The Bon-Ton Stores, Inc. Announces Second Quarter of Fiscal 2013 Results

  The Bon-Ton Stores, Inc. Announces Second Quarter of Fiscal 2013 Results

 ~ Net Loss per Diluted Share Improved by 19.8% to $1.95 per Diluted Share ~

Business Wire

YORK, Pa. -- August 22, 2013

The Bon-Ton Stores, Inc. (NASDAQ:BONT) today reported operating results for
the second quarter of fiscal 2013 ended August 3, 2013.

Second Quarter Highlights

  *Comparable store sales decreased 6.4%.
  *Gross margin rate increased 100 basis points to 37.0%, compared with 36.0%
    in the second quarter of fiscal 2012.
  *Operating loss improved by $2.2 million to $15.5 million, compared with an
    operating loss of $17.6 million in the second quarter of fiscal 2012.
  *Adjusted EBITDA increased $1.6 million to $8.7 million, compared with $7.1
    million in the second quarter of fiscal 2012. Adjusted EBITDA is not a
    measure recognized under generally accepted accounting principles (see
    Note 1).
  *Net loss improved by $7.7 million to $37.3 million, or $1.95 per diluted
    share, compared with a net loss of $45.0 million, or $2.43 per diluted
    share, for the second quarter of fiscal 2012. The results for the second
    quarter of fiscal 2013 include a charge of $3.9 million, or $0.20 per
    diluted share, for fees and accelerated amortization of deferred fees
    related to the tender and redemption of the Company’s Senior Notes due
    2014 and Second Lien Senior Secured Notes due 2017. The results for the
    second quarter of fiscal 2012 included a charge of $6.3 million, or $0.34
    per diluted share, for fees associated with the exchange of certain of the
    Company’s Senior Notes due 2014 for Second Lien Senior Secured Notes due
    2017.

Comments

Brendan Hoffman, President and Chief Executive Officer, commented, “We were
disappointed in our second quarter sales performance, but we were pleased we
were able to deliver on several of our goals, including a 100 basis point
increase in the gross margin rate and reduced expenses, which led to 23%
growth in Adjusted EBITDA. We believe overall sales weakness was in part
attributable to the adverse impact of inclement weather in our markets and
higher gas prices, especially in the Northeast and Midwest, which contributed
to an unfavorable shift in consumer spending patterns. Looking ahead, we
remain focused on the continued execution of our key merchandising, marketing
and eCommerce strategies, including the localization of our merchandise
assortments and marketing programs to drive top-line growth, while maintaining
disciplined inventory management and careful cost controls.”

Year-to-date Highlights

  *Comparable stores sales decreased 2.5%.
  *Gross margin rate increased 70 basis points to 35.8% compared with 35.1%
    in the prior year period.
  *Operating loss improved by $13.6 million to $22.6 million, compared with
    an operating loss of $36.1 million in the prior year period.
  *Adjusted EBITDA increased $12.0 million to $23.9 million, compared with
    $12.0 million in the prior year period.
  *Net loss improved by $21.9 million to $64.0 million, or $3.37 per diluted
    share, compared with a net loss of $85.8 million, or $4.66 per diluted
    share, for the prior year period. Year-to-date results for fiscal 2013
    include a charge of $4.3 million, or $0.23 per diluted share, for fees and
    accelerated amortization of deferred fees related to the tender and
    redemption of certain of the Company’s senior notes. Year-to-date results
    for fiscal 2012 included a charge of $7.5 million, or $0.41 per diluted
    share, for fees associated with the senior notes exchange and
    extinguishment of certain mortgage debt.

Net Sales

Comparable store sales for the second quarter of fiscal 2013 decreased 6.4%.
Total sales for the second quarter of fiscal 2013 decreased 6.3% to
$557.1million, compared with $594.9million for the prior year period.

Other Income

Other income in the second quarter of fiscal 2013 was $13.8 million, compared
with $12.4 million in the second quarter of fiscal 2012.

Gross Margin

In the second quarter of fiscal 2013, gross margin decreased $8.0 million to
$206.1 million, compared with $214.1 million in the second quarter of fiscal
2012. The gross margin rate for the second quarter of fiscal 2013 increased
100 basis points to 37.0% of net sales from 36.0% of net sales in the prior
year period. The increase in the gross margin rate in the current year period
is largely attributable to reduced net markdowns and an increase in cumulative
markup percentage.

Selling, General and Administrative (“SG&A”) Expense

SG&A expense decreased $8.2 million to $211.3 million in the second quarter of
fiscal 2013, compared with $219.4 million in the second quarter of fiscal
2012. The SG&A expense rate for the second quarter of fiscal 2013 increased to
37.9% of net sales, compared with 36.9% of net sales in the second quarter of
fiscal 2012, reflecting lower sales in the current quarter.

Depreciation and Amortization / Amortization of Lease-related Interests

Depreciation and amortization expense, including amortization of lease-related
interests, was $24.1 million in the second quarter of fiscal 2013, compared
with $24.6 million in the second quarter of fiscal 2012.

Interest Expense, Net

In the second quarter of fiscal 2013, interest expense, net, decreased $3.2
million to $17.5 million, compared with $20.7 million in the prior year
period. The decrease in the current year period primarily reflects reduced
borrowings, deferred fees and interest rates.

Loss on Exchange/Extinguishment of Debt

In the second quarter of fiscal 2013, the Company recorded a $3.9 million loss
on extinguishment of debt related to fees and accelerated amortization of
deferred fees related to the tender and redemption of certain of the Company’s
senior notes. In the second quarter of fiscal 2012, the Company recorded a
$6.3 million loss on exchange of debt related to fees associated with the
exchange of certain of its senior notes.

Income Tax Provision

An income tax provision of $0.4 million was recorded in the second quarter of
fiscal 2013, comparable to the income tax provision in the second quarter of
fiscal 2012.

Guidance

Keith Plowman, Executive Vice President and Chief Financial Officer, stated,
“We are revising our fiscal 2013 guidance for Adjusted EBITDA in a range of
$170 million to $190 million, for earnings per diluted share in a range of
$0.15 to $0.75 and for cash flow (see Note 2) in a range of $10 million to $30
million. Assumptions reflected in our full-year guidance are:

  *Comparable store sales in a range of a negative 2.5% to flat;
  *Gross margin rate in a range of 36.0% to 36.2%;
  *SG&A expense, including increased performance incentives, flat to down
    two-tenths as a percent of sales compared with fiscal 2012;
  *Capital expenditures not to exceed $70 million, net of external
    contributions; and
  *Estimated 20.5 million average diluted shares outstanding.”

Mr. Plowman added, “Our excess borrowing capacity under our revolving credit
facility was approximately $376 million at the end of the second quarter of
fiscal 2013.”

Conference Call Details

The Company’s quarterly conference call to discuss second quarter of fiscal
2013 results will be broadcast live today at 10:00 a.m. Eastern time.
Investors and analysts interested in participating in the call are invited to
dial (888) 224-1058 at 9:55 a.m. Eastern time. A taped replay of the
conference call will be available within two hours of the conclusion of the
call and will remain available through Thursday, September 5, 2013. The number
to call for the taped replay is (877) 870-5176 and the conference PIN is
9001858. The conference call will also be broadcast on the Company’s website
at http://investors.bonton.com. An online archive of the webcast will be
available within two hours of the conclusion of the call and will remain
available through Thursday, September 5, 2013.

About The Bon-Ton Stores, Inc.

The Bon-Ton Stores, Inc., with corporate headquarters in York, Pennsylvania
and Milwaukee, Wisconsin, operates 270 department stores, which includes 10
furniture galleries, in 24 states in the Northeast, Midwest and upper Great
Plains under the Bon-Ton, Bergner’s, Boston Store, Carson’s, Elder-Beerman,
Herberger’s and Younkers nameplates. The stores offer a broad assortment of
national and private brand fashion apparel and accessories for women, men and
children, as well as cosmetics and home furnishings. For further information,
please visit the investor relations section of the Company’s website at
http://investors.bonton.com.

Cautionary Note Regarding Forward-Looking Statements

Certain information included in this press release contains statements that
are forward-looking within the meaning of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements, which may be identified
by words such as “may,” “could,” “will,” “plan,” “expect,” “anticipate,”
“estimate,” “project,” “intend” or other similar expressions, involve
important risks and uncertainties that could significantly affect results in
the future and, accordingly, such results may differ from those expressed in
any forward-looking statements made by or on behalf of the Company. Factors
that could cause such differences include, but are not limited to: risks
related to retail businesses generally; a significant and prolonged
deterioration of general economic conditions which could negatively impact the
Company in a number of ways, including the potential write-down of the current
valuation of intangible assets and deferred taxes; risks related to the
Company’s proprietary credit card program; potential increases in pension
obligations; consumer spending patterns, debt levels, and the availability and
cost of consumer credit; additional competition from existing and new
competitors; inflation; deflation; changes in the costs of fuel and other
energy and transportation costs; weather conditions that could negatively
impact sales; uncertainties associated with expanding or remodeling existing
stores; the ability to attract and retain qualified management; the dependence
upon relationships with vendors and their factors; a data security breach or
system failure; the ability to reduce or control SG&A expenses, including
initiatives to reduce expenses and improve efficiency; operational
disruptions; unsuccessful marketing initiatives; the failure to successfully
implement our key strategies, including initiatives to improve our
merchandising, marketing and operations; adverse outcomes in litigation; the
incurrence of unplanned capital expenditures; the ability to obtain financing
for working capital, capital expenditures and general corporate purpose; the
impact of regulatory requirements including the Health Care Reform Act and the
Dodd-Frank Wall Street Reform and Consumer Protection Act; the inability or
limitations on the Company’s ability to favorably adjust the valuation
allowance on deferred tax assets; and the financial condition of mall
operators. Additional factors that could cause the Company’s actual results to
differ from those contained in these forward-looking statements are discussed
in greater detail under Item 1A of the Company’s Form 10-K filed with the
Securities and Exchange Commission.

Note 1: As used in this release, Adjusted EBITDA is defined as earnings before
interest, income taxes, depreciation and amortization, including amortization
of lease-related interests, impairment charges and loss on
exchange/extinguishment of debt. Adjusted EBITDA is not a measure of financial
performance under generally accepted accounting principles (“GAAP”). However,
we present Adjusted EBITDA in this release because we consider it to be an
important supplemental measure of our performance and because it is frequently
used by securities analysts, investors and other interested parties to
evaluate the performance of companies in our industry and by some investors to
determine a company’s ability to service or incur debt. In addition, our
management uses Adjusted EBITDA internally to compare the profitability of our
stores. Adjusted EBITDA is not calculated in the same manner by all companies
and, accordingly, is not necessarily comparable to similarly entitled measures
of other companies and may not be an appropriate measure for performance
relative to other companies. Adjusted EBITDA should not be assessed in
isolation from or construed as a substitute for net income or cash flows from
operations, which are prepared in accordance with GAAP. Adjusted EBITDA is not
intended to represent, and should not be considered to be a more meaningful
measure than, or an alternative to, measures of operating performance as
determined in accordance with GAAP. A reconciliation of net loss to Adjusted
EBITDA is provided in the financial schedules accompanying this release.

Note 2: As used in this release, cash flow reflects the forecasted net income,
plus depreciation and amortization, amortization of lease-related interests,
impairment charges and taxes, less capital expenditures and pension
contributions.



THE BON-TON STORES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except share and per share data)   August 3,      February 2,
(Unaudited)                                      2013           2013
Assets
Current assets:
Cash and cash equivalents                        $ 8,140         $ 7,926
Merchandise inventories                            720,177         758,400
Prepaid expenses and other current assets         70,883       70,601    
Total current assets                              799,200      836,927   
Property, fixtures and equipment at cost, net of
accumulated depreciation and amortization of       643,033         652,822
$846,396 and $804,559 at August 3, 2013 and
February 2, 2013, respectively
Deferred income taxes                              16,432          15,010
Intangible assets, net of accumulated
amortization of $60,807 and $57,596 at August 3,   106,797         110,563
2013 and February 2, 2013, respectively
Other long-term assets                            23,338       18,887    
Total assets                                     $ 1,588,800   $ 1,634,209 
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable                                 $ 235,160       $ 193,898
Accrued payroll and benefits                       29,475          32,410
Accrued expenses                                   140,090         165,536
Current maturities of long-term debt               7,129           75,886
Current maturities of obligations under capital    3,936           3,925
leases
Deferred income taxes                              22,561          20,256
Income taxes payable                              -            739       
Total current liabilities                         438,351      492,650   
Long-term debt, less current maturities            841,948         768,864
Obligations under capital leases, less current     50,542          52,478
maturities
Other long-term liabilities                       208,253      209,611   
Total liabilities                                 1,539,094    1,523,603 
Shareholders' equity:
Preferred Stock - authorized 5,000,000 shares at   -               -
$0.01 par value; no shares issued
Common Stock - authorized 40,000,000 shares at
$0.01 par value; issued shares of 17,874,312 and   179             175
17,491,277 at August 3, 2013 and February 2,
2013, respectively
Class A Common Stock - authorized 20,000,000
shares at $0.01 par value; issued and              30              30
outstanding shares of 2,951,490 at August 3,
2013 and February 2, 2013
Treasury stock, at cost - 337,800 shares at        (1,387    )     (1,387    )
August 3, 2013 and February 2, 2013
Additional paid-in-capital                         160,652         158,728
Accumulated other comprehensive loss               (70,140   )     (73,242   )
(Accumulated deficit) retained earnings           (39,628   )   26,302    
Total shareholders' equity                        49,706       110,606   
Total liabilities and shareholders' equity       $ 1,588,800   $ 1,634,209 
                                                                             
                                                                             



THE BON-TON STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
                                                                
                        THIRTEEN                    TWENTY-SIX
                        WEEKS ENDED                WEEKS ENDED
(In thousands except    August 3,     July 28,      August 3,       July 28,
per share data)
(Unaudited)            2013        2012        2013          2012        
                                                                    
Net sales               $ 557,140     $ 594,855     $ 1,204,044     $ 1,235,626
Other income             13,845     12,405     28,824       25,931    
                       570,985    607,260    1,232,868    1,261,557 
                                                                    
Costs and expenses:
Costs of merchandise      351,008       380,716       772,596         801,932
sold
Selling, general and      211,253       219,435       436,349         447,675
administrative
Depreciation and          22,919        23,425        44,099          45,612
amortization
Amortization of           1,135         1,178         2,271           2,361
lease-related interests
Impairment charges       131        119        131          119       
Loss from operations      (15,461 )     (17,613 )     (22,578   )     (36,142   )
Interest expense, net     17,547        20,706        36,255          41,279
Loss on
exchange/extinguishment  3,917      6,301      4,277        7,470     
of debt
                                                                    
Loss before income        (36,925 )     (44,620 )     (63,110   )     (84,891   )
taxes
Income tax provision     404        419        854          928       
                                                                    
Net loss               $ (37,329 )  $ (45,039 )  $ (63,964   )  $ (85,819   )
                                                                    
Basic loss per share    $ (1.95   )  $ (2.43   )  $ (3.37     )  $ (4.66     )
                                                                    
                                                                    
Diluted loss per share  $ (1.95   )  $ (2.43   )  $ (3.37     )  $ (4.66     )
                                                                    
Other financial data:
Adjusted EBITDA (1)     $ 8,724       $ 7,109       $ 23,923        $ 11,950

(1) Adjusted EBITDA reconciliation



The following table reconciles net loss to Adjusted EBITDA for the periods
indicated:
                                                                    
                               THIRTEEN                    TWENTY-SIX
                               WEEKS ENDED                WEEKS ENDED
(In thousands)                 August 3,     July 28,      August 3,     July 28,
(Unaudited)                   2013        2012        2013         2012      
                                                                         
Net loss                       $ (37,329 )   $ (45,039 )   $ (63,964 )   $ (85,819 )
Adjustments:
       Income tax provision      404           419           854           928
       Loss on
       exchange/extinguishment   3,917         6,301         4,277         7,470
       of debt
       Interest expense, net     17,547        20,706        36,255        41,279
       Depreciation and          22,919        23,425        44,099        45,612
       amortization
       Amortization of           1,135         1,178         2,271         2,361
       lease-related interests
      Impairment charges       131        119        131        119     
                                                                         
Adjusted EBITDA                $ 8,724     $ 7,109     $ 23,923    $ 11,950  

Contact:

The Bon-Ton Stores, Inc.
Mary Kerr, 717-751-3071
Vice President
Investor and Public Relations
mkerr@bonton.com