##### Table of Contents



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 August 2, 2008
    
    Commission File Number0-19517
 THE BON-TON STORES, INC.
 2801 East Market Street
York, Pennsylvania 17402
 Incorporated in Pennsylvania
    
    IRS No. 23-2835229
 
 Yes þ No o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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TABLE OF CONTENTS  PART I: FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTSCONSOLIDATED BALANCE SHEETSCONSOLIDATED STATEMENTS OF OPERATIONSCONSOLIDATED STATEMENTS OF CASH FLOWSCONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITYNOTES TO CONSOLIDATED 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 1. LEGAL PROCEEDINGSITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSITEM 6. EXHIBITSSIGNATURESExhibit 31.1Exhibit 31.2Exhibit 32.1    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)
    
    August 2,
    
    
    February 2,(Unaudited)
    
    2008
    
    
    2008AssetsCurrent assets:Cash and cash equivalents
    
    $
    18,080
    
    
    $
    21,238Merchandise inventories
    
    
    710,703
    
    
    
    754,802Prepaid expenses and other current assets
    
    
    121,322
    
    
    
    78,332Deferred income taxes
    
    
    17,536
    
    
    
    17,536Total current assets
    
    
    867,641
    
    
    
    871,908Property, fixtures and equipment at cost, net of accumulated depreciation and amortization
of $470,749 and $418,279 at August 2, 2008 and February 2, 2008, respectively
    
    
    880,504
    
    
    
    885,455Deferred income taxes
    
    
    91,047
    
    
    
    87,357Goodwill
    
    
    
    
    
    
    17,767Intangible assets, net of accumulated amortization of $26,359 and $21,917 at August 2, 2008
and February 2, 2008, respectively
    
    
    161,055
    
    
    
    165,872Other long-term assets
    
    
    34,055
    
    
    
    39,272Total assets
    
    $
    2,034,302
    
    
    $
    2,067,631Liabilities and Shareholders EquityCurrent liabilities:Accounts payable
    
    $
    232,425
    
    
    $
    220,158Accrued payroll and benefits
    
    
    34,556
    
    
    
    49,902Accrued expenses
    
    
    164,892
    
    
    
    166,603Current maturities of long-term debt
    
    
    5,899
    
    
    
    5,656Current maturities of obligations under capital leases
    
    
    2,452
    
    
    
    2,239Income taxes payable
    
    
    
    
    
    
    899Total current liabilities
    
    
    440,224
    
    
    
    445,457Long-term debt, less current maturities
    
    
    1,115,442
    
    
    
    1,079,841Obligations under capital leases, less current maturities
    
    
    65,994
    
    
    
    67,217Other long-term liabilities
    
    
    115,073
    
    
    
    112,055Total liabilities
    
    
    1,736,733
    
    
    
    1,704,570Contingencies (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
15,087,273 and 14,614,111 at August 2, 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 August 2, 2008 and February 2, 2008
    
    
    30
    
    
    
    30Treasury stock, at cost  337,800 shares at August 2, 2008 and February 2, 2008
    
    
    (1,387
    )
    
    
    (1,387
    )Additional paid-in-capital
    
    
    142,230
    
    
    
    139,805Accumulated other comprehensive income
    
    
    2,499
    
    
    
    799Retained earnings
    
    
    154,046
    
    
    
    223,668Total shareholders equity
    
    
    297,569
    
    
    
    363,061Total liabilities and shareholders equity
    
    $
    2,034,302
    
    
    $
    2,067,631
   2




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##### Table of Contents



THE BON-TON STORES, INC.
 
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 THIRTEEN
    
    
    TWENTY-SIXWEEKS ENDED
    
    
    WEEKS ENDED(In thousands except share and per share data)
    
    August 2,
    
    
    August 4,
    
    
    August 2,
    
    
    August 4,(Unaudited)
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Net sales
    
    $
    673,384
    
    
    $
    708,620
    
    
    $
    1,373,632
    
    
    $
    1,446,181Other income
    
    
    21,513
    
    
    
    22,288
    
    
    
    44,288
    
    
    
    45,149694,897
    
    
    
    730,908
    
    
    
    1,417,920
    
    
    
    1,491,330Costs and expenses:Costs of merchandise sold
    
    
    431,962
    
    
    
    439,198
    
    
    
    894,462
    
    
    
    929,870Selling, general and administrative
    
    
    246,394
    
    
    
    255,651
    
    
    
    502,168
    
    
    
    515,998Depreciation and amortization
    
    
    29,892
    
    
    
    30,239
    
    
    
    58,910
    
    
    
    57,199Amortization of lease-related interests
    
    
    1,206
    
    
    
    1,332
    
    
    
    2,414
    
    
    
    2,561Goodwill impairment
    
    
    17,767
    
    
    
    
    
    
    
    17,767
    
    
    
    (Loss) income from operations
    
    
    (32,324
    )
    
    
    4,488
    
    
    
    (57,801
    )
    
    
    (14,298
    )Interest expense, net
    
    
    24,376
    
    
    
    27,429
    
    
    
    48,738
    
    
    
    54,898Loss before income taxes
    
    
    (56,700
    )
    
    
    (22,941
    )
    
    
    (106,539
    )
    
    
    (69,196
    )Income tax benefit
    
    
    (22,874
    )
    
    
    (7,966
    )
    
    
    (38,650
    )
    
    
    (24,922
    )Net loss
    
    $
    (33,826
    )
    
    $
    (14,975
    )
    
    $
    (67,889
    )
    
    $
    (44,274
    )Per share amounts Basic:Net loss
    
    $
    (2.01
    )
    
    $
    (0.91
    )
    
    $
    (4.04
    )
    
    $
    (2.68
    )Basic weighted average shares outstanding
    
    
    16,796,187
    
    
    
    16,498,320
    
    
    
    16,786,887
    
    
    
    16,490,038Diluted:Net loss
    
    $
    (2.01
    )
    
    $
    (0.91
    )
    
    $
    (4.04
    )
    
    $
    (2.68
    )Diluted weighted average shares outstanding
    
    
    16,796,187
    
    
    
    16,498,320
    
    
    
    16,786,887
    
    
    
    16,490,038
   3




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##### Table of Contents



THE BON-TON STORES, INC.
 
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 TWENTY-SIXWEEKS ENDED(In thousands)
    
    August 2,
    
    
    August 4,(Unaudited)
    
    2008
    
    
    2007Cash flows from operating activities:Net loss
    
    $
    (67,889
    )
    
    $
    (44,274
    )Adjustments to reconcile net loss to net cash provided by (used in) operating activities:Depreciation and amortization
    
    
    58,910
    
    
    
    57,199Amortization of lease-related interests
    
    
    2,414
    
    
    
    2,561Goodwill impairment
    
    
    17,767
    
    
    
    Share-based compensation expense
    
    
    2,692
    
    
    
    3,320Excess tax benefit from share-based compensation
    
    
    
    
    
    
    (289
    )Loss on sale of property, fixtures and equipment
    
    
    644
    
    
    
    552Amortization of deferred financing costs
    
    
    2,074
    
    
    
    1,958Amortization of deferred gain on sale of proprietary credit card portfolio
    
    
    (1,207
    )
    
    
    (1,207
    )Deferred income taxes
    
    
    (4,889
    )
    
    
    Changes in operating assets and liabilities:Decrease in merchandise inventories
    
    
    44,099
    
    
    
    30,194Increase in prepaid expenses and other current assets
    
    
    (43,252
    )
    
    
    (23,666
    )Decrease in other long-term assets
    
    
    3,409
    
    
    
    1,444Increase in accounts payable
    
    
    21,593
    
    
    
    28,728Decrease in accrued payroll and benefits and accrued expenses
    
    
    (16,061
    )
    
    
    (52,109
    )Decrease in income taxes payable
    
    
    (899
    )
    
    
    (34,013
    )Increase in other long-term liabilities
    
    
    8,146
    
    
    
    901Net cash provided by (used in) operating activities
    
    
    27,551
    
    
    
    (28,701
    )Cash flows from investing activities:Capital expenditures
    
    
    (52,759
    )
    
    
    (44,753
    )Acquisition, net of cash acquired
    
    
    
    
    
    
    (61
    )Proceeds from sale of property, fixtures and equipment
    
    
    83
    
    
    
    2,708Net cash used in investing activities
    
    
    (52,676
    )
    
    
    (42,106
    )Cash flows from financing activities:Payments on long-term debt and capital lease obligations
    
    
    (346,697
    )
    
    
    (368,012
    )Proceeds from issuance of long-term debt
    
    
    381,530
    
    
    
    441,287Cash dividends paid
    
    
    (1,733
    )
    
    
    (1,714
    )Proceeds from stock options exercised
    
    
    
    
    
    
    386Excess tax benefit from share-based compensation
    
    
    
    
    
    
    289Deferred financing costs paid
    
    
    (266
    )
    
    
    (266
    )Decrease in bank overdraft balances
    
    
    (10,867
    )
    
    
    (3,995
    )Net cash provided by financing activities
    
    
    21,967
    
    
    
    67,975Net decrease in cash and cash equivalents
    
    
    (3,158
    )
    
    
    (2,832
    )Cash and cash equivalents at beginning of period
    
    
    21,238
    
    
    
    24,733Cash and cash equivalents at end of period
    
    $
    18,080
    
    
    $
    21,901Supplemental Cash Flow Information:Interest paid
    
    $
    47,429
    
    
    $
    53,132Net income taxes paid
    
    $
    5,626
    
    
    $
    39,642
   4




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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 2, 2008
    
    $
    146
    
    
    $
    30
    
    
    $
    (1,387
    )
    
    $
    139,805
    
    
    $
    799
    
    
    $
    223,668
    
    
    $
    363,061Comprehensive loss (Note 9):Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (67,889
    )
    
    
    (67,889
    )Amortization
of pension plan amounts, net of $95 tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    159
    
    
    
    
    
    
    
    159Change in fair value of cash flow hedges,
net of $1,104 tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,541
    
    
    
    
    
    
    
    1,541Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (66,189
    )Dividends to shareholders, $0.10 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,733
    )
    
    
    (1,733
    )Share-based compensation expense
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    2,687
    
    
    
    
    
    
    
    
    
    
    
    2,692Excess tax shortfall from share-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (262
    )
    
    
    
    
    
    
    
    
    
    
    (262
    )BALANCE AT AUGUST 2, 2008
    
    $
    151
    
    
    $
    30
    
    
    $
    (1,387
    )
    
    $
    142,230
    
    
    $
    2,499
    
    
    $
    154,046
    
    
    $
    297,569
   5




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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
       Future Accounting Changes
   6




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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)
 2. PER-SHARE AMOUNTS
  THIRTEEN
    
    
    TWENTY-SIXWEEKS ENDED
    
    
    WEEKS ENDEDAugust 2,
    
    
    August 4,
    
    
    August 2,
    
    
    August 4,2008
    
    
    2007
    
    
    2008
    
    
    2007Basic calculation
    
    
    16,796,187
    
    
    
    16,498,320
    
    
    
    16,786,887
    
    
    
    16,490,038Effect of dilutive shares Restricted shares and restricted
stock units
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Diluted calculation
    
    
    16,796,187
    
    
    
    16,498,320
    
    
    
    16,786,887
    
    
    
    16,490,038
  THIRTEEN
    
    
    TWENTY-SIXWEEKS ENDED
    
    
    WEEKS ENDEDAugust 2,
    
    
    August 4,
    
    
    August 2,
    
    
    August 4,2008
    
    
    2007
    
    
    2008
    
    
    2007Antidilutive shares Restricted shares and restricted
stock units
    
    
    607,602
    
    
    
    728,289
    
    
    
    595,523
    
    
    
    715,091Stock options
    
    
    1,145,663
    
    
    
    731,953
    
    
    
    1,036,451
    
    
    
    684,790
  THIRTEEN
    
    
    TWENTY-SIXWEEKS ENDED
    
    
    WEEKS ENDEDAugust 2,
    
    
    August 4,
    
    
    August 2,
    
    
    August 4,2008
    
    
    2007
    
    
    2008
    
    
    2007Effect of dilutive securities Restricted shares and restricted
stock units
    
    
    240,770
    
    
    
    412,470
    
    
    
    219,591
    
    
    
    408,311Stock options
    
    
    4,698
    
    
    
    212,911
    
    
    
    4,714
    
    
    
    226,197
  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)
 3. GOODWILL IMPAIRMENT
    4. FAIR VALUE MEASUREMENTS
     8




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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)
   Fair Value Measurements at August 2, 2008Using:SignificantQuoted Prices
    
    
    Other
    
    
    SignificantTotal Carrying
    
    
    in Active
    
    
    Observable
    
    
    UnobservableValue at
    
    
    Markets
    
    
    Inputs
    
    
    InputsAugust 2, 2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Interest rate swap liabilities
    
    $
    5,079
    
    
    $
    
    
    
    $
    5,079
    
    
    $
    
   5. SUPPLEMENTAL BALANCE SHEET INFORMATION
  August 2,
    
    
    February 2,2008
    
    
    2008Prepaid expenses
    
    $
    44,373
    
    
    $
    35,384Other current assets
    
    
    76,949
    
    
    
    42,948Total
    
    $
    121,322
    
    
    $
    78,332
  9




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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)
 6. EXIT OR DISPOSAL ACTIVITIES
  Termination
    
    
    OtherBenefits
    
    
    Costs
    
    
    TotalBalance as of February 2, 2008
    
    $
    20
    
    
    $
    
    
    
    $
    20Provision:Thirteen weeks ended May 3, 2008
    
    
    (2
    )
    
    
    24
    
    
    
    22Thirteen weeks ended August 2, 2008
    
    
    
    
    
    
    
    
    
    
    Payments:Thirteen weeks ended May 3, 2008
    
    
    (18
    )
    
    
    (24
    )
    
    
    (42
    )Thirteen weeks ended August 2, 2008
    
    
    
    
    
    
    
    
    
    
    Balance as of August 2, 2008
    
    $
    
    
    
    $
    
    
    
    $
    
   7. EMPLOYEE DEFINED AND POSTRETIREMENT BENEFIT PLANS
  THIRTEEN
    
    
    TWENTY-SIXWEEKS ENDED
    
    
    WEEKS ENDEDAugust 2,
    
    
    August 4,
    
    
    August 2,
    
    
    August 4,2008
    
    
    2007
    
    
    2008
    
    
    2007Service cost
    
    $
    39
    
    
    $
    33
    
    
    $
    78
    
    
    $
    65Interest cost
    
    
    2,935
    
    
    
    3,041
    
    
    
    5,870
    
    
    
    6,083Expected return on plan assets
    
    
    (3,075
    )
    
    
    (3,669
    )
    
    
    (6,151
    )
    
    
    (7,337
    )Recognition of prior service cost
    
    
    1
    
    
    
    1
    
    
    
    2
    
    
    
    2Recognition of net actuarial loss
    
    
    126
    
    
    
    79
    
    
    
    252
    
    
    
    158Net periodic benefit expense (income)
    
    $
    26
    
    
    $
    (515
    )
    
    $
    51
    
    
    $
    (1,029
    )
  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)
   8. CONTINGENCIES
    9. COMPREHENSIVE LOSS
  THIRTEEN
    
    
    TWENTY-SIXWEEKS ENDED
    
    
    WEEKS ENDEDAugust 2,
    
    
    August 4,
    
    
    August 2,
    
    
    August 4,2008
    
    
    2007
    
    
    2008
    
    
    2007Net loss
    
    $
    (33,826
    )
    
    $
    (14,975
    )
    
    $
    (67,889
    )
    
    $
    (44,274
    )Other comprehensive income (loss):Amortization of pension plan
amounts,
net of tax
    
    
    79
    
    
    
    50
    
    
    
    159
    
    
    
    101Cash flow hedge derivative
income (loss), net of tax
    
    
    605
    
    
    
    267
    
    
    
    1,541
    
    
    
    (175
    )Comprehensive loss
    
    $
    (33,142
    )
    
    $
    (14,658
    )
    
    $
    (66,189
    )
    
    $
    (44,348
    )
  11




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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)
 10. INCOME TAXES
  11. SUBSEQUENT EVENT
  12. GUARANTOR AND NON-GUARANTOR SUBSIDIARIES
    12




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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 Balance Sheet
August 2, 2008
 Bon-Ton(Parent
    
    
    
    
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Consolidating
    
    
    CompanyCompany)
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assets:Cash and cash equivalents
    
    $
    1
    
    
    $
    8,283
    
    
    $
    9,796
    
    
    $
    
    
    
    $
    
    
    
    $
    18,080Merchandise inventories
    
    
    
    
    
    
    360,034
    
    
    
    350,669
    
    
    
    
    
    
    
    
    
    
    
    710,703Prepaid expenses and other current assets
    
    
    
    
    
    
    100,683
    
    
    
    20,060
    
    
    
    579
    
    
    
    
    
    
    
    121,322Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    21,566
    
    
    
    
    
    
    
    (4,030
    )
    
    
    17,536Total current assets
    
    
    1
    
    
    
    469,000
    
    
    
    402,091
    
    
    
    579
    
    
    
    (4,030
    )
    
    
    867,641Property, fixtures and equipment at cost, net
    
    
    
    
    
    
    294,631
    
    
    
    275,670
    
    
    
    310,203
    
    
    
    
    
    
    
    880,504Deferred income taxes
    
    
    
    
    
    
    22,907
    
    
    
    68,140
    
    
    
    
    
    
    
    
    
    
    
    91,047Intangible assets, net
    
    
    
    
    
    
    67,147
    
    
    
    93,908
    
    
    
    
    
    
    
    
    
    
    
    161,055Investment in and advances to (from) affiliates
    
    
    299,775
    
    
    
    687,128
    
    
    
    (6,037
    )
    
    
    317
    
    
    
    (981,183
    )
    
    
    Other long-term assets
    
    
    
    
    
    
    24,548
    
    
    
    6,357
    
    
    
    3,150
    
    
    
    
    
    
    
    34,055Total assets
    
    $
    299,776
    
    
    $
    1,565,361
    
    
    $
    840,129
    
    
    $
    314,249
    
    
    $
    (985,213
    )
    
    $
    2,034,302Liabilities and Shareholders EquityCurrent liabilities:Accounts payable
    
    $
    
    
    
    $
    232,425
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    232,425Accrued payroll and benefits
    
    
    
    
    
    
    24,093
    
    
    
    10,463
    
    
    
    
    
    
    
    
    
    
    
    34,556Accrued expenses
    
    
    
    
    
    
    88,718
    
    
    
    76,088
    
    
    
    86
    
    
    
    
    
    
    
    164,892Current maturities of long-term debt and obligations
under capital leases
    
    
    
    
    
    
    285
    
    
    
    2,167
    
    
    
    5,899
    
    
    
    
    
    
    
    8,351Deferred income taxes
    
    
    
    
    
    
    4,030
    
    
    
    
    
    
    
    
    
    
    
    (4,030
    )
    
    
    Total current liabilities
    
    
    
    
    
    
    349,551
    
    
    
    88,718
    
    
    
    5,985
    
    
    
    (4,030
    )
    
    
    440,224Long-term debt and obligations under capital leases,
less current maturities
    
    
    
    
    
    
    868,172
    
    
    
    58,333
    
    
    
    254,931
    
    
    
    
    
    
    
    1,181,436Other long-term liabilities
    
    
    2,207
    
    
    
    66,501
    
    
    
    45,218
    
    
    
    1,147
    
    
    
    
    
    
    
    115,073Total liabilities
    
    
    2,207
    
    
    
    1,284,224
    
    
    
    192,269
    
    
    
    262,063
    
    
    
    (4,030
    )
    
    
    1,736,733Shareholders equity
    
    
    297,569
    
    
    
    281,137
    
    
    
    647,860
    
    
    
    52,186
    
    
    
    (981,183
    )
    
    
    297,569Total liabilities and shareholders equity
    
    $
    299,776
    
    
    $
    1,565,361
    
    
    $
    840,129
    
    
    $
    314,249
    
    
    $
    (985,213
    )
    
    $
    2,034,302
  13




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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 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
    
    
    
    
    
    
    75,188
    
    
    
    9,027
    
    
    
    578
    
    
    
    (6,461
    )
    
    
    78,332Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    21,566
    
    
    
    
    
    
    
    (4,030
    )
    
    
    17,536Total current assets
    
    
    1
    
    
    
    459,954
    
    
    
    421,866
    
    
    
    578
    
    
    
    (10,491
    )
    
    
    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 affiliates
    
    
    365,267
    
    
    
    700,704
    
    
    
    5,710
    
    
    
    318
    
    
    
    (1,071,999
    )
    
    
    Other long-term assets
    
    
    
    
    
    
    28,518
    
    
    
    7,948
    
    
    
    2,806
    
    
    
    
    
    
    
    39,272Total assets
    
    $
    365,268
    
    
    $
    1,593,700
    
    
    $
    871,374
    
    
    $
    319,779
    
    
    $
    (1,082,490
    )
    
    $
    2,067,631Liabilities and Shareholders EquityCurrent liabilities:Accounts payable
    
    $
    
    
    
    $
    220,158
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    220,158Accrued payroll and benefits
    
    
    
    
    
    
    37,037
    
    
    
    12,865
    
    
    
    
    
    
    
    
    
    
    
    49,902Accrued expenses
    
    
    
    
    
    
    86,586
    
    
    
    79,930
    
    
    
    87
    
    
    
    
    
    
    
    166,603Current maturities of long-term debt and obligations
under capital leases
    
    
    
    
    
    
    260
    
    
    
    1,979
    
    
    
    5,656
    
    
    
    
    
    
    
    7,895Income taxes payable
    
    
    
    
    
    
    
    
    
    
    7,360
    
    
    
    
    
    
    
    (6,461
    )
    
    
    899Deferred income taxes
    
    
    
    
    
    
    4,030
    
    
    
    
    
    
    
    
    
    
    
    (4,030
    )
    
    
    Total current liabilities
    
    
    
    
    
    
    348,071
    
    
    
    102,134
    
    
    
    5,743
    
    
    
    (10,491
    )
    
    
    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
    
    
    
    1,244,379
    
    
    
    203,629
    
    
    
    264,846
    
    
    
    (10,491
    )
    
    
    1,704,570Shareholders equity
    
    
    363,061
    
    
    
    349,321
    
    
    
    667,745
    
    
    
    54,933
    
    
    
    (1,071,999
    )
    
    
    363,061Total liabilities and shareholders equity
    
    $
    365,268
    
    
    $
    1,593,700
    
    
    $
    871,374
    
    
    $
    319,779
    
    
    $
    (1,082,490
    )
    
    $
    2,067,631
  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)
 The Bon-Ton Stores, Inc.
Condensed Consolidating Statement of Operations
Thirteen Weeks Ended August 2, 2008
 Bon-Ton(Parent
    
    
    
    
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Consolidating
    
    
    CompanyCompany)
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    286,720
    
    
    $
    386,664
    
    
    $
    
    
    
    $
    
    
    
    $
    673,384Other income
    
    
    
    
    
    
    9,065
    
    
    
    12,448
    
    
    
    
    
    
    
    
    
    
    
    21,513
    
    
    
    295,785
    
    
    
    399,112
    
    
    
    
    
    
    
    
    
    
    
    694,897Costs and expenses:Costs of merchandise sold
    
    
    
    
    
    
    184,479
    
    
    
    247,483
    
    
    
    
    
    
    
    
    
    
    
    431,962Selling, general and administrative
    
    
    
    
    
    
    111,637
    
    
    
    143,591
    
    
    
    20
    
    
    
    (8,854
    )
    
    
    246,394Depreciation and amortization
    
    
    
    
    
    
    14,111
    
    
    
    12,844
    
    
    
    2,937
    
    
    
    
    
    
    
    29,892Amortization of lease-related interests
    
    
    
    
    
    
    750
    
    
    
    456
    
    
    
    
    
    
    
    
    
    
    
    1,206Goodwill impairment
    
    
    
    
    
    
    8,488
    
    
    
    9,279
    
    
    
    
    
    
    
    
    
    
    
    17,767Loss from operations
    
    
    
    
    
    
    (23,680
    )
    
    
    (14,541
    )
    
    
    (2,957
    )
    
    
    8,854
    
    
    
    (32,324
    )Other income (expense):Intercompany rental and royalty income
    
    
    
    
    
    
    
    
    
    
    1,739
    
    
    
    7,115
    
    
    
    (8,854
    )
    
    
    Equity in losses of subsidiaries
    
    
    (56,700
    )
    
    
    (15,282
    )
    
    
    
    
    
    
    
    
    
    
    71,982
    
    
    
    Interest expense, net
    
    
    
    
    
    
    (17,738
    )
    
    
    (2,343
    )
    
    
    (4,295
    )
    
    
    
    
    
    
    (24,376
    )Loss before income taxes
    
    
    (56,700
    )
    
    
    (56,700
    )
    
    
    (15,145
    )
    
    
    (137
    )
    
    
    71,982
    
    
    
    (56,700
    )Income tax benefit
    
    
    (22,874
    )
    
    
    (22,874
    )
    
    
    (6,319
    )
    
    
    
    
    
    
    29,193
    
    
    
    (22,874
    )Net loss
    
    $
    (33,826
    )
    
    $
    (33,826
    )
    
    $
    (8,826
    )
    
    $
    (137
    )
    
    $
    42,789
    
    
    $
    (33,826
    )
  15




---



##### 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 Operations
Thirteen Weeks Ended August 4, 2007
 Bon-Ton(Parent
    
    
    
    
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Consolidating
    
    
    CompanyCompany)
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    140,069
    
    
    $
    568,551
    
    
    $
    
    
    
    $
    
    
    
    $
    708,620Other income
    
    
    
    
    
    
    4,431
    
    
    
    17,857
    
    
    
    
    
    
    
    
    
    
    
    22,288
    
    
    
    144,500
    
    
    
    586,408
    
    
    
    
    
    
    
    
    
    
    
    730,908Costs and expenses:Costs of merchandise sold
    
    
    
    
    
    
    84,688
    
    
    
    354,510
    
    
    
    
    
    
    
    
    
    
    
    439,198Selling, general and administrative
    
    
    
    
    
    
    56,390
    
    
    
    208,287
    
    
    
    19
    
    
    
    (9,045
    )
    
    
    255,651Depreciation and amortization
    
    
    
    
    
    
    8,977
    
    
    
    18,316
    
    
    
    2,946
    
    
    
    
    
    
    
    30,239Amortization of lease-related interests
    
    
    
    
    
    
    168
    
    
    
    1,164
    
    
    
    
    
    
    
    
    
    
    
    1,332(Loss) income from operations
    
    
    
    
    
    
    (5,723
    )
    
    
    4,131
    
    
    
    (2,965
    )
    
    
    9,045
    
    
    
    4,488Other income (expense):Intercompany rental and royalty income
    
    
    
    
    
    
    
    
    
    
    1,929
    
    
    
    7,116
    
    
    
    (9,045
    )
    
    
    Equity in (losses) earnings of subsidiaries
    
    
    (22,941
    )
    
    
    1,514
    
    
    
    
    
    
    
    
    
    
    
    21,427
    
    
    
    Interest expense, net
    
    
    
    
    
    
    (18,732
    )
    
    
    (4,312
    )
    
    
    (4,385
    )
    
    
    
    
    
    
    (27,429
    )(Loss) income before income taxes
    
    
    (22,941
    )
    
    
    (22,941
    )
    
    
    1,748
    
    
    
    (234
    )
    
    
    21,427
    
    
    
    (22,941
    )Income tax (benefit) provision
    
    
    (7,966
    )
    
    
    (7,966
    )
    
    
    651
    
    
    
    
    
    
    
    7,315
    
    
    
    (7,966
    )Net (loss) income
    
    $
    (14,975
    )
    
    $
    (14,975
    )
    
    $
    1,097
    
    
    $
    (234
    )
    
    $
    14,112
    
    
    $
    (14,975
    )
  16




---



##### 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 Operations
Twenty-Six Weeks Ended August 2, 2008
 Bon-Ton(Parent
    
    
    
    
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Consolidating
    
    
    CompanyCompany)
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    584,616
    
    
    $
    789,016
    
    
    $
    
    
    
    $
    
    
    
    $
    1,373,632Other income
    
    
    
    
    
    
    19,079
    
    
    
    25,209
    
    
    
    
    
    
    
    
    
    
    
    44,288
    
    
    
    603,695
    
    
    
    814,225
    
    
    
    
    
    
    
    
    
    
    
    1,417,920Costs and expenses:Costs of merchandise sold
    
    
    
    
    
    
    380,849
    
    
    
    513,613
    
    
    
    
    
    
    
    
    
    
    
    894,462Selling, general and administrative
    
    
    
    
    
    
    230,128
    
    
    
    289,715
    
    
    
    41
    
    
    
    (17,716
    )
    
    
    502,168Depreciation and amortization
    
    
    
    
    
    
    27,248
    
    
    
    25,788
    
    
    
    5,874
    
    
    
    
    
    
    
    58,910Amortization of lease-related interests
    
    
    
    
    
    
    1,505
    
    
    
    909
    
    
    
    
    
    
    
    
    
    
    
    2,414Goodwill impairment
    
    
    
    
    
    
    8,488
    
    
    
    9,279
    
    
    
    
    
    
    
    
    
    
    
    17,767Loss from operations
    
    
    
    
    
    
    (44,523
    )
    
    
    (25,079
    )
    
    
    (5,915
    )
    
    
    17,716
    
    
    
    (57,801
    )Other income (expense):Intercompany rental and royalty income
    
    
    
    
    
    
    
    
    
    
    3,486
    
    
    
    14,230
    
    
    
    (17,716
    )
    
    
    Equity in losses of subsidiaries
    
    
    (106,539
    )
    
    
    (26,135
    )
    
    
    
    
    
    
    
    
    
    
    132,674
    
    
    
    Interest expense, net
    
    
    
    
    
    
    (35,881
    )
    
    
    (4,241
    )
    
    
    (8,616
    )
    
    
    
    
    
    
    (48,738
    )Loss before income taxes
    
    
    (106,539
    )
    
    
    (106,539
    )
    
    
    (25,834
    )
    
    
    (301
    )
    
    
    132,674
    
    
    
    (106,539
    )Income tax benefit
    
    
    (38,650
    )
    
    
    (38,650
    )
    
    
    (10,974
    )
    
    
    
    
    
    
    49,624
    
    
    
    (38,650
    )Net loss
    
    $
    (67,889
    )
    
    $
    (67,889
    )
    
    $
    (14,860
    )
    
    $
    (301
    )
    
    $
    83,050
    
    
    $
    (67,889
    )
  17




---



##### 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 Operations
Twenty-Six Weeks Ended August 4, 2007
 Bon-Ton(Parent
    
    
    
    
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Consolidating
    
    
    CompanyCompany)
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    280,620
    
    
    $
    1,165,561
    
    
    $
    
    
    
    $
    
    
    
    $
    1,446,181Other income
    
    
    
    
    
    
    8,943
    
    
    
    36,206
    
    
    
    
    
    
    
    
    
    
    
    45,149
    
    
    
    289,563
    
    
    
    1,201,767
    
    
    
    
    
    
    
    
    
    
    
    1,491,330Costs and expenses:Costs of merchandise sold
    
    
    
    
    
    
    180,361
    
    
    
    749,509
    
    
    
    
    
    
    
    
    
    
    
    929,870Selling, general and administrative
    
    
    
    
    
    
    106,986
    
    
    
    427,893
    
    
    
    (635
    )
    
    
    (18,246
    )
    
    
    515,998Depreciation and amortization
    
    
    
    
    
    
    14,636
    
    
    
    36,636
    
    
    
    5,927
    
    
    
    
    
    
    
    57,199Amortization of lease-related interests
    
    
    
    
    
    
    226
    
    
    
    2,335
    
    
    
    
    
    
    
    
    
    
    
    2,561Loss from operations
    
    
    
    
    
    
    (12,646
    )
    
    
    (14,606
    )
    
    
    (5,292
    )
    
    
    18,246
    
    
    
    (14,298
    )Other income (expense):Intercompany rental and royalty income
    
    
    
    
    
    
    
    
    
    
    3,895
    
    
    
    14,351
    
    
    
    (18,246
    )
    
    
    Equity in losses of subsidiaries
    
    
    (69,196
    )
    
    
    (19,111
    )
    
    
    
    
    
    
    
    
    
    
    88,307
    
    
    
    Interest expense, net
    
    
    
    
    
    
    (37,439
    )
    
    
    (7,591
    )
    
    
    (9,868
    )
    
    
    
    
    
    
    (54,898
    )Loss before income taxes
    
    
    (69,196
    )
    
    
    (69,196
    )
    
    
    (18,302
    )
    
    
    (809
    )
    
    
    88,307
    
    
    
    (69,196
    )Income tax benefit
    
    
    (24,922
    )
    
    
    (24,922
    )
    
    
    (6,808
    )
    
    
    
    
    
    
    31,730
    
    
    
    (24,922
    )Net loss
    
    $
    (44,274
    )
    
    $
    (44,274
    )
    
    $
    (11,494
    )
    
    $
    (809
    )
    
    $
    56,577
    
    
    $
    (44,274
    )
  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
Twenty-Six Weeks Ended August 2, 2008
 Bon-Ton(Parent
    
    
    
    
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Consolidating
    
    
    CompanyCompany)
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:
    
    $
    1,733
    
    
    $
    2,557
    
    
    $
    27,190
    
    
    $
    5,275
    
    
    $
    (9,204
    )
    
    $
    27,551Cash flows from investing activities:Capital expenditures
    
    
    
    
    
    
    (29,588
    )
    
    
    (23,171
    )
    
    
    
    
    
    
    
    
    
    
    (52,759
    )Proceeds from sale of property, fixtures
and equipment
    
    
    
    
    
    
    20
    
    
    
    63
    
    
    
    
    
    
    
    
    
    
    
    83Net cash used in investing activities
    
    
    
    
    
    
    (29,568
    )
    
    
    (23,108
    )
    
    
    
    
    
    
    
    
    
    
    (52,676
    )Cash flows from financing activities:Payments on long-term debt and capital
lease obligations
    
    
    
    
    
    
    (342,980
    )
    
    
    (894
    )
    
    
    (2,823
    )
    
    
    
    
    
    
    (346,697
    )Proceeds from issuance of long-term debt
    
    
    
    
    
    
    381,530
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    381,530Intercompany financing activity
    
    
    
    
    
    
    (1,733
    )
    
    
    (5,025
    )
    
    
    (2,446
    )
    
    
    9,204
    
    
    
    Cash dividends paid
    
    
    (1,733
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,733
    )Deferred financing costs paid
    
    
    
    
    
    
    (260
    )
    
    
    
    
    
    
    (6
    )
    
    
    
    
    
    
    (266
    )Decrease in bank overdraft balances
    
    
    
    
    
    
    (10,867
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,867
    )Net cash (used in) provided by financing activities
    
    
    (1,733
    )
    
    
    25,690
    
    
    
    (5,919
    )
    
    
    (5,275
    )
    
    
    9,204
    
    
    
    21,967Net decrease in cash and cash
equivalents
    
    
    
    
    
    
    (1,321
    )
    
    
    (1,837
    )
    
    
    
    
    
    
    
    
    
    
    (3,158
    )Cash and cash equivalents at beginning
of period
    
    
    1
    
    
    
    9,604
    
    
    
    11,633
    
    
    
    
    
    
    
    
    
    
    
    21,238Cash and cash equivalents at end of period
    
    $
    1
    
    
    $
    8,283
    
    
    $
    9,796
    
    
    $
    
    
    
    $
    
    
    
    $
    18,080
  19




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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
Twenty-Six Weeks Ended August 4, 2007
 Bon-Ton(Parent
    
    
    
    
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Consolidating
    
    
    CompanyCompany)
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:
    
    $
    1,328
    
    
    $
    (46,234
    )
    
    $
    19,550
    
    
    $
    6,582
    
    
    $
    (9,927
    )
    
    $
    (28,701
    )Cash flows from investing activities:Capital expenditures
    
    
    
    
    
    
    (29,749
    )
    
    
    (15,004
    )
    
    
    
    
    
    
    
    
    
    
    (44,753
    )Acquisition, net of cash acquired
    
    
    
    
    
    
    (61
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (61
    )Proceeds from sale of property, fixtures
and equipment
    
    
    
    
    
    
    53
    
    
    
    160
    
    
    
    2,495
    
    
    
    
    
    
    
    2,708Net cash (used in) provided by investing activities
    
    
    
    
    
    
    (29,757
    )
    
    
    (14,844
    )
    
    
    2,495
    
    
    
    
    
    
    
    (42,106
    )Cash flows from financing activities:Payments on long-term debt and capital
lease obligations
    
    
    
    
    
    
    (360,918
    )
    
    
    (962
    )
    
    
    (6,132
    )
    
    
    
    
    
    
    (368,012
    )Proceeds from issuance of long-term debt
    
    
    
    
    
    
    441,287
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    441,287Intercompany financing activity
    
    
    
    
    
    
    (1,328
    )
    
    
    (5,657
    )
    
    
    (2,942
    )
    
    
    9,927
    
    
    
    Cash dividends paid
    
    
    (1,714
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,714
    )Proceeds from stock options exercised
    
    
    386
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    386Excess tax benefit from share-based compensation
    
    
    
    
    
    
    289
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    289Deferred financing costs paid
    
    
    
    
    
    
    (263
    )
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    (266
    )Decrease in bank overdraft balances
    
    
    
    
    
    
    (3,995
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,995
    )Net cash (used in) provided by financing activities
    
    
    (1,328
    )
    
    
    75,072
    
    
    
    (6,619
    )
    
    
    (9,077
    )
    
    
    9,927
    
    
    
    67,975Net decrease in cash and cash
equivalents
    
    
    
    
    
    
    (919
    )
    
    
    (1,913
    )
    
    
    
    
    
    
    
    
    
    
    (2,832
    )Cash and cash equivalents at beginning
of period
    
    
    1
    
    
    
    7,384
    
    
    
    17,348
    
    
    
    
    
    
    
    
    
    
    
    24,733Cash and cash equivalents at end of period
    
    $
    1
    
    
    $
    6,465
    
    
    $
    15,435
    
    
    $
    
    
    
    $
    
    
    
    $
    21,901
  20




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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
 Bon-Ton,
   21




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##### Table of Contents



THE BON-TON STORES, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 Results of Operations
  THIRTEEN
    
    
    TWENTY-SIXWEEKS ENDED
    
    
    WEEKS ENDEDAugust 2,
    
    
    August 4,
    
    
    August 2,
    
    
    August 4,2008
    
    
    2007
    
    
    2008
    
    
    2007Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Other income
    
    
    3.2
    
    
    
    3.1
    
    
    
    3.2
    
    
    
    3.1103.2
    
    
    
    103.1
    
    
    
    103.2
    
    
    
    103.1Costs and expenses:Costs of merchandise sold
    
    
    64.1
    
    
    
    62.0
    
    
    
    65.1
    
    
    
    64.3Selling, general and administrative
    
    
    36.6
    
    
    
    36.1
    
    
    
    36.6
    
    
    
    35.7Depreciation and amortization
    
    
    4.4
    
    
    
    4.3
    
    
    
    4.3
    
    
    
    4.0Amortization of lease-related interests
    
    
    0.2
    
    
    
    0.2
    
    
    
    0.2
    
    
    
    0.2Goodwill impairment
    
    
    2.6
    
    
    
    
    
    
    
    1.3
    
    
    
    (Loss) income from operations
    
    
    (4.8
    )
    
    
    0.6
    
    
    
    (4.2
    )
    
    
    (1.0
    )Interest expense, net
    
    
    3.6
    
    
    
    3.9
    
    
    
    3.5
    
    
    
    3.8Loss before income taxes
    
    
    (8.4
    )
    
    
    (3.2
    )
    
    
    (7.8
    )
    
    
    (4.8
    )Income tax benefit
    
    
    (3.4
    )
    
    
    (1.1
    )
    
    
    (2.8
    )
    
    
    (1.7
    )Net loss
    
    
    (5.0
    )%
    
    
    (2.1
    )%
    
    
    (4.9
    )%
    
    
    (3.1
    )%
 Second Quarter of 2008 Compared with Second Quarter of 2007
 Net sales
  Other income
  22




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##### Table of Contents



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
 2008 Compared with 2007
 Net sales
  23




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##### Table of Contents



THE BON-TON STORES, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
  Other income
 Costs and expenses
    Loss from operations
 Interest expense, net
  24




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##### Table of Contents



THE BON-TON STORES, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 Income tax benefit
 Net loss
 Seasonality
   Liquidity and Capital Resources
  August 2,
    
    
    August 4,(Dollars in millions)
    
    2008
    
    
    2007Working capital
    
    $
    427.4
    
    
    $
    474.6Current ratio
    
    
    1.97:1
    
    
    
    2.10:1Debt to total capitalization (1)
    
    
    0.80:1
    
    
    
    0.81:1Unused availability under lines of credit (2)
    
    $
    238.0
    
    
    $
    229.0
 (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 August 2, 2008 and August 4,
2007.      25




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##### Table of Contents



THE BON-TON STORES, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
        Critical Accounting Policies
   26




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##### Table of Contents



THE BON-TON STORES, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
  Inventory Valuation
   on-hand.
   27




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##### Table of Contents



THE BON-TON STORES, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 Vendor Allowances
   Income Taxes
     28




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##### Table of Contents



THE BON-TON STORES, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 Long-lived Assets
  long-lived
 
    
    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.
   Goodwill and Intangible Assets
    29




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##### Table of Contents



THE BON-TON STORES, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
   Insurance Reserve Estimates
  Pension and Supplementary Retirement Plans
  Option-adjusted
   Future Accounting Changes
   30




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##### Table of Contents



THE BON-TON STORES, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 Forward-Looking Statements
   31




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##### Table of Contents



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
   32




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##### Table of Contents



THE BON-TON STORES, INC.
 
 
 PART II: OTHER INFORMATION
 
 
 ITEM 1. LEGAL PROCEEDINGS
    33




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##### Table of Contents



THE BON-TON STORES, INC.
 
 
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  1.
    
    The following individuals were nominated and elected by the votes set forth opposite his or
her name to serve as the directors of the Company:
 Lucinda M. Baier
    
    For:
    
    
    40,782,087Withhold Authority:
    
    
    73,737Robert B. Bank
    
    For:
    
    
    40,761,755Withhold Authority:
    
    
    94,069Byron L. Bergren
    
    For:
    
    
    40,765,787Withhold Authority:
    
    
    90,037Philip M. Browne
    
    For:
    
    
    40,782,187Withhold Authority:
    
    
    73,637Shirley A. Dawe
    
    For:
    
    
    40,782,287Withhold Authority:
    
    
    73,537Marsha M. Everton
    
    For:
    
    
    40,684,973Withhold Authority:
    
    
    170,851Michael L. Gleim
    
    For:
    
    
    39,776,380Withhold Authority:
    
    
    1,079,444M. Thomas Grumbacher
    
    For:
    
    
    40,765,874Withhold Authority:
    
    
    89,950Thomas K. Hernquist
    
    For:
    
    
    40,782,182Withhold Authority:
    
    
    73,642Todd C. McCarty
    
    For:
    
    
    40,780,562Withhold Authority:
    
    
    75,262
 2.
    
    With respect to the proposal to approve the amendment of the Amended and Restated 2000 Stock
Incentive and Performance-Based Plan, 35,185,996 votes were cast in favor, 1,649,346 votes
were cast against and 106,788 votes abstained.3.
    
    With respect to the proposal to ratify the appointment of KPMG LLP as the Companys
independent registered accounting firm for 2008, 40,666,360 votes were cast in favor, 148,002
votes were cast against and 41,462 votes abstained.
  34




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##### Table of Contents



THE BON-TON STORES, INC.
 
 
 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.
 
 
 SIGNATURES
  THE BON-TON STORES, INC.DATE: September 10, 2008
    
    BY:
    
    /s/ Byron L. Bergren

Byron L. BergrenPresident andChief Executive OfficerDATE: September 10, 2008
    
    BY:
    
    /s/ Keith E. Plowman

Keith E. PlowmanExecutive Vice President,Chief Financial Officer andPrincipal Accounting Officer
  35