731,461			758,400
Prepaid expenses and other current assets		71,613			70,601
Total current assets		812,091			836,927
Property, fixtures and equipment at cost, net of accumulated depreciation and amortization of $825,089 and $804,559 at May 4, 2013 and February 2, 2013, respectively		642,190			652,822
Deferred income taxes		16,328			15,010
Intangible assets, net of accumulated amortization of $59,479 and $57,596 at May 4, 2013 and February 2, 2013, respectively		108,680			110,563
Other long-term assets		17,904			18,887
Total assets		$	1,597,193		$	1,634,209
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable		$	184,343		$	193,898
Accrued payroll and benefits		29,162			32,410
Accrued expenses		149,648			165,536
Current maturities of long-term debt		7,014			75,886
Current maturities of obligations under capital leases		3,975			3,925
Deferred income taxes		22,020			20,256
Income taxes payable		32			739
Total current liabilities		396,194			492,650
Long-term debt, less current maturities		855,600			768,864
Obligations under capital leases, less current maturities		51,475			52,478
Other long-term liabilities		209,131			209,611
Total liabilities		1,512,400			1,523,603
Contingencies (Note 10)
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 17,787,882 and 17,491,277 at May 4, 2013 and February 2, 2013, respectively		178			175
Class A Common Stock — authorized 20,000,000 shares at $0.01 par value; issued and outstanding shares of 2,951,490 at May 4, 2013 and February 2, 2013		30			30
Treasury stock, at cost — 337,800 shares at May 4, 2013 and February 2, 2013		(1,387		)	(1,387		)
Additional paid-in capital		158,977			158,728
Accumulated other comprehensive loss		(71,691		)	(73,242		)
(Accumulated deficit) retained earnings		(1,314		)	26,302
Total shareholders’ equity		84,793			110,606
Total liabilities and shareholders’ equity		$	1,597,193		$	1,634,209

 

The accompanying notes are an integral part of these consolidated financial statements.

 

2

 

THE BON-TON STORES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

 

		THIRTEEN
		WEEKS ENDED
(In thousands, except per share data)		May 4,			April 28,
(Unaudited)		2013			2012
Net sales		$	646,904		$	640,771
Other income		14,979			13,526
		661,883			654,297
Costs and expenses:
Costs of merchandise sold		421,588			421,216
Selling, general and administrative		225,096			228,240
Depreciation and amortization		21,180			22,187
Amortization of lease-related interests		1,136			1,183
Loss from operations		(7,117		)	(18,529		)
Interest expense, net		18,708			20,573
Loss on extinguishment of debt		360			1,169
Loss before income taxes		(26,185		)	(40,271		)
Income tax provision		450			509
Net loss		$	(26,635	)	$	(40,780	)
Per share amounts —
Basic:
Net loss		$	(1.41	)	$	(2.23	)
Diluted:
Net loss		$	(1.41	)	$	(2.23	)

 

The accompanying notes are an integral part of these consolidated financial statements.

 

3

 

THE BON-TON STORES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

 

		THIRTEEN
		WEEKS ENDED
(In thousands)		May 4,			April 28,
(Unaudited)		2013			2012
Net loss		$	(26,635	)	$	(40,780	)
Other comprehensive income, net of tax:
Pension and postretirement benefit plans		1,551			1,596
Comprehensive loss		$	(25,084	)	$	(39,184	)

 

The accompanying notes are an integral part of these consolidated financial statements.

 

4

 

THE BON-TON STORES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

		THIRTEEN
		WEEKS ENDED
(In thousands)		May 4,			April 28,
(Unaudited)		2013			2012
Cash flows from operating activities:
Net loss		$	(26,635	)	$	(40,780	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		21,180			22,187
Amortization of lease-related interests		1,136			1,183
Share-based compensation expense		1,810			1,369
Gain on sale of property, fixtures and equipment		(2		)	(3,210		)
Reclassifications of accumulated other comprehensive loss		1,551			1,596
Loss on extinguishment of debt		360			1,169
Amortization of deferred financing costs		1,007			2,171
Amortization of deferred gain on sale of proprietary credit card portfolio		—			(603		)
Deferred income tax provision		447			428
Changes in operating assets and liabilities:
Decrease (increase) in merchandise inventories		26,939			(18,791		)
Increase in prepaid expenses and other current assets		(1,012		)	(6,359		)
Increase in other long-term assets		(378		)	(596		)
Increase in accounts payable		2,768			23,754
Decrease in accrued payroll and benefits and accrued expenses		(18,346		)	(12,609		)
Decrease in income taxes payable		(707		)	—
Decrease in other long-term liabilities		(171		)	(4,378		)
Net cash provided by (used in) operating activities		9,947			(33,469		)
Cash flows from investing activities:
Capital expenditures		(13,256		)	(14,288		)
Proceeds from sale of property, fixtures and equipment		2			8,257
Net cash used in investing activities		(13,254		)	(6,031		)
Cash flows from financing activities:
Payments on long-term debt and capital lease obligations		(226,721		)	(106,061		)
Proceeds from issuance of long-term debt		243,632			161,216
Cash dividends paid		—			(961		)
Restricted shares forfeited in lieu of payroll taxes		(2,076		)	(1,067		)
Proceeds from stock options exercised		518			18
Decrease in book overdraft balances		(10,955		)	(13,622		)
Net cash provided by financing activities		4,398			39,523
Net increase in cash and cash equivalents		1,091			23
Cash and cash equivalents at beginning of period		7,926			14,272
Cash and cash equivalents at end of period		$	9,017		$	14,295

 

The accompanying notes are an integral part of these financial statements.

 

5

 

THE BON-TON STORES, INC.

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

 

														Accumulated			(Accumulated
					Class A						Additional			Other			Deficit)
(In thousands, except per share data)		Common			Common			Treasury			Paid-in			Comprehensive			Retained
(Unaudited)		Stock			Stock			Stock			Capital			Loss			Earnings			Total
BALANCE AT FEBRUARY 2, 2013		$	175		$	30		$	(1,387	)	$	158,728		$	(73,242	)	$	26,302		$	110,606
Net loss		—			—			—			—			—			(26,635		)	(26,635		)
Other comprehensive income		—			—			—			—			1,551			—			1,551
Dividends to shareholders, $0.05 per share		—			—			—			—			—			(981		)	(981		)
Restricted shares forfeited in lieu of payroll taxes		(2		)	—			—			(2,074		)	—			—			(2,076		)
Proceeds from stock options exercised		1			—			—			517			—			—			518
Share-based compensation expense		4			—			—			1,806			—			—			1,810
BALANCE AT MAY 4, 2013		$	178		$	30		$	(1,387	)	$	158,977		$	(71,691	)	$	(1,314	)	$	84,793

 

The accompanying notes are an integral part of these consolidated financial statements.

 

6

 

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 24 states in the Northeast, Midwest and upper Great Plains under the Bon-Ton, Bergner’s, Boston Store, Carson’s, Elder-Beerman, Herberger’s and Younkers nameplates.

 

The accompanying unaudited consolidated financial statements include the accounts of The Bon-Ton Stores, Inc. (the “Parent”) 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 Company’s 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 Company’s Annual Report on Form 10-K for the fiscal year ended February 2, 2013.

 

All references to the “first quarter of 2013” and the “first quarter of 2012” are to the 13 weeks ended May 4, 2013 and April 28, 2012, respectively.  All references to “2013” are to the 52 weeks ending February 1, 2014; references to “2012” are to the 53 weeks ended February 2, 2013.

 

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 management’s 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.

 

Certain prior year balances presented in the consolidated financial statements and notes thereto have been reclassified to conform to the current year presentation.  These reclassifications did not impact the Company’s net loss for the periods presented.

 

Previously Issued Accounting Standards

 

In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (“ASU 2013-02”).  ASU 2013-02 requires disclosure of amounts reclassified out of accumulated other comprehensive income by component.  In addition, an entity is required to present either on the face of the statement of operations or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is

 

7

 

THE BON-TON STORES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

(Unaudited)

 

required to be reclassified to net income in its entirety in the same reporting period. For amounts not reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that provide additional detail about those amounts.  The provisions of ASU 2013-02 were adopted in the first quarter of 2013.  The adoption of ASU 2013-02 did not impact the Company’s consolidated financial position, results of operations or cash flows as it required only a change in the format of presentation.

 

In July 2012, ASU No. 2012-02, Testing Indefinite-Lived Intangible Assets for Impairment (“ASU 2012-02”), was issued, amending FASB Accounting Standards Codification (“ASC”) Topic 350 (“ASC 350”) to simplify the impairment testing of indefinite-lived intangible assets by allowing an entity to make a qualitative impairment assessment. Entities are required to test indefinite-lived intangible assets for impairment at least annually and more frequently if indicators of impairment exist.  The addition of the optional qualitative assessment permits an entity to consider events and circumstances that could affect the fair value of the indefinite-lived intangible asset and if the entity concludes, based on an evaluation of all relevant qualitative factors, that it is not more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount, it will not be required to perform the quantitative impairment test for that asset.  The provisions of ASU 2012-02 were adopted in the first quarter of 2013.  The adoption of ASU 2012-02 did not have a material impact on the Company’s 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 2013 and 2012:

 

		THIRTEEN
		WEEKS ENDED
		May 4,			April 28,
		2013			2012
Basic Loss Per Common Share
Net loss		$	(26,635	)	$	(40,780	)
Less: Income allocated to participating securities		—			—
Net loss available to common shareholders		$	(26,635	)	$	(40,780	)
Weighted average common shares outstanding		18,843,072			18,287,395
Basic loss per common share		$	(1.41	)	$	(2.23	)
Diluted Loss Per Common Share
Net loss		$	(26,635	)	$	(40,780	)
Less: Income allocated to participating securities		—			—
Net loss available to common shareholders		$	(26,635	)	$	(40,780	)
Weighted average common shares outstanding		18,843,072			18,287,395
Common shares issuable - stock options		—			—
Weighted average common shares outstanding assuming dilution		18,843,072			18,287,395
Diluted loss per common share		$	(1.41	)	$	(2.23	)

 

8

 

THE BON-TON STORES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

(Unaudited)

 

Due to the Company’s net loss position, weighted average unvested restricted shares (participating securities) of 1,051,861 and 1,475,536 for the first quarter in each of 2013 and 2012, 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 534,684 and 968,943 for the first quarter in each of 2013 and 2012, respectively, were excluded from the calculation of diluted EPS as they would have been antidilutive.  Certain of these stock option shares were excluded solely due to the Company’s net loss position.  Had the Company reported net income for the first quarter in each of 2013 and 2012, these shares would have increased the weighted average common shares outstanding by 170,577 and 93,769, respectively, for purposes of calculating diluted EPS.

 

3.             FAIR VALUE MEASUREMENTS

 

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 Company’s own assumptions.

 

The carrying values of the Company’s 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 Company’s long-term debt, including current maturities but excluding capital leases, as of May 4, 2013 are as follows:

 

								Fair Value Measurements Using
		Carrying Value			Total Estimated Fair Value			Quoted Prices in Active Markets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Senior notes		$	68,983		$	69,242		$	69,242		$	—		$	—
Second lien senior secured notes		329,998			334,123			334,123			—			—
Mortgage facilities		224,663			229,202			—			—			229,202
Senior secured credit facility		238,970			238,970			—			—			238,970
Total		$	862,614		$	871,537		$	403,365		$	—		$	468,172

 

The carrying value and estimated fair value of the Company’s long-term debt, including current maturities but excluding capital leases, as of February 2, 2013 are as follows:

 

9

 

THE BON-TON STORES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

(Unaudited)

 

								Fair Value Measurements Using
		Carrying Value			Total Estimated Fair Value			Quoted Prices in Active Markets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Senior notes		$	133,983		$	133,816		$	133,816		$	—		$	—
Second lien senior secured notes		329,998			328,348			—			328,348			—
Mortgage facilities		226,434			230,601			—			—			230,601
Senior secured credit facility		154,335			154,335			—			—			154,335
Total		$	844,750		$	847,100		$	133,816		$	328,348		$	384,936

 

The Level 2 fair value estimates are determined by a market approach using prices generated by market transactions.  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 2 or Level 3 fair value estimates.

 

4.             SUPPLEMENTAL BALANCE SHEET INFORMATION

 

Prepaid expenses and other current assets were comprised of the following:

 

		May 4,			February 2,
		2013			2013
Other receivables		$	38,435		$	36,029
Prepaid expenses		33,178			34,572
Total		$	71,613		$	70,601

 

5.             SUPPLEMENTAL CASH FLOW INFORMATION

 

The following supplemental cash flow information is provided for the periods reported:

 

		THIRTEEN
		WEEKS ENDED
		May 4,			April 28,
		2013			2012
Cash paid for:
Interest, net of amounts capitalized		$	30,598		$	30,299
Income taxes, net of refunds received		775			45
Non-cash investing and financing activities:
Property, fixtures and equipment included in accrued expenses		$	2,689		$	4,110
Declared dividends to shareholders included in accrued expenses		981			971

 

10

 

THE BON-TON STORES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

(Unaudited)

 

6.             EXIT OR DISPOSAL ACTIVITIES

 

The following table summarizes exit or disposal activities during the first quarter of 2013 related to targeted reductions in administrative and support functions and store closings in 2013 and 2012:

 

		Termination Benefits			Other Costs			Total
Accrued balance as of February 2, 2013		$	741		$	—		$	741
Provision		55			799			854
Payments		(196		)	(47		)	(243		)
Accrued balance as of May 4, 2013		$	600		$	752		$	1,352

 

The above provision was included within selling, general and administrative expense.

 

7.             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
		May 4,			April 28,
		2013			2012
Interest cost		$	1,998		$	2,116
Expected return on plan assets		(2,235		)	(2,157		)
Recognition of net actuarial loss		1,642			1,690
Net periodic benefit expense		$	1,405		$	1,649

 

During the first quarter of 2013, contributions of $3,861 were made to the Pension Plans.  The Company anticipates contributing an additional $11,499 to fund the Pension Plans in 2013 for an annual total of $15,360.

 

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:

 

11

 

THE BON-TON STORES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

(Unaudited)

 

		THIRTEEN
		WEEKS ENDED
		May 4,			April 28,
		2013			2012
Interest cost		$	30		$	35
Recognition of net actuarial gain		(91		)	(94		)
Net periodic benefit income		$	(61	)	$	(59	)

 

During the first quarter of 2013, the Company contributed $38 to fund the Postretirement Benefit Plan, and anticipates contributing an additional $552 in 2013 for a net annual total of $590.

 

8.             LONG-TERM DEBT

 

On January 23, 2013, the Company issued a notice of partial redemption for $65,000 aggregate principal amount of its 10¼% Senior Notes due 2014 (the “2014 Notes”) at a cash redemption price equal to the principal amount plus accrued and unpaid interest.  The redemption was completed on February 22, 2013, with associated interest of $2,906, for a total payment of $67,906.  Unamortized deferred financing fees of $360 associated with the 2014 Notes were accelerated upon redemption and were recognized in loss on extinguishment of debt.

 

On May 28, 2013, the Company issued $350,000 principal amount of its 8.00% Second Lien Senior Secured Notes due 2021 (the “2021 Notes”), proceeds of which were used to purchase or redeem the entirety of the remaining $68,983 of the Company’s 2014 Notes (see Note 13).  As a result, $68,983 of current maturities of long-term debt was reclassified to long-term debt as of May 4, 2013.

 

9.             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 2012 and the first quarter of 2013 on all of the Company’s net deferred tax assets.  The Company’s deferred tax asset valuation allowance totaled $163,866 and $152,735 at May 4, 2013 and February 2, 2013, respectively.

 

Given the Company’s valuation allowance position, no tax benefit was recognized on the Company’s loss before income taxes in the first quarter in each of 2013 and 2012.  The income tax provision of $450 and $509 recorded in the first quarter in each of 2013 and 2012, respectively, reflects certain state income tax expense and recognition of deferred tax liabilities associated with indefinite-lived assets.

 

As of May 4, 2013, it is reasonably possible that gross unrecognized tax benefits could decrease by $178 within the next 12 months due to the expiration of certain statutes of limitations.

 

10.          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 Company’s financial position, results of operations or liquidity.

 

12

 

THE BON-TON STORES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

(Unaudited)

 

11.          COMPREHENSIVE LOSS

 

Accumulated other comprehensive loss is comprised of the net actuarial loss associated with the Pension Plans and Postretirement Benefit Plan.  Other comprehensive income is comprised entirely of the amortization of the net actuarial loss (gain) associated with the Pension Plans and Postretirement Benefit Plan.

 

As a result of the deferred tax asset valuation allowance maintained throughout 2012 and the first quarter of 2013 (see Note 9), no tax effect was recorded on the changes recognized within other comprehensive income for all periods presented.

 

The before-tax amount of amortization of net actuarial loss (gain) (see Note 7) was recorded within selling, general and administrative expense.

 

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.

 

13

 

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

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

 

14

 

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

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

 

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