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 May 3, 2008
    
    Commission File Number
0-19517
 THE BON-TON STORES, INC.
 2801 East Market Street
York, Pennsylvania 17402
 Incorporated in Pennsylvania
    
    IRS No. 23-2835229
 
 þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
(Do not check if a smaller
reporting company)
    
    Smaller reporting company o
 o þ




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##### 



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 3,
    
    
    February 2,(Unaudited)
    
    2008
    
    
    2008AssetsCurrent assets:Cash and cash equivalents
    
    $
    18,759
    
    
    $
    21,238Merchandise inventories
    
    
    774,294
    
    
    
    754,802Prepaid expenses and other current assets
    
    
    86,650
    
    
    
    78,332Deferred income taxes
    
    
    17,536
    
    
    
    17,536Total current assets
    
    
    897,239
    
    
    
    871,908Property, fixtures and equipment at cost, net of accumulated depreciation and
amortization of $446,120 and $418,279 at May 3, 2008 and February 2, 2008, respectively
    
    
    880,400
    
    
    
    885,455Deferred income taxes
    
    
    88,105
    
    
    
    87,357Goodwill
    
    
    17,767
    
    
    
    17,767Intangible assets, net of accumulated amortization of $23,951 and $21,917 at
May 3, 2008 and February 2, 2008, respectively
    
    
    163,464
    
    
    
    165,872Other long-term assets
    
    
    36,977
    
    
    
    39,272Total assets
    
    $
    2,083,952
    
    
    $
    2,067,631Liabilities and Shareholders EquityCurrent liabilities:Accounts payable
    
    $
    230,914
    
    
    $
    220,158Accrued payroll and benefits
    
    
    39,661
    
    
    
    49,902Accrued expenses
    
    
    154,177
    
    
    
    166,603Current maturities of long-term debt
    
    
    5,797
    
    
    
    5,656Current maturities of obligations under capital leases
    
    
    2,357
    
    
    
    2,239Income taxes payable
    
    
    
    
    
    
    899Total current liabilities
    
    
    432,906
    
    
    
    445,457Long-term debt, less current maturities
    
    
    1,142,813
    
    
    
    1,079,841Obligations under capital leases, less current maturities
    
    
    66,599
    
    
    
    67,217Other long-term liabilities
    
    
    110,955
    
    
    
    112,055Total liabilities
    
    
    1,753,273
    
    
    
    1,704,570Contingencies (Note 7)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 15,074,906 and 14,614,111 at May 3, 2008 and February 2, 2008, respectively
    
    
    151
    
    
    
    146Class A Common Stock  authorized 20,000,000 shares at $0.01 par value; issued
and outstanding shares of 2,951,490 at May 3, 2008 and February 2, 2008
    
    
    30
    
    
    
    30Treasury stock, at cost - 337,800 shares at May 3, 2008 and February 2, 2008
    
    
    (1,387
    )
    
    
    (1,387
    )Additional paid-in-capital
    
    
    141,331
    
    
    
    139,805Accumulated other comprehensive income
    
    
    1,815
    
    
    
    799Retained earnings
    
    
    188,739
    
    
    
    223,668Total shareholders equity
    
    
    330,679
    
    
    
    363,061Total liabilities and shareholders equity
    
    $
    2,083,952
    
    
    $
    2,067,631
   2




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##### 



THE BON-TON STORES, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 THIRTEENWEEKS ENDED(In thousands except share and per share data)
    
    May 3,
    
    
    May 5,(Unaudited)
    
    2008
    
    
    2007Net sales
    
    $
    700,248
    
    
    $
    737,561Other income
    
    
    22,775
    
    
    
    22,861723,023
    
    
    
    760,422Costs and expenses:Costs of merchandise sold
    
    
    462,500
    
    
    
    490,672Selling, general and administrative
    
    
    255,774
    
    
    
    260,347Depreciation and amortization
    
    
    29,018
    
    
    
    26,960Amortization of lease-related interests
    
    
    1,208
    
    
    
    1,229Loss from operations
    
    
    (25,477
    )
    
    
    (18,786
    )Interest expense, net
    
    
    24,362
    
    
    
    27,469Loss before income taxes
    
    
    (49,839
    )
    
    
    (46,255
    )Income tax benefit
    
    
    (15,776
    )
    
    
    (16,956
    )Net loss
    
    $
    (34,063
    )
    
    $
    (29,299
    )Per share
amounts Basic:Net loss
    
    $
    (2.03
    )
    
    $
    (1.78
    )Basic weighted average shares outstanding
    
    
    16,777,587
    
    
    
    16,481,756Diluted:Net loss
    
    $
    (2.03
    )
    
    $
    (1.78
    )Diluted weighted average shares outstanding
    
    
    16,777,587
    
    
    
    16,481,756
   3




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##### 



THE BON-TON STORES, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 THIRTEENWEEKS ENDED(In thousands)
    
    May 3,
    
    
    May 5,(Unaudited)
    
    2008
    
    
    2007Cash flows from operating activities:Net loss
    
    $
    (34,063
    )
    
    $
    (29,299
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    29,018
    
    
    
    26,960Amortization of lease-related interests
    
    
    1,208
    
    
    
    1,229Share-based compensation expense
    
    
    1,627
    
    
    
    1,702Excess tax shortfall (benefit) from share-based compensation
    
    
    96
    
    
    
    (175
    )Loss (gain) on sale of property, fixtures and equipment
    
    
    138
    
    
    
    (534
    )Amortization of deferred financing costs
    
    
    1,033
    
    
    
    977Amortization of deferred gain on sale of proprietary credit card portfolio
    
    
    (603
    )
    
    
    (603
    )Deferred income taxes
    
    
    (1,467
    )
    
    
    Changes in operating assets and liabilities:Increase in merchandise inventories
    
    
    (19,492
    )
    
    
    (37,084
    )Increase in prepaid expenses and other current assets
    
    
    (8,414
    )
    
    
    (8,946
    )Decrease in other long-term assets
    
    
    1,524
    
    
    
    583Increase in accounts payable
    
    
    15,745
    
    
    
    20,262Decrease in accrued payroll and benefits and accrued expenses
    
    
    (19,168
    )
    
    
    (48,106
    )Decrease in income taxes payable
    
    
    (899
    )
    
    
    (33,838
    )Increase (decrease) in other long-term liabilities
    
    
    1,747
    
    
    
    (266
    )Net cash used in operating activities
    
    
    (31,970
    )
    
    
    (107,138
    )Cash flows from investing activities:Capital expenditures
    
    
    (25,538
    )
    
    
    (16,200
    )Acquisition, net of cash acquired
    
    
    
    
    
    
    (51
    )Proceeds from sale of property, fixtures and equipment
    
    
    39
    
    
    
    2,551Net cash used in investing activities
    
    
    (25,499
    )
    
    
    (13,700
    )Cash flows from financing activities:Payments on long-term debt and capital lease obligations
    
    
    (151,692
    )
    
    
    (179,789
    )Proceeds from issuance of long-term debt
    
    
    214,305
    
    
    
    305,897Cash dividends paid
    
    
    (866
    )
    
    
    (857
    )Proceeds from stock options exercised
    
    
    
    
    
    
    352Excess tax (shortfall) benefit from share-based compensation
    
    
    (96
    )
    
    
    175Deferred financing costs paid
    
    
    (261
    )
    
    
    (253
    )Decrease in bank overdraft balances
    
    
    (6,400
    )
    
    
    (5,029
    )Net cash provided by financing activities
    
    
    54,990
    
    
    
    120,496Net decrease in cash and cash equivalents
    
    
    (2,479
    )
    
    
    (342
    )Cash and cash equivalents at beginning of period
    
    
    21,238
    
    
    
    24,733Cash and cash equivalents at end of period
    
    $
    18,759
    
    
    $
    24,391Supplemental Cash Flow Information:Interest paid
    
    $
    36,754
    
    
    $
    39,134Net income taxes paid
    
    $
    4,760
    
    
    $
    39,625
   4




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##### 



THE BON-TON STORES, INC.
 
 CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
 AccumulatedClass A
    
    
    
    
    
    
    Additional
    
    
    Other(In thousands except per share data)
    
    Common
    
    
    Common
    
    
    Treasury
    
    
    Paid-in
    
    
    Comprehensive
    
    
    Retained(Unaudited)
    
    Stock
    
    
    Stock
    
    
    Stock
    
    
    Capital
    
    
    Income
    
    
    Earnings
    
    
    TotalBALANCE AT FEBRUARY 2, 2008
    
    $
    146
    
    
    $
    30
    
    
    $
    (1,387
    )
    
    $
    139,805
    
    
    $
    799
    
    
    $
    223,668
    
    
    $
    363,061Comprehensive loss (Note 8):Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (34,063
    )
    
    
    (34,063
    )Pension plans, net of $48 tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80
    
    
    
    
    
    
    
    80Change in fair value of cash flow hedges,
net of $671 tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    936
    
    
    
    
    
    
    
    936Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33,047
    )Dividends to shareholders, $0.05 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (866
    )
    
    
    (866
    )Share-based compensation expense
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    1,622
    
    
    
    
    
    
    
    
    
    
    
    1,627Excess tax shortfall from share-based
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (96
    )
    
    
    
    
    
    
    
    
    
    
    (96
    )BALANCE AT MAY 3, 2008
    
    $
    151
    
    
    $
    30
    
    
    $
    (1,387
    )
    
    $
    141,331
    
    
    $
    1,815
    
    
    $
    188,739
    
    
    $
    330,679
   5




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##### 



THE BON-TON STORES, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share data)
 1. BASIS OF PRESENTATION
       Future Accounting Changes
   6




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##### 



THE BON-TON STORES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share data)
 2. PER-SHARE AMOUNTS
  THIRTEENWEEKS ENDEDMay 3,
    
    
    May 5,2008
    
    
    2007Basic calculation
    
    
    16,777,587
    
    
    
    16,481,756Effect of
dilutive shares Restricted shares and restricted
stock units
    
    
    
    
    
    
    Stock options
    
    
    
    
    
    
    Diluted calculation
    
    
    16,777,587
    
    
    
    16,481,756
  THIRTEENWEEKS ENDEDMay 3,
    
    
    May 5,2008
    
    
    2007Antidilutive shares Restricted shares and restricted
stock units
    
    
    583,444
    
    
    
    701,893Stock options
    
    
    927,239
    
    
    
    637,626
  THIRTEENWEEKS ENDEDMay 3,
    
    
    May 5,2008
    
    
    2007Effect of dilutive securities Restricted shares and restricted
stock units
    
    
    198,411
    
    
    
    402,042Stock options
    
    
    4,729
    
    
    
    238,303
  7




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##### 



THE BON-TON STORES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share data)
 3. FAIR VALUE MEASUREMENTS
      Fair Value Measurements at May 3, 2008 Using:SignificantQuoted Prices
    
    
    Other
    
    
    SignificantTotal Carrying
    
    
    in Active
    
    
    Observable
    
    
    UnobservableValue at
    
    
    Markets
    
    
    Inputs
    
    
    InputsDescription
    
    May 3, 2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Interest rate swap liabilities
    
    $
    6,117
    
    
    $
    
    
    
    $
    6,117
    
    
    $
    
  8




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##### 



THE BON-TON STORES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share data)
   4. SUPPLEMENTAL BALANCE SHEET INFORMATION
  May 3,
    
    
    February 2,2008
    
    
    2008Prepaid expenses
    
    $
    36,842
    
    
    $
    35,384Other current assets
    
    
    49,808
    
    
    
    42,948Total
    
    $
    86,650
    
    
    $
    78,332
 5. EXIT OR DISPOSAL ACTIVITIES
  Termination
    
    
    OtherBenefits
    
    
    Costs
    
    
    TotalBalance as of February 2, 2008
    
    $
    20
    
    
    $
    
    
    
    $
    20Provision
    
    
    (2
    )
    
    
    24
    
    
    
    22Payments
    
    
    (18
    )
    
    
    (24
    )
    
    
    (42
    )Balance as of May 3, 2008
    
    $
    
    
    
    $
    
    
    
    $
    
    9




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##### 



THE BON-TON STORES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share data)
 6. EMPLOYEE BENEFIT PLANS
   THIRTEENWEEKS ENDEDMay 3,
    
    
    May 5,2008
    
    
    2007Service cost
    
    $
    39
    
    
    $
    32Interest cost
    
    
    2,935
    
    
    
    3,042Expected return on plan assets
    
    
    (3,076
    )
    
    
    (3,668
    )Recognition of prior service cost
    
    
    1
    
    
    
    1Recognition of net actuarial loss
    
    
    126
    
    
    
    79Net periodic benefit expense (income)
    
    $
    25
    
    
    $
    (514
    )
   7. CONTINGENCIES
    10




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##### 



THE BON-TON STORES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share data)
  8. COMPREHENSIVE LOSS
  THIRTEENWEEKS ENDEDMay 3,
    
    
    May 5,2008
    
    
    2007Net loss
    
    $
    (34,063
    )
    
    $
    (29,299
    )Other comprehensive income (loss):Amortization of pension plan amounts, net of tax
    
    
    80
    
    
    
    51Cash flow hedge derivative income (loss), net of tax
    
    
    936
    
    
    
    (442
    )Comprehensive loss
    
    $
    (33,047
    )
    
    $
    (29,690
    )
 9. SUBSEQUENT EVENT
  10. GUARANTOR AND NON-GUARANTOR SUBSIDIARIES
    11




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##### 



THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share data)
 The Bon-Ton Stores, Inc.
Condensed Consolidating Balance Sheet
May 3, 2008
 Bon-Ton(Parent
    
    
    
    
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Consolidating
    
    
    CompanyCompany)
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assets:Cash and cash equivalents
    
    $
    1
    
    
    $
    8,793
    
    
    $
    9,965
    
    
    $
    
    
    
    $
    
    
    
    $
    18,759Merchandise inventories
    
    
    
    
    
    
    367,528
    
    
    
    406,766
    
    
    
    
    
    
    
    
    
    
    
    774,294Prepaid expenses and other current assets
    
    
    
    
    
    
    70,890
    
    
    
    15,181
    
    
    
    579
    
    
    
    
    
    
    
    86,650Deferred income taxes
    
    
    
    
    
    
    (4,030
    )
    
    
    21,566
    
    
    
    
    
    
    
    
    
    
    
    17,536Total current assets
    
    
    1
    
    
    
    443,181
    
    
    
    453,478
    
    
    
    579
    
    
    
    
    
    
    
    897,239Property, fixtures and equipment at cost, net
    
    
    
    
    
    
    304,405
    
    
    
    262,855
    
    
    
    313,140
    
    
    
    
    
    
    
    880,400Deferred income taxes
    
    
    
    
    
    
    22,848
    
    
    
    65,257
    
    
    
    
    
    
    
    
    
    
    
    88,105Goodwill
    
    
    
    
    
    
    8,488
    
    
    
    9,279
    
    
    
    
    
    
    
    
    
    
    
    17,767Intangible assets, net
    
    
    
    
    
    
    68,330
    
    
    
    95,134
    
    
    
    
    
    
    
    
    
    
    
    163,464Investment in and advances to (from) affiliates
    
    
    332,885
    
    
    
    730,563
    
    
    
    (43,730
    )
    
    
    317
    
    
    
    (1,020,035
    )
    
    
    Other long-term assets
    
    
    
    
    
    
    27,995
    
    
    
    6,248
    
    
    
    2,734
    
    
    
    
    
    
    
    36,977Total assets
    
    $
    332,886
    
    
    $
    1,605,810
    
    
    $
    848,521
    
    
    $
    316,770
    
    
    $
    (1,020,035
    )
    
    $
    2,083,952Liabilities and Shareholders EquityCurrent liabilities:Accounts payable
    
    $
    
    
    
    $
    230,914
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    230,914Accrued payroll and benefits
    
    
    
    
    
    
    27,214
    
    
    
    12,447
    
    
    
    
    
    
    
    
    
    
    
    39,661Accrued expenses
    
    
    
    
    
    
    80,538
    
    
    
    73,509
    
    
    
    130
    
    
    
    
    
    
    
    154,177Current maturities of long-term debt and obligations
under capital leases
    
    
    
    
    
    
    274
    
    
    
    2,083
    
    
    
    5,797
    
    
    
    
    
    
    
    8,154Total current liabilities
    
    
    
    
    
    
    338,940
    
    
    
    88,039
    
    
    
    5,927
    
    
    
    
    
    
    
    432,906Long-term debt and obligations under capital leases,
less current maturities
    
    
    
    
    
    
    886,400
    
    
    
    66,599
    
    
    
    256,413
    
    
    
    
    
    
    
    1,209,412Other long-term liabilities
    
    
    2,207
    
    
    
    65,158
    
    
    
    42,463
    
    
    
    1,127
    
    
    
    
    
    
    
    110,955Total liabilities
    
    
    2,207
    
    
    
    1,290,498
    
    
    
    197,101
    
    
    
    263,467
    
    
    
    
    
    
    
    1,753,273Shareholders equity
    
    
    330,679
    
    
    
    315,312
    
    
    
    651,420
    
    
    
    53,303
    
    
    
    (1,020,035
    )
    
    
    330,679Total liabilities and shareholders equity
    
    $
    332,886
    
    
    $
    1,605,810
    
    
    $
    848,521
    
    
    $
    316,770
    
    
    $
    (1,020,035
    )
    
    $
    2,083,952
  12




---



##### 



THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share data)
 The Bon-Ton Stores, Inc.
Condensed Consolidating Balance Sheet
February 2, 2008
 Bon-Ton(Parent
    
    
    
    
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Consolidating
    
    
    CompanyCompany)
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assets:Cash and cash equivalents
    
    $
    1
    
    
    $
    9,604
    
    
    $
    11,633
    
    
    $
    
    
    
    $
    
    
    
    $
    21,238Merchandise inventories
    
    
    
    
    
    
    375,162
    
    
    
    379,640
    
    
    
    
    
    
    
    
    
    
    
    754,802Prepaid expenses and other current assets
    
    
    
    
    
    
    68,727
    
    
    
    9,027
    
    
    
    578
    
    
    
    
    
    
    
    78,332Deferred income taxes
    
    
    
    
    
    
    (4,030
    )
    
    
    21,566
    
    
    
    
    
    
    
    
    
    
    
    17,536Total current assets
    
    
    1
    
    
    
    449,463
    
    
    
    421,866
    
    
    
    578
    
    
    
    
    
    
    
    871,908Property, fixtures and equipment at cost, net
    
    
    
    
    
    
    304,128
    
    
    
    265,250
    
    
    
    316,077
    
    
    
    
    
    
    
    885,455Deferred income taxes
    
    
    
    
    
    
    22,136
    
    
    
    65,221
    
    
    
    
    
    
    
    
    
    
    
    87,357Goodwill
    
    
    
    
    
    
    8,488
    
    
    
    9,279
    
    
    
    
    
    
    
    
    
    
    
    17,767Intangible assets, net
    
    
    
    
    
    
    69,772
    
    
    
    96,100
    
    
    
    
    
    
    
    
    
    
    
    165,872Investment in and advances to (from) affiliates
    
    
    365,267
    
    
    
    706,372
    
    
    
    (6,984
    )
    
    
    318
    
    
    
    (1,064,973
    )
    
    
    Other long-term assets
    
    
    
    
    
    
    28,518
    
    
    
    7,948
    
    
    
    2,806
    
    
    
    
    
    
    
    39,272Total assets
    
    $
    365,268
    
    
    $
    1,588,877
    
    
    $
    858,680
    
    
    $
    319,779
    
    
    $
    (1,064,973
    )
    
    $
    2,067,631Liabilities and Shareholders EquityCurrent liabilities:Accounts payable
    
    $
    
    
    
    $
    220,158
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    220,158Accrued payroll and benefits
    
    
    
    
    
    
    38,275
    
    
    
    11,627
    
    
    
    
    
    
    
    
    
    
    
    49,902Accrued expenses
    
    
    
    
    
    
    91,016
    
    
    
    75,500
    
    
    
    87
    
    
    
    
    
    
    
    166,603Current maturities of long-term debt and obligations
under capital leases
    
    
    
    
    
    
    260
    
    
    
    1,979
    
    
    
    5,656
    
    
    
    
    
    
    
    7,895Income taxes payable
    
    
    
    
    
    
    (6,461
    )
    
    
    7,360
    
    
    
    
    
    
    
    
    
    
    
    899Total current liabilities
    
    
    
    
    
    
    343,248
    
    
    
    96,466
    
    
    
    5,743
    
    
    
    
    
    
    
    445,457Long-term debt and obligations under capital leases,
less current maturities
    
    
    
    
    
    
    829,648
    
    
    
    59,413
    
    
    
    257,997
    
    
    
    
    
    
    
    1,147,058Other long-term liabilities
    
    
    2,207
    
    
    
    66,660
    
    
    
    42,082
    
    
    
    1,106
    
    
    
    
    
    
    
    112,055Total liabilities
    
    
    2,207
    
    
    
    1,239,556
    
    
    
    197,961
    
    
    
    264,846
    
    
    
    
    
    
    
    1,704,570Shareholders equity
    
    
    363,061
    
    
    
    349,321
    
    
    
    660,719
    
    
    
    54,933
    
    
    
    (1,064,973
    )
    
    
    363,061Total liabilities and shareholders equity
    
    $
    365,268
    
    
    $
    1,588,877
    
    
    $
    858,680
    
    
    $
    319,779
    
    
    $
    (1,064,973
    )
    
    $
    2,067,631
  13




---



##### 



THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share data)
 The Bon-Ton Stores, Inc.
Condensed Consolidating Statement of Operations
Thirteen Weeks Ended May 3, 2008
 Bon-Ton(Parent
    
    
    
    
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Consolidating
    
    
    CompanyCompany)
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    297,896
    
    
    $
    402,352
    
    
    $
    
    
    
    $
    
    
    
    $
    700,248Other income
    
    
    
    
    
    
    10,014
    
    
    
    12,761
    
    
    
    
    
    
    
    
    
    
    
    22,775
    
    
    
    307,910
    
    
    
    415,113
    
    
    
    
    
    
    
    
    
    
    
    723,023Costs and expenses:Costs of merchandise sold
    
    
    
    
    
    
    196,370
    
    
    
    266,130
    
    
    
    
    
    
    
    
    
    
    
    462,500Selling, general and administrative
    
    
    
    
    
    
    118,491
    
    
    
    146,124
    
    
    
    21
    
    
    
    (8,862
    )
    
    
    255,774Depreciation and amortization
    
    
    
    
    
    
    13,137
    
    
    
    12,944
    
    
    
    2,937
    
    
    
    
    
    
    
    29,018Amortization of lease-related interests
    
    
    
    
    
    
    755
    
    
    
    453
    
    
    
    
    
    
    
    
    
    
    
    1,208Loss from operations
    
    
    
    
    
    
    (20,843
    )
    
    
    (10,538
    )
    
    
    (2,958
    )
    
    
    8,862
    
    
    
    (25,477
    )Other income (expense):Intercompany rental and royalty income
    
    
    
    
    
    
    
    
    
    
    1,747
    
    
    
    7,115
    
    
    
    (8,862
    )
    
    
    Equity in losses of subsidiaries
    
    
    (49,839
    )
    
    
    (10,853
    )
    
    
    
    
    
    
    
    
    
    
    60,692
    
    
    
    Interest expense, net
    
    
    
    
    
    
    (18,143
    )
    
    
    (1,898
    )
    
    
    (4,321
    )
    
    
    
    
    
    
    (24,362
    )Loss before income taxes
    
    
    (49,839
    )
    
    
    (49,839
    )
    
    
    (10,689
    )
    
    
    (164
    )
    
    
    60,692
    
    
    
    (49,839
    )Income tax benefit
    
    
    (15,776
    )
    
    
    (15,776
    )
    
    
    (4,655
    )
    
    
    
    
    
    
    20,431
    
    
    
    (15,776
    )Net loss
    
    $
    (34,063
    )
    
    $
    (34,063
    )
    
    $
    (6,034
    )
    
    $
    (164
    )
    
    $
    40,261
    
    
    $
    (34,063
    )
  14




---



##### 



THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share data)
 The Bon-Ton Stores, Inc.
Condensed Consolidating Statement of Operations
Thirteen Weeks Ended May 5, 2007
 Bon-Ton(Parent
    
    
    
    
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Consolidating
    
    
    CompanyCompany)
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    140,551
    
    
    $
    597,010
    
    
    $
    
    
    
    $
    
    
    
    $
    737,561Other income
    
    
    
    
    
    
    4,512
    
    
    
    18,349
    
    
    
    
    
    
    
    
    
    
    
    22,861
    
    
    
    145,063
    
    
    
    615,359
    
    
    
    
    
    
    
    
    
    
    
    760,422Costs and expenses:Costs of merchandise sold
    
    
    
    
    
    
    95,673
    
    
    
    394,999
    
    
    
    
    
    
    
    
    
    
    
    490,672Selling, general and administrative
    
    
    
    
    
    
    50,596
    
    
    
    219,606
    
    
    
    (654
    )
    
    
    (9,201
    )
    
    
    260,347Depreciation and amortization
    
    
    
    
    
    
    5,659
    
    
    
    18,320
    
    
    
    2,981
    
    
    
    
    
    
    
    26,960Amortization of lease-related interests
    
    
    
    
    
    
    58
    
    
    
    1,171
    
    
    
    
    
    
    
    
    
    
    
    1,229Loss from operations
    
    
    
    
    
    
    (6,923
    )
    
    
    (18,737
    )
    
    
    (2,327
    )
    
    
    9,201
    
    
    
    (18,786
    )Other income (expense):Intercompany rental and royalty income
    
    
    
    
    
    
    
    
    
    
    1,966
    
    
    
    7,235
    
    
    
    (9,201
    )
    
    
    Equity in losses of subsidiaries
    
    
    (46,255
    )
    
    
    (20,625
    )
    
    
    
    
    
    
    
    
    
    
    66,880
    
    
    
    Interest expense, net
    
    
    
    
    
    
    (18,707
    )
    
    
    (3,279
    )
    
    
    (5,483
    )
    
    
    
    
    
    
    (27,469
    )Loss before income taxes
    
    
    (46,255
    )
    
    
    (46,255
    )
    
    
    (20,050
    )
    
    
    (575
    )
    
    
    66,880
    
    
    
    (46,255
    )Income tax benefit
    
    
    (16,956
    )
    
    
    (16,956
    )
    
    
    (7,459
    )
    
    
    
    
    
    
    24,415
    
    
    
    (16,956
    )Net loss
    
    $
    (29,299
    )
    
    $
    (29,299
    )
    
    $
    (12,591
    )
    
    $
    (575
    )
    
    $
    42,465
    
    
    $
    (29,299
    )
  15




---



##### 



THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share data)
 The Bon-Ton Stores, Inc.
Condensed Consolidating Statement of Cash Flows
Thirteen Weeks Ended May 3, 2008
 Bon-Ton(Parent
    
    
    
    
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Consolidating
    
    
    CompanyCompany)
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:
    
    $
    866
    
    
    $
    (39,302
    )
    
    $
    9,149
    
    
    $
    2,914
    
    
    $
    (5,597
    )
    
    $
    (31,970
    )Cash flows from investing activities:Capital expenditures
    
    
    
    
    
    
    (18,390
    )
    
    
    (7,148
    )
    
    
    
    
    
    
    
    
    
    
    (25,538
    )Proceeds from sale of property, fixtures
and equipment
    
    
    
    
    
    
    
    
    
    
    39
    
    
    
    
    
    
    
    
    
    
    
    39Net cash used in investing activities
    
    
    
    
    
    
    (18,390
    )
    
    
    (7,109
    )
    
    
    
    
    
    
    
    
    
    
    (25,499
    )Cash flows from financing activities:Payments on long-term debt and capital
lease obligations
    
    
    
    
    
    
    (149,806
    )
    
    
    (443
    )
    
    
    (1,443
    )
    
    
    
    
    
    
    (151,692
    )Proceeds from issuance of long-term debt
    
    
    
    
    
    
    214,305
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    214,305Intercompany financing activity
    
    
    
    
    
    
    (866
    )
    
    
    (3,265
    )
    
    
    (1,466
    )
    
    
    5,597
    
    
    
    Cash dividends paid
    
    
    (866
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (866
    )Excess tax shortfall from share-based compensation
    
    
    
    
    
    
    (96
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (96
    )Deferred financing costs paid
    
    
    
    
    
    
    (256
    )
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    (261
    )Decrease in bank overdraft balances
    
    
    
    
    
    
    (6,400
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,400
    )Net cash (used in) provided by financing activities
    
    
    (866
    )
    
    
    56,881
    
    
    
    (3,708
    )
    
    
    (2,914
    )
    
    
    5,597
    
    
    
    54,990Net decrease in cash and cash equivalents
    
    
    
    
    
    
    (811
    )
    
    
    (1,668
    )
    
    
    
    
    
    
    
    
    
    
    (2,479
    )Cash and cash equivalents at beginning
of period
    
    
    1
    
    
    
    9,604
    
    
    
    11,633
    
    
    
    
    
    
    
    
    
    
    
    21,238Cash and cash equivalents at end of period
    
    $
    1
    
    
    $
    8,793
    
    
    $
    9,965
    
    
    $
    
    
    
    $
    
    
    
    $
    18,759
  16




---



##### 



THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share data)
 The Bon-Ton Stores, Inc.
Condensed Consolidating Statement of Cash Flows
Thirteen Weeks Ended May 5, 2007
 Bon-Ton(Parent
    
    
    
    
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Consolidating
    
    
    CompanyCompany)
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:
    
    $
    505
    
    
    $
    (111,958
    )
    
    $
    6,147
    
    
    $
    3,824
    
    
    $
    (5,656
    )
    
    $
    (107,138
    )Cash flows from investing activities:Capital expenditures
    
    
    
    
    
    
    (14,561
    )
    
    
    (1,639
    )
    
    
    
    
    
    
    
    
    
    
    (16,200
    )Acquisition, net of cash acquired
    
    
    
    
    
    
    (51
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (51
    )Proceeds from sale of property, fixtures
and equipment
    
    
    
    
    
    
    15
    
    
    
    41
    
    
    
    2,495
    
    
    
    
    
    
    
    2,551Net cash (used in) provided by investing activities
    
    
    
    
    
    
    (14,597
    )
    
    
    (1,598
    )
    
    
    2,495
    
    
    
    
    
    
    
    (13,700
    )Cash flows from financing activities:Payments on long-term debt and capital
lease obligations
    
    
    
    
    
    
    (174,455
    )
    
    
    (489
    )
    
    
    (4,845
    )
    
    
    
    
    
    
    (179,789
    )Proceeds from issuance of long-term debt
    
    
    
    
    
    
    305,897
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    305,897Intercompany financing activity
    
    
    
    
    
    
    (505
    )
    
    
    (3,680
    )
    
    
    (1,471
    )
    
    
    5,656
    
    
    
    Cash dividends paid
    
    
    (857
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (857
    )Proceeds from stock options exercised
    
    
    352
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    352Excess tax benefit from share-based compensation
    
    
    
    
    
    
    175
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    175Deferred financing costs paid
    
    
    
    
    
    
    (250
    )
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    (253
    )Decrease in bank overdraft balances
    
    
    
    
    
    
    (5,029
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,029
    )Net cash (used in) provided by financing activities
    
    
    (505
    )
    
    
    125,833
    
    
    
    (4,169
    )
    
    
    (6,319
    )
    
    
    5,656
    
    
    
    120,496Net (decrease) increase in cash and cash
equivalents
    
    
    
    
    
    
    (722
    )
    
    
    380
    
    
    
    
    
    
    
    
    
    
    
    (342
    )Cash and cash equivalents at beginning
of period
    
    
    1
    
    
    
    7,122
    
    
    
    17,610
    
    
    
    
    
    
    
    
    
    
    
    24,733Cash and cash equivalents at end of period
    
    $
    1
    
    
    $
    6,400
    
    
    $
    17,990
    
    
    $
    
    
    
    $
    
    
    
    $
    24,391
  17




---



##### 



THE BON-TON STORES, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF  OPERATIONS
  Overview
    18




---



##### 



THE BON-TON STORES, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 Results of Operations
  THIRTEENWEEKS ENDEDMay 3,
    
    
    May 5,2008
    
    
    2007Net sales
    
    
    100.0
    %
    
    
    100.0
    %Other income
    
    
    3.3
    
    
    
    3.1103.3
    
    
    
    103.1Costs and expenses:Costs of merchandise sold
    
    
    66.0
    
    
    
    66.5Selling, general and administrative
    
    
    36.5
    
    
    
    35.3Depreciation and amortization
    
    
    4.1
    
    
    
    3.7Amortization of lease-related interests
    
    
    0.2
    
    
    
    0.2Loss from operations
    
    
    (3.6
    )
    
    
    (2.5
    )Interest expense, net
    
    
    3.5
    
    
    
    3.7Loss before income taxes
    
    
    (7.1
    )
    
    
    (6.3
    )Income tax benefit
    
    
    (2.3
    )
    
    
    (2.3
    )Net loss
    
    
    (4.9
    )%
    
    
    (4.0
    )%
 Thirteen Weeks Ended May 3, 2008 Compared with Thirteen Weeks Ended May 5, 2007
 Net sales
  Other income
 Costs and expenses
   19




---



##### 



THE BON-TON STORES, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
  Loss from operations
 Interest expense, net
 Income tax benefit
 Net loss
 Seasonality
   Liquidity and Capital Resources
  May 3,
    
    
    May 5,(Dollars in millions)
    
    2008
    
    
    2007Working capital
    
    $
    464.3
    
    
    $
    534.3Current ratio
    
    
    2.07:1
    
    
    
    2.25:1Debt to total capitalization (1)
    
    
    0.79:1
    
    
    
    0.81:1Unused availability under lines of credit (2)
    
    $
    273.8
    
    
    $
    191.3
 (1)
    
    Debt includes obligations under capital leases. Total capitalization includes shareholders equity, debt and
obligations under capital leases.(2)
    
    Subject to a minimum borrowing availability covenant of $75 as of May 3, 2008 and May 5, 2007.  20




---



##### 



THE BON-TON STORES, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
             21




---



##### 



THE BON-TON STORES, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 Critical Accounting Policies
   Inventory Valuation
     22




---



##### 



THE BON-TON STORES, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
  Vendor Allowances
   Income Taxes
    23




---



##### 



THE BON-TON STORES, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
  Long-lived Assets
   
    
    Significant under-performance 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.
    24




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THE BON-TON STORES, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 Goodwill
and Intangible Assets
    Insurance Reserve Estimates
  Pension and Supplementary Retirement Plans
      25




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THE BON-TON STORES, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 Future Accounting Changes
  Forward-Looking Statements
   26




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THE BON-TON STORES, INC.
 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Market Risk and Financial Instruments
  
 ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
   27




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THE BON-TON STORES, INC.
 
 PART II: OTHER INFORMATION
 
 ITEM 6. EXHIBITS
  Exhibit
    
    Description
    
    Document Location10.1(a)
    
    Employment Agreement with Stephen
Byers dated June 28, 2006
    
    Filed herewith10.1(b)
    
    First Amendment to Employment
Agreement with Stephen Byers
effective October 2, 2006
    
    Filed herewith10.2
    
    Restricted Stock Agreement with 
Byron L. Bergren
    
    Incorporated by
reference to Exhibit
10.1 to the Current
Report on Form 8-K
filed on March 27, 200831.1
    
    Certification of Byron L. Bergren
    
    Filed herewith31.2
    
    Certification of Keith E. Plowman
    
    Filed herewith32.1
    
    Certification Pursuant to Rules
13a-14(b) and 15d-14(b) of the
Securities Exchange Act of 1934
    
    Furnished herewith
 
 SIGNATURES
  THE BON-TON STORES, INC.DATE: June 11, 2008
    BY:
    /s/  Byron L. BergrenByron L. BergrenPresident and
Chief Executive OfficerDATE: June 11, 2008
    BY:
    /s/  Keith E. PlowmanKeith E. PlowmanExecutive Vice President,
Chief Financial Officer and
Principal Accounting Officer  28