BonTon Stores Inc. Reports Operating Results (10-Q)
Bonton Stores Inc. has a market cap of $186.7 million; its shares were traded at around $10.06 with a P/E ratio of 14.8 and P/S ratio of 0.1. Bonton Stores Inc. had an annual average earning growth of 20.6% over the past 10 years. GuruFocus rated Bonton Stores Inc. the business predictability rank of 4-star.BONT is in the portfolios of Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:Costs and expenses: Gross margin in the first quarter of 2010 was $247.0 million as compared with $224.2 million in the comparable prior year period. The $22.9 million increase reflects both the increased sales volume and an increased gross margin rate. Gross margin as a percentage of net sales increased 260 basis points to 37.4% in the first quarter of 2010 from 34.8% in the same period last year. We improved our merchandise margins primarily through strong inventory management, resulting in decreased net markdowns, and increased sales penetration of private brand and value-priced offerings, both of which typically generate higher net markup and gross margins.
Depreciation and amortization expense and amortization of lease-related interests decreased $2.0 million, to $27.4 million, in the first quarter of 2010 from $29.3 million in the first quarter of 2009, primarily due to the reduced asset base resulting from significant 2009 reductions in capital expenditures (whereby 2009 depreciation expense greatly exceeded asset additions) and, to a lesser extent, asset impairments recorded in 2009.
Income tax provision (benefit): The effective income tax rate in the first quarter of 2010 and the first quarter of 2009 largely reflects the Companys valuation allowance position against all net deferred tax assets. The $0.6 million net income tax provision in the first quarter of 2010 was primarily due to certain state income tax expense and recognition of deferred tax liabilities associated with indefinite-lived assets. The ($1.1) million benefit in the first quarter of 2009 reflects a ($1.6) million tax benefit resulting from recognition of uncertain tax positions due to a statute of limitations expiration, partially offset by certain state income tax expense.
At May 1, 2010, we had $16.5 million in cash and cash equivalents and $407.3 million available under our asset-based revolving credit facility (before taking into account the minimum borrowing availability covenant under such facility of $75.0 million). In anticipation of continued economic uncertainty in 2010, we heightened our focus on maximizing cash flow by reducing operating expenses and continuing to control inventory levels in order to benefit our working capital needs. We anticipate that these actions will positively impact our 2010 cash flow.
Net cash used in investing activities primarily reflects capital expenditures for store remodels and information technology. Capital expenditures totaled $6.6 million and $6.1 million in the first quarter of 2010 and the first quarter of 2009, respectively; these expenditures do not reflect reductions for external contributions of $2.3 million and $1.9 million in the first quarter of 2010 and the first quarter of 2009, respectively. We anticipate our 2010 capital expenditures will not exceed $50.0 million (net of external contributions of $7.0 million), an increase over our 2009 capital investments of $32.3 million (which do not reflect reductions for external contributions of $7.6 million).
Net intangible assets totaled $136.6 million and $138.8 million at May 1, 2010 and January 30, 2010, respectively. Our intangible assets at May 1, 2010 are principally comprised of $68.9 million of lease interests that relate to below-market-rate leases and $67.7 million associated with trade names, private label brand names and customer lists. The lease-related interests are being amortized using a straight-line method. The customer lists are being amortized using a declining-balance method. At May 1, 2010, trade names and private label brand names of $54.0 million have been deemed as having indefinite lives.
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