The Bon-Ton Stores, Inc., together with its subsidiaries, operates quality fashion department stores. The company's strategy focuses on being the premier fashion retailer in smaller markets that demand, but often have limited access to, better branded merchandise. In many of its markets, The Bon-Ton is the primary destination for branded fashion merchandise from top designers such as Calvin Klein, Liz Claiborne, Nautica, Ralph Lauren and Tommy Hilfiger. Bonton Stores Inc. has a market cap of $215.2 million; its shares were traded at around $11.59 with and P/S ratio of 0.1. Bonton Stores Inc. had an annual average earning growth of 11.3% over the past 10 years.
Highlight of Business Operations:Costs and expenses: Gross margin in the third quarter of 2009 increased $6.8 million to $264.9 million as compared with $258.1 million in the comparable prior year period. The increase is attributable to an increased margin rate; gross margin as a percentage of net sales increased approximately 200 basis points to 37.6% in the third quarter of 2009 from 35.6% in the same period last year, primarily due to disciplined inventory management efforts that resulted in decreased net markdowns as well as an increased net markup percentage and reduced distribution costs.
Depreciation and amortization expense and amortization of lease-related interests decreased $1.8 million, to $29.2 million in the third quarter of 2009 from $31.0 million in the third quarter of 2008, primarily due to the reduced asset base resulting from significant asset impairments recorded in the fourth quarter of 2008 and reduced capital expenditures.
Costs and expenses: Gross margin in 2009 was $715.2 million as compared with $737.3 million in 2008, reflecting a decrease of $22.1 million. The decrease in gross margin dollars was due to the decreased sales volume in the period. Gross margin as a percentage of net sales increased approximately 140 basis points to 36.5% in the current year from 35.1% last year, primarily due to decreased net markdowns and reduced distribution costs.
At October 31, 2009, we had $15.7 million in cash and cash equivalents and $245.6 million available under our Existing Credit Facility (before taking into account the minimum borrowing availability covenant under such facility of $75.0 million). In anticipation of continued recessionary pressures in fiscal 2009, we heightened our focus on maximizing cash flow by reducing operating expenses and significantly curtailing our planned capital expenditures. Additionally, we are continuing to control inventory levels in order to benefit working capital. We anticipate that these actions, together with projected cash benefits from our cost savings initiatives, will positively impact our fiscal 2009 cash flow.
Our primary sources of working capital are cash flows from operations and borrowings under our New Credit Facility, which provides for up to $675.0 million in borrowings and replaces our $800.0 million Existing Credit Facility. In the first quarter of 2009, we elected to reduce the previous $1.0 billion commitment under our Existing Credit Facility by $200.0 million in order to reduce interest expense associated with the unused commitment fee.
Our capital expenditures in 2009, which do not reflect reductions for landlord contributions of $5.5 million, totaled $22.2 million. Capital expenditures for fiscal 2009, net of approximately $7 million of landlord contributions, are not expected to exceed $35 million, a significant reduction from the prior years capital expenditures of $84.8 million (which do not reflect reductions for landlord contributions of $18.9 million), as we are limiting store expansion and major remodel activities in the near term. Included in fiscal 2009 planned capital expenditures is continued investment in information technology.
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