##### Table of Contents



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 5, 2007
 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
  o þ o
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TABLE OF CONTENTS  PART I: FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTSITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 4. CONTROLS AND PROCEDURESPART II: OTHER INFORMATIONITEM 6. EXHIBITSSIGNATURESCertification of Byron L. BergrenCertification of Keith E. PlowmanCertification Pursuant to Rules 13a-14(b) and 15d-14(b)    Table of Contents  
 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 5,
    
    
    February 3,(Unaudited)
    
    2007
    
    
    2007AssetsCurrent assets:Cash and cash equivalents
    
    $
    24,391
    
    
    $
    24,733Merchandise inventories
    
    
    824,571
    
    
    
    787,487Prepaid expenses and other current assets
    
    
    93,677
    
    
    
    84,731Deferred income taxes
    
    
    17,858
    
    
    
    17,858Total current assets
    
    
    960,497
    
    
    
    914,809Property, fixtures and equipment at cost, net of accumulated depreciation and amortization
of $334,284 and $311,160 at May 5, 2007 and February 3, 2007, respectively
    
    
    880,381
    
    
    
    897,886Deferred income taxes
    
    
    76,873
    
    
    
    76,586Goodwill
    
    
    27,824
    
    
    
    27,377Intangible assets, net of accumulated amortization of $14,487 and $12,087 at May 5, 2007
and February 3, 2007, respectively
    
    
    174,300
    
    
    
    176,700Other long-term assets
    
    
    40,132
    
    
    
    41,441Total assets
    
    $
    2,160,007
    
    
    $
    2,134,799Liabilities and Shareholders EquityCurrent liabilities:Accounts payable
    
    $
    229,882
    
    
    $
    209,742Accrued payroll and benefits
    
    
    47,781
    
    
    
    68,434Accrued expenses
    
    
    141,215
    
    
    
    178,642Current maturities of long-term debt
    
    
    5,368
    
    
    
    5,555Current maturities of obligations under capital leases
    
    
    1,948
    
    
    
    1,936Income taxes payable
    
    
    
    
    
    
    48,086Total current liabilities
    
    
    426,194
    
    
    
    512,395Long-term debt, less current maturities
    
    
    1,246,953
    
    
    
    1,120,169Obligations under capital leases, less current maturities
    
    
    68,955
    
    
    
    69,456Other long-term liabilities
    
    
    99,827
    
    
    
    86,383Total liabilities
    
    
    1,841,929
    
    
    
    1,788,403Contingencies (Note 8)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
14,520,434 and 14,469,196 shares at May 5, 2007 and February 3, 2007, respectively
    
    
    145
    
    
    
    145Class A Common Stock  authorized 20,000,000 shares at $0.01 par value; issued
and outstanding shares of 2,951,490 at May 5, 2007 and February 3, 2007
    
    
    30
    
    
    
    30Treasury stock, at cost - 337,800 shares at May 5, 2007 and February 3, 2007
    
    
    (1,387
    )
    
    
    (1,387
    )Additional paid-in-capital
    
    
    133,104
    
    
    
    130,875Accumulated other comprehensive income
    
    
    798
    
    
    
    1,189Retained earnings
    
    
    185,388
    
    
    
    215,544Total shareholders equity
    
    
    318,078
    
    
    
    346,396Total liabilities and shareholders equity
    
    $
    2,160,007
    
    
    $
    2,134,799
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##### Table of Contents



THE BON-TON STORES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
 THIRTEENWEEKS ENDED(In thousands except share and per share data)
    
    May 5,
    
    
    April 29,(Unaudited)
    
    2007
    
    
    2006Net sales
    
    $
    737,561
    
    
    $
    561,774Other income
    
    
    22,646
    
    
    
    14,813760,207
    
    
    
    576,587Costs and expenses:Costs of merchandise sold
    
    
    490,672
    
    
    
    351,580Selling, general and administrative
    
    
    260,132
    
    
    
    199,780Depreciation and amortization
    
    
    26,960
    
    
    
    18,514Amortization of lease-related interests
    
    
    1,229
    
    
    
    702(Loss) income from operations
    
    
    (18,786
    )
    
    
    6,011Interest expense, net
    
    
    27,469
    
    
    
    23,868Loss before income taxes
    
    
    (46,255
    )
    
    
    (17,857
    )Income tax benefit
    
    
    (16,956
    )
    
    
    (7,022
    )Net loss
    
    $
    (29,299
    )
    
    $
    (10,835
    )Per share amounts Basic:Net loss
    
    $
    (1.78
    )
    
    $
    (0.66
    )Basic weighted average shares outstanding
    
    
    16,481,756
    
    
    
    16,389,962Diluted:Net loss
    
    $
    (1.78
    )
    
    $
    (0.66
    )Diluted weighted average shares outstanding
    
    
    16,481,756
    
    
    
    16,389,962
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##### Table of Contents



THE BON-TON STORES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
 THIRTEENWEEKS ENDED(In thousands)
    
    May 5,
    
    
    April 29,(Unaudited)
    
    2007
    
    
    2006Cash flows from operating activities:Net loss
    
    $
    (29,299
    )
    
    $
    (10,835
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    26,960
    
    
    
    18,514Amortization of lease-related interests
    
    
    1,229
    
    
    
    702Share-based compensation expense
    
    
    1,702
    
    
    
    749Excess tax benefit from share-based compensation
    
    
    (175
    )
    
    
    (832
    )Gain on sale of property, fixtures and equipment
    
    
    (534
    )
    
    
    (558
    )Amortization of deferred financing costs
    
    
    977
    
    
    
    3,199Amortization of deferred gain on sale of proprietary credit card portfolio
    
    
    (603
    )
    
    
    (603
    )Changes in operating assets and liabilities, net of effect of acquisition:Increase in merchandise inventories
    
    
    (37,084
    )
    
    
    (29,280
    )Increase in prepaid expenses and other current assets
    
    
    (8,946
    )
    
    
    (19,269
    )Decrease in other long-term assets
    
    
    583
    
    
    
    564Increase (decrease) in accounts payable
    
    
    20,808
    
    
    
    (19,733
    )(Decrease) increase in accrued payroll and benefits and accrued expenses
    
    
    (53,717
    )
    
    
    30,419Decrease in income taxes payable
    
    
    (47,911
    )
    
    
    (15,371
    )Increase (decrease) in other long-term liabilities
    
    
    13,807
    
    
    
    (1,398
    )Net cash used in operating activities
    
    
    (112,203
    )
    
    
    (43,732
    )Cash flows from investing activities:Capital expenditures
    
    
    (11,135
    )
    
    
    (15,220
    )Acquisition, net of cash acquired
    
    
    (51
    )
    
    
    (1,055,527
    )Proceeds from sale of property, fixtures and equipment
    
    
    2,551
    
    
    
    535Net cash used in investing activities
    
    
    (8,635
    )
    
    
    (1,070,212
    )Cash flows from financing activities:Payments on long-term debt and capital lease obligations
    
    
    (179,789
    )
    
    
    (205,947
    )Proceeds from issuance of long-term debt
    
    
    305,897
    
    
    
    1,359,110Cash dividends paid
    
    
    (857
    )
    
    
    (422
    )Proceeds from stock options exercised
    
    
    352
    
    
    
    546Excess tax benefit from share-based compensation
    
    
    175
    
    
    
    832Deferred financing costs paid
    
    
    (253
    )
    
    
    (27,549
    )(Decrease) increase in bank overdraft balances
    
    
    (5,029
    )
    
    
    576Net cash provided by financing activities
    
    
    120,496
    
    
    
    1,127,146Net (decrease) increase in cash and cash equivalents
    
    
    (342
    )
    
    
    13,202Cash and cash equivalents at beginning of period
    
    
    24,733
    
    
    
    9,771Cash and cash equivalents at end of period
    
    $
    24,391
    
    
    $
    22,973Supplemental Cash Flow Information:Interest paid
    
    $
    39,134
    
    
    $
    9,488Net income taxes paid
    
    $
    39,625
    
    
    $
    15,640
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##### Table of Contents



THE BON-TON STORES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
 AccumulatedOtherClass A
    
    
    
    
    
    
    Additional
    
    
    Compre-(In thousands except per share data)
    
    Common
    
    
    Common
    
    
    Treasury
    
    
    Paid-in
    
    
    hensive
    
    
    Retained(Unaudited)
    
    Stock
    
    
    Stock
    
    
    Stock
    
    
    Capital
    
    
    Income
    
    
    Earnings
    
    
    TotalBALANCE AT FEBRUARY 3, 2007
    
    $
    145
    
    
    $
    30
    
    
    $
    (1,387
    )
    
    $
    130,875
    
    
    $
    1,189
    
    
    $
    215,544
    
    
    $
    346,396Comprehensive loss (Note 9):Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29,299
    )
    
    
    (29,299
    )Pension plan, net of $29 tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51
    
    
    
    
    
    
    
    51Change in fair value of cash flow
hedges, net of $316 tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (442
    )
    
    
    
    
    
    
    (442
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29,690
    )Dividends to
shareholders, $0.05 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (857
    )
    
    
    (857
    )Stock options exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    352
    
    
    
    
    
    
    
    
    
    
    
    352Share-based compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,702
    
    
    
    
    
    
    
    
    
    
    
    1,702Excess tax
benefit from share-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    175
    
    
    
    
    
    
    
    
    
    
    
    175BALANCE AT MAY 5, 2007
    
    $
    145
    
    
    $
    30
    
    
    $
    (1,387
    )
    
    $
    133,104
    
    
    $
    798
    
    
    $
    185,388
    
    
    $
    318,078
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##### Table of Contents



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




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THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share data)
  Future Accounting Changes
   2. PER-SHARE AMOUNTS
  THIRTEENWEEKS ENDEDMay 5,
    
    
    April 29,2007
    
    
    2006Basic calculation
    
    
    16,481,756
    
    
    
    16,389,962Effect of dilutive shares Restricted shares and restricted
stock units
    
    
    
    
    
    
    Options
    
    
    
    
    
    
    Diluted calculation
    
    
    16,481,756
    
    
    
    16,389,962
  7




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##### Table of Contents



THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share data)
 THIRTEENWEEKS ENDEDMay 5,
    
    
    April 29,2007
    
    
    2006Antidilutive shares Restricted shares and restricted
stock units
    
    
    701,893
    
    
    
    526,165Options
    
    
    637,626
    
    
    
    510,919
  THIRTEENWEEKS ENDEDMay 5,
    
    
    April 29,2007
    
    
    2006Effect of dilutive securities Restricted shares and restricted
stock units
    
    
    402,042
    
    
    
    201,366Options
    
    
    238,303
    
    
    
    64,770
 3. CARSONS ACQUISITION
   8




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THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share data)
 Final Purchase Price
 Cash purchase
    
    $
    1,040,188Carsons severance
    
    
    514Professional fees incurred
    
    
    11,863Total
    
    $
    1,052,565
 Final Purchase Price Allocation
 Cash and cash equivalents
    
    $
    3,110Merchandise inventories
    
    
    455,207Prepaid expenses
    
    
    33,687Property, fixtures and equipment
    
    
    724,447Deferred income taxes
    
    
    21,951Goodwill
    
    
    24,860Intangible assets
    
    
    178,180Other assets
    
    
    9,040Total assets acquired
    
    
    1,450,482Accounts payable
    
    
    (158,860
    )Accrued payroll and benefits
    
    
    (34,560
    )Other accrued expenses
    
    
    (79,088
    )Obligations under capital leases
    
    
    (73,000
    )Other liabilities
    
    
    (52,409
    )Total liabilities assumed
    
    
    (397,917
    )Net assets acquired
    
    $
    1,052,565
 4. SUPPLEMENTAL BALANCE SHEET INFORMATION
  May 5,
    
    
    February 3,2007
    
    
    2007Landlord receivables
    
    $
    1,073
    
    
    $
    15,000Prepaid expenses
    
    
    39,903
    
    
    
    29,527Other
    
    
    52,701
    
    
    
    40,204Total
    
    $
    93,677
    
    
    $
    84,731
 5. INTEGRATION ACTIVITIES
  9




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THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share data)
   Termination
    
    
    LeaseBenefits
    
    
    Termination
    
    
    TotalBalance as of February 3, 2007
    
    $
    333
    
    
    $
    987
    
    
    $
    1,320Provision
    
    
    24
    
    
    
    
    
    
    
    24Payments
    
    
    (205
    )
    
    
    (20
    )
    
    
    (225
    )Balance as of May 5, 2007
    
    $
    152
    
    
    $
    967
    
    
    $
    1,119
  6. EXIT OR DISPOSAL ACTIVITIES
  Termination
    
    
    OtherBenefits
    
    
    Costs
    
    
    TotalBalance as of February 3, 2007
    
    $
    2,436
    
    
    $
    
    
    
    $
    2,436Provision
    
    
    498
    
    
    
    1,159
    
    
    
    1,657Payments
    
    
    (2,914
    )
    
    
    (1,159
    )
    
    
    (4,073
    )Balance as of May 5, 2007
    
    $
    20
    
    
    $
    
    
    
    $
    20
   10




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##### Table of Contents



THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share data)
 Termination
    
    
    Lease
    
    
    Contract
    
    
    OtherBenefits
    
    
    Termination
    
    
    Termination
    
    
    Costs
    
    
    TotalBalance as of February 3, 2007
    
    $
    341
    
    
    $
    344
    
    
    $
    32
    
    
    $
    231
    
    
    $
    948Provision
    
    
    664
    
    
    
    
    
    
    
    
    
    
    
    189
    
    
    
    853Payments
    
    
    (639
    )
    
    
    (90
    )
    
    
    (21
    )
    
    
    (420
    )
    
    
    (1,170
    )Balance as of May 5, 2007
    
    $
    366
    
    
    $
    254
    
    
    $
    11
    
    
    $
    
    
    
    $
    631
  7. EMPLOYEE BENEFIT PLANS
   THIRTEENWEEKS ENDEDMay 5,
    
    
    April 29,2007
    
    
    2006Service cost
    
    $
    32
    
    
    $
    34Interest cost
    
    
    3,042
    
    
    
    117Expected return on plan assets
    
    
    (3,668
    )
    
    
    Recognition of prior service cost
    
    
    1
    
    
    
    Recognition of net actuarial loss
    
    
    79
    
    
    
    Net periodic benefit (income) expense
    
    $
    (514
    )
    
    $
    151
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THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share data)
  8. CONTINGENCIES
    12




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THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share data)
  9. COMPREHENSIVE LOSS
  THIRTEENWEEKS ENDEDMay 5,
    
    
    April 29,2007
    
    
    2006Net loss
    
    $
    (29,299
    )
    
    $
    (10,835
    )Other comprehensive (loss) income:Amortization of pension plan amounts, net of tax
    
    
    51
    
    
    
    Cash flow hedge derivative (loss) income, net of tax
    
    
    (442
    )
    
    
    5Comprehensive loss
    
    $
    (29,690
    )
    
    $
    (10,830
    )
 10. SUBSEQUENT EVENT
  11. GUARANTOR AND NON-GUARANTOR SUBSIDIARIES
   13




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THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share data)
 
 Bon-Ton(Parent
    
    
    
    
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Consolidating
    
    
    CompanyCompany)
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assets:Cash and cash equivalents
    
    $
    1
    
    
    $
    6,400
    
    
    $
    17,990
    
    
    $
    
    
    
    $
    
    
    
    $
    24,391Merchandise inventories
    
    
    
    
    
    
    253,220
    
    
    
    571,351
    
    
    
    
    
    
    
    
    
    
    
    824,571Prepaid expenses and other current assets
    
    
    
    
    
    
    51,868
    
    
    
    41,086
    
    
    
    723
    
    
    
    
    
    
    
    93,677Deferred income taxes
    
    
    
    
    
    
    2,038
    
    
    
    15,820
    
    
    
    
    
    
    
    
    
    
    
    17,858Total current assets
    
    
    1
    
    
    
    313,526
    
    
    
    646,247
    
    
    
    723
    
    
    
    
    
    
    
    960,497Property, fixtures and equipment at cost, net
    
    
    
    
    
    
    172,055
    
    
    
    383,366
    
    
    
    324,960
    
    
    
    
    
    
    
    880,381Deferred income taxes
    
    
    
    
    
    
    13,841
    
    
    
    63,032
    
    
    
    
    
    
    
    
    
    
    
    76,873Goodwill
    
    
    
    
    
    
    2,965
    
    
    
    24,859
    
    
    
    
    
    
    
    
    
    
    
    27,824Intangible assets, net
    
    
    
    
    
    
    2,541
    
    
    
    171,759
    
    
    
    
    
    
    
    
    
    
    
    174,300Investment in and advances to affiliates
    
    
    320,108
    
    
    
    875,746
    
    
    
    212,217
    
    
    
    558
    
    
    
    (1,408,629
    )
    
    
    Other long-term assets
    
    
    
    
    
    
    26,832
    
    
    
    10,275
    
    
    
    3,025
    
    
    
    
    
    
    
    40,132Total assets
    
    $
    320,109
    
    
    $
    1,407,506
    
    
    $
    1,511,755
    
    
    $
    329,266
    
    
    $
    (1,408,629
    )
    
    $
    2,160,007Liabilities and Shareholders EquityCurrent liabilities:Accounts payable
    
    $
    
    
    
    $
    229,882
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    229,882Accrued payroll and benefits
    
    
    
    
    
    
    7,281
    
    
    
    40,500
    
    
    
    
    
    
    
    
    
    
    
    47,781Accrued expenses
    
    
    
    
    
    
    39,864
    
    
    
    101,130
    
    
    
    221
    
    
    
    
    
    
    
    141,215Current maturities of long-term debt and obligations
under capital leases
    
    
    
    
    
    
    
    
    
    
    1,948
    
    
    
    5,368
    
    
    
    
    
    
    
    7,316Total current liabilities
    
    
    
    
    
    
    277,027
    
    
    
    143,578
    
    
    
    5,589
    
    
    
    
    
    
    
    426,194Long-term debt and obligations under capital leases,
less current maturities
    
    
    
    
    
    
    984,742
    
    
    
    68,955
    
    
    
    262,211
    
    
    
    
    
    
    
    1,315,908Other long-term liabilities
    
    
    2,031
    
    
    
    32,818
    
    
    
    63,930
    
    
    
    1,048
    
    
    
    
    
    
    
    99,827Total liabilities
    
    
    2,031
    
    
    
    1,294,587
    
    
    
    276,463
    
    
    
    268,848
    
    
    
    
    
    
    
    1,841,929Shareholders equity
    
    
    318,078
    
    
    
    112,919
    
    
    
    1,235,292
    
    
    
    60,418
    
    
    
    (1,408,629
    )
    
    
    318,078Total liabilities and shareholders equity
    
    $
    320,109
    
    
    $
    1,407,506
    
    
    $
    1,511,755
    
    
    $
    329,266
    
    
    $
    (1,408,629
    )
    
    $
    2,160,007
 14




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##### Table of Contents



THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share data)
 
 Bon-Ton(Parent
    
    
    
    
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Consolidating
    
    
    CompanyCompany)
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assets:Cash and cash equivalents
    
    $
    1
    
    
    $
    7,122
    
    
    $
    17,610
    
    
    $
    
    
    
    $
    
    
    
    $
    24,733Merchandise inventories
    
    
    
    
    
    
    262,532
    
    
    
    524,955
    
    
    
    
    
    
    
    
    
    
    
    787,487Prepaid expenses and other current assets
    
    
    
    
    
    
    41,064
    
    
    
    43,016
    
    
    
    651
    
    
    
    
    
    
    
    84,731Deferred income taxes
    
    
    
    
    
    
    2,038
    
    
    
    15,820
    
    
    
    
    
    
    
    
    
    
    
    17,858Total current assets
    
    
    1
    
    
    
    312,756
    
    
    
    601,401
    
    
    
    651
    
    
    
    
    
    
    
    914,809Property, fixtures and equipment at cost, net
    
    
    
    
    
    
    158,582
    
    
    
    407,492
    
    
    
    331,812
    
    
    
    
    
    
    
    897,886Deferred income taxes
    
    
    
    
    
    
    13,525
    
    
    
    63,061
    
    
    
    
    
    
    
    
    
    
    
    76,586Goodwill
    
    
    
    
    
    
    2,965
    
    
    
    24,412
    
    
    
    
    
    
    
    
    
    
    
    27,377Intangible assets, net
    
    
    
    
    
    
    2,599
    
    
    
    174,101
    
    
    
    
    
    
    
    
    
    
    
    176,700Investment in and advances to affiliates
    
    
    348,426
    
    
    
    794,071
    
    
    
    314,073
    
    
    
    345
    
    
    
    (1,456,915
    )
    
    
    Other long-term assets
    
    
    
    
    
    
    26,861
    
    
    
    11,338
    
    
    
    3,242
    
    
    
    
    
    
    
    41,441Total assets
    
    $
    348,427
    
    
    $
    1,311,359
    
    
    $
    1,595,878
    
    
    $
    336,050
    
    
    $
    (1,456,915
    )
    
    $
    2,134,799Liabilities and Shareholders EquityCurrent liabilities:Accounts payable
    
    $
    
    
    
    $
    209,742
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    209,742Accrued payroll and benefits
    
    
    
    
    
    
    16,801
    
    
    
    51,633
    
    
    
    
    
    
    
    
    
    
    
    68,434Accrued expenses
    
    
    
    
    
    
    65,629
    
    
    
    112,880
    
    
    
    133
    
    
    
    
    
    
    
    178,642Current maturities of long-term debt and obligations
under capital leases
    
    
    
    
    
    
    
    
    
    
    1,936
    
    
    
    5,555
    
    
    
    
    
    
    
    7,491Income taxes payable
    
    
    2,031
    
    
    
    (6,520
    )
    
    
    52,575
    
    
    
    
    
    
    
    
    
    
    
    48,086Total current liabilities
    
    
    2,031
    
    
    
    285,652
    
    
    
    219,024
    
    
    
    5,688
    
    
    
    
    
    
    
    512,395Long-term debt and obligations under capital leases,
less current maturities
    
    
    
    
    
    
    853,300
    
    
    
    69,456
    
    
    
    266,869
    
    
    
    
    
    
    
    1,189,625Other long-term liabilities
    
    
    
    
    
    
    29,417
    
    
    
    55,937
    
    
    
    1,029
    
    
    
    
    
    
    
    86,383Total liabilities
    
    
    2,031
    
    
    
    1,168,369
    
    
    
    344,417
    
    
    
    273,586
    
    
    
    
    
    
    
    1,788,403Shareholders equity
    
    
    346,396
    
    
    
    142,990
    
    
    
    1,251,461
    
    
    
    62,464
    
    
    
    (1,456,915
    )
    
    
    346,396Total liabilities and shareholders equity
    
    $
    348,427
    
    
    $
    1,311,359
    
    
    $
    1,595,878
    
    
    $
    336,050
    
    
    $
    (1,456,915
    )
    
    $
    2,134,799
 15




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##### Table of Contents



THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share data)
 
 Bon-Ton(Parent
    
    
    
    
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Consolidating
    
    
    CompanyCompany)
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    140,551
    
    
    $
    597,010
    
    
    $
    
    
    
    $
    
    
    
    $
    737,561Other income
    
    
    
    
    
    
    4,297
    
    
    
    18,349
    
    
    
    
    
    
    
    
    
    
    
    22,646
    
    
    
    144,848
    
    
    
    615,359
    
    
    
    
    
    
    
    
    
    
    
    760,207Costs and expenses:Costs of merchandise sold
    
    
    
    
    
    
    95,673
    
    
    
    394,999
    
    
    
    
    
    
    
    
    
    
    
    490,672Selling, general and administrative
    
    
    
    
    
    
    50,381
    
    
    
    219,606
    
    
    
    (654
    )
    
    
    (9,201
    )
    
    
    260,132Depreciation 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
    )
 16




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##### Table of Contents



THE BON-TON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share data)
 
 Bon-Ton(Parent
    
    
    
    
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Consolidating
    
    
    CompanyCompany)
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    128,585
    
    
    $
    433,189
    
    
    $
    
    
    
    $
    
    
    
    $
    561,774Other income
    
    
    
    
    
    
    4,444
    
    
    
    10,369
    
    
    
    
    
    
    
    
    
    
    
    14,813
    
    
    
    133,029
    
    
    
    443,558
    
    
    
    
    
    
    
    
    
    
    
    576,587Costs and expenses:Costs of merchandise sold
    
    
    
    
    
    
    88,024
    
    
    
    263,556
    
    
    
    
    
    
    
    
    
    
    
    351,580Selling, general and administrative
    
    
    2
    
    
    
    56,249
    
    
    
    150,375
    
    
    
    5
    
    
    
    (6,851
    )
    
    
    199,780Depreciation and amortization
    
    
    
    
    
    
    5,198
    
    
    
    10,656
    
    
    
    2,660
    
    
    
    
    
    
    
    18,514Amortization of lease-related interests
    
    
    
    
    
    
    118
    
    
    
    584
    
    
    
    
    
    
    
    
    
    
    
    702Income (loss) from operations
    
    
    (2
    )
    
    
    (16,560
    )
    
    
    18,387
    
    
    
    (2,665
    )
    
    
    6,851
    
    
    
    6,011Other income (expense):Intercompany interest income
    
    
    1,700
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,700
    )
    
    
    Intercompany rental and royalty income
    
    
    
    
    
    
    
    
    
    
    2,515
    
    
    
    4,336
    
    
    
    (6,851
    )
    
    
    Equity in earnings (losses) of subsidiaries
    
    
    (19,555
    )
    
    
    17,479
    
    
    
    
    
    
    
    
    
    
    
    2,076
    
    
    
    Interest expense, net
    
    
    
    
    
    
    (20,474
    )
    
    
    (2,166
    )
    
    
    (2,928
    )
    
    
    1,700
    
    
    
    (23,868
    )Income (loss) before income taxes
    
    
    (17,857
    )
    
    
    (19,555
    )
    
    
    18,736
    
    
    
    (1,257
    )
    
    
    2,076
    
    
    
    (17,857
    )Income tax provision (benefit)
    
    
    (7,022
    )
    
    
    (7,690
    )
    
    
    7,390
    
    
    
    
    
    
    
    300
    
    
    
    (7,022
    )Net income (loss)
    
    $
    (10,835
    )
    
    $
    (11,865
    )
    
    $
    11,346
    
    
    $
    (1,257
    )
    
    $
    1,776
    
    
    $
    (10,835
    )
 17




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##### Table of Contents



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
    
    
    $
    (119,057
    )
    
    $
    8,181
    
    
    $
    3,824
    
    
    $
    (5,656
    )
    
    $
    (112,203
    )Cash flows from investing activities:Capital expenditures
    
    
    
    
    
    
    (7,462
    )
    
    
    (3,673
    )
    
    
    
    
    
    
    
    
    
    
    (11,135
    )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
    
    
    
    
    
    
    (7,498
    )
    
    
    (3,632
    )
    
    
    2,495
    
    
    
    
    
    
    
    (8,635
    )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
 18




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##### Table of Contents



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 April 29, 2006
 Bon-Ton(Parent
    
    
    
    
    
    Guarantor
    
    Non-Guarantor
    
    Consolidating
    
    CompanyCompany)
    
    Issuer
    
    Subsidiaries
    
    Subsidiaries
    
    Eliminations
    
    ConsolidatedCash flows from operating activities:
    
    $
    (133
    )
    
    $
    189,589
    
    
    $
    18,752
    
    
    $
    2,754
    
    
    $
    (254,694
    )
    
    $
    (43,732
    )Cash flows from investing activities:Capital expenditures
    
    
    
    
    
    
    (9,967
    )
    
    
    (5,253
    )
    
    
    
    
    
    
    
    
    
    
    (15,220
    )Acquisition, net of cash acquired
    
    
    
    
    
    
    (1,055,527
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,055,527
    )Proceeds from sale of property, fixtures
and equipment
    
    
    
    
    
    
    17
    
    
    
    518
    
    
    
    
    
    
    
    
    
    
    
    535Net cash used in investing activities
    
    
    
    
    
    
    (1,065,477
    )
    
    
    (4,735
    )
    
    
    
    
    
    
    
    
    
    
    (1,070,212
    )Cash flows from financing activities:Payments on long-term debt and capital
lease obligations
    
    
    
    
    
    
    (205,541
    )
    
    
    (166
    )
    
    
    (240
    )
    
    
    
    
    
    
    (205,947
    )Proceeds from issuance of long-term debt
    
    
    
    
    
    
    1,106,650
    
    
    
    
    
    
    
    252,460
    
    
    
    
    
    
    
    1,359,110Intercompany financing activity
    
    
    
    
    
    
    124
    
    
    
    (4,775
    )
    
    
    (250,043
    )
    
    
    254,694
    
    
    
    Cash dividends paid
    
    
    (422
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (422
    )Proceeds from stock options exercised
    
    
    546
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    546Excess tax benefit from share-based compensation
    
    
    
    
    
    
    832
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    832Deferred financing costs paid
    
    
    
    
    
    
    (24,818
    )
    
    
    
    
    
    
    (2,731
    )
    
    
    
    
    
    
    (27,549
    )(Decrease) increase in bank overdraft balances
    
    
    
    
    
    
    (2,044
    )
    
    
    2,620
    
    
    
    
    
    
    
    
    
    
    
    576Net cash provided by (used in) financing activities
    
    
    124
    
    
    
    875,203
    
    
    
    (2,321
    )
    
    
    (554
    )
    
    
    254,694
    
    
    
    1,127,146Net (decrease) increase in cash and cash
equivalents
    
    
    (9
    )
    
    
    (685
    )
    
    
    11,696
    
    
    
    2,200
    
    
    
    
    
    
    
    13,202Cash and cash equivalents at beginning
of period
    
    
    10
    
    
    
    7,455
    
    
    
    2,306
    
    
    
    
    
    
    
    
    
    
    
    9,771Cash and cash equivalents at end of period
    
    $
    1
    
    
    $
    6,770
    
    
    $
    14,002
    
    
    $
    2,200
    
    
    $
    
    
    
    $
    22,973
 19




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##### Table of Contents



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
     Results of Operations
  20




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THE BON-TON STORES, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 THIRTEENWEEKS ENDEDMay 5,
    
    April 29,2007
    
    2006Net sales
    
    
    100.0
    %
    
    
    100.0
    %Other income
    
    
    3.1
    
    
    
    2.6103.1
    
    
    
    102.6Costs and expenses:Costs of merchandise sold
    
    
    66.5
    
    
    
    62.6Selling, general and administrative
    
    
    35.3
    
    
    
    35.6Depreciation and amortization
    
    
    3.7
    
    
    
    3.3Amortization of lease-related interests
    
    
    0.2
    
    
    
    0.1(Loss) income from operations
    
    
    (2.5
    )
    
    
    1.1Interest expense, net
    
    
    3.7
    
    
    
    4.2Loss before income taxes
    
    
    (6.3
    )
    
    
    (3.2
    )Income tax benefit
    
    
    (2.3
    )
    
    
    (1.3
    )Net loss
    
    
    (4.0
    )%
    
    
    (1.9
    )%
 Thirteen Weeks Ended May 5, 2007 Compared to Thirteen Weeks Ended April 29, 2006
 Net sales
  Other income
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THE BON-TON STORES, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
  Costs and expenses
   (Loss) income from operations
 Interest expense, net
 Income tax benefit
 Net loss
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THE BON-TON STORES, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 Seasonality and Inflation
    Liquidity and Capital Resources
  May 5,
    
    April 29,(Dollars in millions)
    
    2007
    
    2006Working capital
    
    $
    534.3
    
    
    $
    416.6Current ratio
    
    
    2.25:1
    
    
    
    1.92:1Debt to total capitalization (1)
    
    
    0.81:1
    
    
    
    0.82:1Unused availability under lines of credit (2)
    
    $
    191.3
    
    
    $
    257.6
 
 (1)
    
    Debt includes obligations under capital leases. Total capitalization includes
shareholders equity, debt and
obligations under capital leases.(2)
    
    Subject to a minimum borrowing covenant of $75 as of May 5, 2007 and April 29, 2006.    23




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THE BON-TON STORES, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
          Critical Accounting Policies
  24




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THE BON-TON STORES, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
   Inventory Valuation
     25




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THE BON-TON STORES, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
  Vendor Allowances
   Income Taxes
   26




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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.
   27




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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
  Future Accounting Changes
   28




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THE BON-TON STORES, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 Forward-Looking Statements
  29




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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
  
 PART II: OTHER INFORMATION
 
 ITEM 6. EXHIBITS
  Exhibit
    
    Description
    
    Document Location31.1
    
    Certification of Byron L. Bergren
    
    Filed herewith.31.2
    
    Certification of Keith E. Plowman
    
    Filed herewith.32.1
    
    Certification Pursuant to Rules 13a-14(b)
and 15d-14(b) of the Securities Exchange
Act of 1934
    
    Furnished herewith.
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THE BON-TON STORES, INC.
 
 SIGNATURES
  THE BON-TON STORES, INC.DATE:      June 13, 2007
    BY:
    /s/  Byron L. BergrenByron L. BergrenPresident and
Chief Executive Officer DATE:      June 13, 2007
    BY:
    /s/  Keith E. PlowmanKeith E. PlowmanExecutive Vice President,
Chief Financial Officer and
Principal Accounting Officer 31