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The Bon-Ton Stores, Inc. Announces Second Quarter Fiscal 2012 Results

Other Income

Other income in the second quarter of fiscal 2012 was $12.4 million, compared with $13.8 million in the second quarter of fiscal 2011.

Gross Margin

In the second quarter of fiscal 2012, gross margin dollars decreased $7.4 million to $214.1 million, compared with $221.6 million in the second quarter of fiscal 2011. The gross margin rate for the second quarter of fiscal 2012 decreased to 36.0% of net sales from 37.2% of net sales in the prior year period. The decline in the gross margin rate in the second quarter is largely attributable to increased net markdowns.

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

SG&A expense was $219.4 million in the second quarter of fiscal 2012, compared with $219.8 million in the prior year period. The SG&A expense rate for the second quarter of fiscal 2012 was even with the expense rate for the second quarter of fiscal 2011 at 36.9% of net sales. SG&A expense in the second quarter of fiscal 2012 includes severance costs associated with the Company’s targeted reduction in administrative and support functions.

Depreciation and Amortization / Amortization of Lease-related Interests

Depreciation and amortization expense, including amortization of lease-related interests, decreased $2.7 million to $24.7 million in the second quarter of fiscal 2012, compared with $27.4 million in the prior year period.

Interest Expense, Net

In the second quarter of fiscal 2012, interest expense, net, decreased $2.1 million to $20.7 million, compared with $22.8 million in the prior year period. The decrease in the second quarter primarily reflects reduced borrowings and interest rates.

Loss on Exchange/Extinguishment of Debt

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 its senior notes. Additionally, in the first quarter of fiscal 2012, the Company recorded a $1.2 million loss on extinguishment of debt related to the prepayment penalty on the extinguishment of mortgage debt associated with the sale of certain of its Rochester, NY locations. In the first quarter of fiscal 2011, the Company recorded a $9.5 million loss on extinguishment of debt related to fees associated with the voluntary prepayment of the second lien term loan and the amendment and restatement of the revolving credit facility agreement.

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