UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended: May 1, 2004
-----------
- OR -
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transaction period from__________to__________
COMMISSION FILE NUMBER 0-20664
BOOKS-A-MILLION, INC.
---------------------
(Exact name of registrant as specified in its charter)
DELAWARE 63-0798460
- -------- -----------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
402 INDUSTRIAL LANE, BIRMINGHAM, ALABAMA 35211
- ---------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(205) 942-3737
--------------
(Registrant's phone number including area code)
NONE
----
(Former name, former address and former fiscal year,
if changed since last period)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's common stock,
as of the latest practicable date: Shares of common stock, par value $.01 per
share, outstanding as of June 8, 2004 were 16,531,304 shares.
BOOKS-A-MILLION, INC. AND SUBSIDIARIES
INDEX
PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (UNAUDITED)
Condensed Consolidated Balance Sheets ......................... 3
Condensed Consolidated Statements of Operations ............... 4
Condensed Consolidated Statements of Cash Flows ............... 5
Notes to Condensed Consolidated Financial Statements .......... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ................................. 12
Item 3. Quantitative and Qualitative Disclosures about Market Risk 17
Item 4. Controls and Procedures ................................... 18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ......................................... 19
Item 2. Changes in Securities ..................................... 19
Item 3. Defaults Upon Senior Securities ........................... 19
Item 4. Submission of Matters of Vote of Security-Holders ......... 19
Item 5. Other Information ......................................... 19
Item 6. Exhibits and Reports on Form 8-K .......................... 19
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BOOKS-A-MILLION, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AND SHARE AMOUNTS)
(UNAUDITED)
AS OF MAY 1, 2004 AS OF JANUARY 31, 2004
----------------- ----------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ............................. $ 5,064 $ 5,348
Accounts receivable, net ............................. 8,046 7,271
Related party accounts receivable, net ............... 349 351
Inventories .......................................... 218,297 211,591
Prepayments and other ................................ 6,314 5,890
Deferred income taxes ................................ 4,509 4,446
---------- ----------
TOTAL CURRENT ASSETS ............................. 242,579 234,897
---------- ----------
PROPERTY AND EQUIPMENT:
Gross property and equipment ......................... 168,095 166,466
Less accumulated depreciation and amortization ....... 121,093 117,289
---------- ----------
NET PROPERTY AND EQUIPMENT ......................... 47,002 49,177
---------- ----------
OTHER ASSETS ............................................ 1,562 1,605
---------- ----------
TOTAL ASSETS ..................................... $ 291,143 $ 285,679
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ..................................... $ 89,162 $ 87,984
Related party accounts payable ....................... 6,750 8,777
Accrued expenses ..................................... 25,814 30,189
Accrued income taxes ................................. 1,485 3,527
Current portion of long-term debt .................... 9,612 --
---------- ----------
TOTAL CURRENT LIABILITIES ........................ 132,823 130,477
---------- ----------
LONG-TERM DEBT .......................................... 23,028 20,640
DEFERRED INCOME TAXES ................................... 1,686 1,805
OTHER LONG-TERM LIABILITIES ............................. 1,282 1,507
---------- ----------
TOTAL NON-CURRENT LIABILITIES .................... 25,996 23,952
---------- ----------
COMMITMENTS AND CONTINGENCIES (NOTE 5)
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 1,000,000 shares
authorized, no shares outstanding..................... -- --
Common stock, $.01 par value, 30,000,000 shares
authorized, 18,620,069 and 18,465,387 shares issued at
May 1, 2004 and January 31, 2004, respectively....... 186 185
Additional paid-in capital ........................... 72,068 71,799
Less treasury stock, at cost (2,094,750 and 2,010,050
shares at May 1, 2004 and January 31, 2004,
respectively)......................................... (5,819) (5,271)
Deferred compensation ................................ (260) (284)
Accumulated other comprehensive loss, net of tax ..... (614) (707)
Retained earnings .................................... 66,763 65,528
---------- ----------
TOTAL STOCKHOLDERS' EQUITY ....................... 132,324 131,250
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ....... $ 291,143 $ 285,679
========== ==========
SEE ACCOMPANYING NOTES
3
BOOKS-A-MILLION, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THIRTEEN WEEKS ENDED
--------------------
MAY 1, 2004 MAY 3, 2003
----------- -----------
NET SALES .............................................. $ 108,515 $ 98,505
Cost of products sold (including warehouse
distribution and store occupancy costs) (1) ......... 78,831 73,568
-------- --------
GROSS PROFIT ........................................... 29,684 24,937
Operating, selling and administrative expenses ...... 23,183 21,576
Depreciation and amortization ....................... 3,991 4,035
-------- --------
OPERATING INCOME (LOSS)
2,510 (674)
Interest expense, net ............................... 518 869
-------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME
TAXES .................................................. 1,992 (1,543)
Income taxes provision (benefit) .................... 757 (587)
-------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS ............... 1,235 (956)
DISCONTINUED OPERATIONS (NOTE 9)
Loss from discontinued operations before income
taxes ............................................... -- (138)
Income tax benefit .................................. -- (52)
-------- --------
LOSS FROM DISCONTINUED OPERATIONS ................. -- (86)
-------- --------
NET INCOME (LOSS) $ 1,235 $ (1,042)
======== ========
NET INCOME (LOSS) PER COMMON SHARE:
BASIC:
INCOME (LOSS) FROM CONTINUING OPERATIONS ........... $ 0.08 $ (0.06)
LOSS FROM DISCONTINUED OPERATIONS .................. -- --
-------- --------
NET INCOME (LOSS) ................................... $ 0.08 $ (0.06)
======== ========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC 16,445 16,220
======== ========
DILUTED:
INCOME (LOSS) FROM CONTINUING OPERATIONS ........... $ 0.07 $ (0.06)
LOSS FROM DISCONTINUED OPERATIONS .................. -- --
-------- --------
NET INCOME (LOSS) ................................... $ 0.07 $ (0.06)
======== ========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING -
DILUTED.............................................. 17,213 16,220
======== ========
(1) Inventory purchases from related parties were $11,261 and $11,764,
respectively, for each of the periods presented above.
SEE ACCOMPANYING NOTES
4
BOOKS-A-MILLION, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
THIRTEEN WEEKS ENDED
--------------------
MAY 1, 2004 MAY 3, 2003
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ...................................................... $ 1,235 $ (1,042)
------- -------
Adjustments to reconcile net income (loss) to net cash used in operating
activities:
Depreciation and amortization ........................................ 3,991 4,087
Deferred compensation amortization ................................... 24 --
Loss on impairment of assets ......................................... -- 12
Gain on disposal of property ......................................... (9) --
Change in deferred income taxes ...................................... (182) (621)
Increase in inventories ............................................ (6,706) (15,435)
Decrease in accounts payable ....................................... (849) (7,365)
Changes in certain other assets and liabilities .................... (7,745) (4,778)
------- -------
Total adjustments ................................................. (11,476) (24,100)
------- -------
Net cash used in operating activities ............................. (10,241) (25,142)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ................................................... (1,778) (1,646)
Proceeds from sale of equipment ........................................ 13 --
------- -------
Net cash used in investing activities ............................. (1,765) (1,646)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under credit facilities ..................................... 56,260 69,870
Repayments under credit facilities ..................................... (44,260) (43,810)
Purchase of treasury stock ............................................. (548) --
Proceeds from sale of common stock, net ................................ 270 84
------- -------
Net cash provided by financing activities ......................... 11,722 26,144
------- -------
Net decrease in cash and cash equivalents ................................. (284) (644)
Cash and cash equivalents at beginning of period .......................... 5,348 4,977
------- -------
Cash and cash equivalents at end of period ................................ $ 5,064 $ 4,333
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the thirteen week period for:
Interest ...................................................... $ 503 $ 1,030
Income taxes, net of refunds .................................. $ 2,609 $ 1,701
SEE ACCOMPANYING NOTES
5
BOOKS-A-MILLION, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
of Books-A-Million, Inc. and its subsidiaries (the "Company") for the
thirteen week periods ended May 1, 2004 and May 3, 2003, have been prepared
in accordance with accounting principles generally accepted in the United
States ("GAAP") for interim financial information and are presented in
accordance with the requirements of Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by GAAP for complete financial statements. These financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto, for the fiscal year ended January 31, 2004,
included in our Fiscal 2004 Annual Report on Form 10-K. In the opinion of
management, the financial statements included herein contain all
adjustments considered necessary for a fair presentation of our financial
position as of May 1, 2004, and the results of its operations and cash
flows for the thirteen week periods ended May 1, 2004 and May 3, 2003.
Certain prior year amounts have been reclassified to conform to current
year presentation.
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the
reporting period. Actual amounts could differ from those estimates and
assumptions.
We have also experienced, and expect to continue to experience,
significant variability in sales and net income from quarter to quarter.
Therefore, the results of the interim periods presented herein are not
necessarily indicative of the results to be expected for any other interim
period or the full year.
Stock-Based Compensation
At May 1, 2004 and January 31, 2004, the Company had one stock option
plan. The Company accounts for the plan under the recognition and
measurement principles of Accounting Pronouncements Bulletin (APB) Opinion
No. 25, "Accounting for Stock Issued to Employees", and related
Interpretations. No stock-based employee compensation cost for this plan is
reflected in net income, as all options granted under the plan had an
exercise price equal to the market value of the underlying common stock on
the date of grant. The following table illustrates the effect on net income
(loss) and net income (loss) per common share if the Company had applied
the fair value recognition provisions of Statement of Financial Accounting
Standards No. 148 ("SFAS 148"), "Accounting for Stock-Based
Compensation--Transaction and Disclosure--an Amendment of FASB Statement
No. 123," to stock-based employee compensation (in thousands except per
share amounts):
For the Thirteen Weeks Ended
----------------------------
In thousands May 1, 2004 May 3, 2003
----------- -----------
Net income (loss), as reported ........ $ 1,235 $ (1,042)
Deduct: Total stock-based employee
compensation expense determined
under fair value based method
for all awards, net of tax effects 341 328
-------- ---------
Pro forma net income (loss) ........... $ 894 $ (1,370)
Net income (loss) per common share:
Basic--as reported .................... $ 0.08 $ (0.06)
Basic--pro forma ...................... $ 0.05 $ (0.08)
Diluted--as reported .................. $ 0.07 $ (0.06)
Diluted--pro forma .................... $ 0.05 $ (0.08)
======== =========
The fair value of the options granted under the Company's stock option
plan was estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted average assumptions for
fiscal 2005 and 2004: no dividend yield; expected volatility of 1.06% and
1.01%, respectively; risk-free interest rates of 3.87% to 4.90% and 3.63%
to 5.10%, respectively; and expected lives of six or ten years.
6
BOOKS-A-MILLION, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2. NET INCOME (LOSS) PER SHARE
Basic net income (loss) per share ("EPS") is computed by dividing
income (loss) available to common shareholders by the weighted average
number of common shares outstanding for the period. Diluted EPS reflects
the potential dilution that could occur if securities or other contracts to
issue common stock are exercised or converted into common stock or resulted
in the issuance of common stock that then shared in the earnings of the
Company. Diluted EPS has been computed based on the weighted average number
of shares outstanding including the effect of outstanding stock options and
restricted stock, if dilutive, in each respective thirteen week period. A
reconciliation of the weighted average shares for basic and diluted EPS is
as follows:
For the Thirteen Weeks Ended
(in thousands)
----------------------------
May 1, 2004 May 3, 2003
----------- -----------
Weighted average shares outstanding:
Basic................................ 16,445 16,220
Dilutive effect of stock options and
restricted stock outstanding......... 768 -
------ ------
Diluted.............................. 17,213 16,220
====== ======
Options outstanding to purchase 1,072,000 and 2,555,000 shares of
common stock as of May 1, 2004 and May 3, 2003, respectively, were not
included in the table above as they were anti-dilutive under the treasury
stock method.
3. DERIVATIVE AND HEDGING ACTIVITIES
The Company is subject to interest rate fluctuations involving its
credit facilities and debt related to an Industrial Development Revenue
Bond (the "Bond"). However, the Company uses fixed interest rate hedges to
manage this exposure. The Company entered into two separate $10 million
swaps on July 24, 2002. Both expire in August 2005 and effectively fix the
interest rate on $20 million of variable credit facility debt at 5.13%. In
addition, the Company entered into a $7.5 million interest rate swap in May
1996 that expires in June 2006 and effectively fixes the interest rate on
the Bond at 7.98%. The counter parties to the interest rate swaps are two
primary banks in the Company's credit facility. The Company believes the
credit and liquidity risks of the counter parties failing to meet their
obligation are remote as the Company settles its interest position with the
banks on a quarterly basis.
7
BOOKS-A-MILLION, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The Company's hedges are generally designated as cash flow hedges
because they are interest rate swaps that convert variable payments to
fixed payments. Cash flow hedges protect against the variability in future
cash outflows of current or forecasted debt and related interest expense.
The changes in the fair value of these hedges are reported on the balance
sheet with a corresponding adjustment to accumulated other comprehensive
income (loss) or in earnings, depending on the type of hedging
relationship. Over time, amounts held in accumulated other comprehensive
income (loss) will be reclassified to earnings when the hedge transaction
affects earnings.
The Company's interest rate swaps described above are reported as a
liability classified in other long-term liabilities in the accompanying
condensed consolidated balance sheets at their fair value of $1.3 million
and $1.5 million as of May 1, 2004 and January 31, 2004, respectively. For
the thirteen weeks ended May 1, 2004 and May 3, 2003, respectively,
adjustment gains of $93,000 (net of tax provision of $57,000) and $63,000
(net of tax provision of $39,000) were recorded as unrealized gains in
accumulated other comprehensive income loss and are detailed in Note 4.
During the fourth quarter of fiscal 2004, one interest rate swap no longer
qualified for hedge accounting under SFAS No. 133; as a result, the Company
de-designated the hedge. A pre-tax gain of $70,000 was recorded in earnings
during the first quarter of fiscal 2005 related to the de-designated hedge.
4. COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) is net income or loss, plus certain other
items that are recorded directly to stockholders' equity. The only such
items currently applicable to the Company are the unrealized gains (losses)
on the hedges explained in Note 3, as follows:
COMPREHENSIVE INCOME (LOSS) Thirteen Weeks Ended
(in thousands)
--------------------
May 1, 2004 May 3, 2003
----------- -----------
Net income (loss).................... $1,235 ($1,042)
Unrealized gains (losses) on
hedges, net of deferred tax provision
(benefit)for the thirteen-week periods
of $57 and $39,respectively.......... 93 63
------ -------
Total comprehensive income (loss).... $1,328 ($979)
====== =====
5. COMMITMENTS AND CONTINGENCIES
The Company is a party to various legal proceedings incidental to its
business. In the opinion of management, after consultation with legal
counsel, the ultimate liability, if any, with respect to those proceedings
is not presently expected to materially affect the financial position,
results of operations or cash flows of the Company.
From time to time, the Company enters into certain types of agreements
that require the Company to indemnify parties against third party claims
under certain circumstances. Generally these agreements relate to: (a)
agreements with vendors and suppliers under which the Company may provide
customary indemnification to its vendors and suppliers in respect of
actions they take at the Company's request or otherwise on its behalf, (b)
agreements with vendors who publish books or manufacture merchandise
specifically for the Company to indemnify the vendors against trademark and
copyright infringement claims concerning the books published or merchandise
manufactured on behalf of the Company, (c) real estate leases, under which
the Company may agree to indemnify the lessors from claims arising from the
Company's use of the property, and (d) agreements with the Company's
directors, officers and employees, under which the Company may agree to
indemnify such persons for liabilities arising out of their relationship
with the Company. The Company has Directors and Officers Liability
Insurance, which, subject to the policy's conditions, provides coverage for
indemnification amounts payable by the Company with respect to its
directors and officers up to specified limits and subject to certain
deductibles.
The nature and terms of these types of indemnities vary. The events or
circumstances that would require the Company to perform under these
indemnities are transaction and circumstance specific. Generally, the
8
BOOKS-A-MILLION, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Company's maximum liability under such indemnities is not explicitly
stated, and therefore the overall maximum amount of the Company's
obligations cannot be reasonably estimated. Historically, the Company has
not incurred significant costs related to performance under these types of
indemnities. No liabilities have been recorded for these obligations on the
Company's balance sheet at May 1, 2004 and January 31, 2004 as such
liabilities are considered de minimis.
6. INVENTORIES
Inventories were:
(In thousands) May 1, 2004 January 31, 2004
----------- ----------------
Inventories (at FIFO) $ 219,101 $ 212,251
LIFO reserve (804) (660)
--------- ----------
Net inventories $ 218,297 $ 211,591
========= ==========
7. BUSINESS SEGMENTS
The Company has two reportable segments: retail trade and electronic
commerce trade. The retail trade segment is a strategic business segment
that is engaged in the retail trade of mostly book merchandise and includes
the Company's distribution center operations, which predominately supplies
merchandise to the Company's retail stores. The electronic commerce trade
segment is a strategic business segment that transacts business over the
internet and is managed separately due to divergent technology and
marketing requirements.
The accounting policies of the segments are substantially the same as
those described in the Company's Fiscal 2004 Annual Report on Form 10-K.
The Company evaluates performance of the segments based on profit and loss
from operations before interest and income taxes. Certain intersegment cost
allocations have been made based upon consolidated and segment revenues.
9
BOOKS-A-MILLION, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEGMENT INFORMATION (IN THOUSANDS)
Thirteen Weeks Ended
--------------------
May 1, 2004 May 3, 2003
----------------- -----------------
NET SALES
Retail /Wholesale Trade........ $ 106,601 $ 97,199
Electronic Commerce Trade...... 6,298 5,207
Intersegment Sales Elimination (4,384) (3,901)
---------- ----------
Net Sales.................. $ 108,515 $ 98,505
========== ==========
OPERATING INCOME (LOSS)
Retail /Wholesale Trade........ $ 2,292 $ (832)
Electronic Commerce Trade...... 85 31
Intersegment Elimination of
Certain Costs................. 133 127
---------- ----------
Total Operating Income (Loss).. $ 2,510 $ (674)
========== ==========
ASSETS As of As of
May 1, 2004 January 31, 2004
----------------- -----------------
Retail/Wholesale Trade......... $ 290,040 $ 284,718
Electronic Commerce Trade...... 1,583 1,527
Intersegment Asset Elimination. (480) (566)
---------- ----------
Total Assets............... $ 291,143 $ 285,679
========== ==========
10
BOOKS-A-MILLION, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
8. RECENT ACCOUNTING PRONOUNCEMENTS
In December 2002, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 148 ("SFAS 148"),
"Accounting for Stock-Based Compensation - Transition and Disclosure - an
Amendment of FASB No. 123." SFAS 148 amends SFAS 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"), to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, SFAS 148 amends the
disclosure requirements of SFAS 123 to require prominent disclosures in both
annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. The disclosure provisions of this statement are effective for financial
statements for fiscal years ending after December 15, 2002, and are included
herein. The Company has not adopted the fair value method of recording stock
options under SFAS No. 123. The FASB has now determined that stock-based
compensation should be recognized as a cost in the financial statements and that
such cost be measured according to the fair value of the stock options. The FASB
has not as yet determined the methodology for calculating fair value and plans
to issue an accounting standard. The Company will continue to monitor
communications on this subject from the FASB in order to determine the impact on
the Company's financial position, results of operations or cash flows.
FASB Interpretation No. 46, "Consolidation of Variable Interest
Entities" ("FIN 46"), was issued in January 2003. This interpretation requires
consolidation of variable interest entities ("VIE"), also formerly referred to
as "special purpose entities," if certain conditions are met. The interpretation
applies immediately to VIE's created after January 31, 2003 and to interests
obtained in VIE's after January 31, 2003. Beginning after June 15, 2003, the
interpretation also applies to VIE's created or interests obtained in VIE's
before January 31, 2003. In December 2003, the FASB issued FASB Interpretation
No. 46R, "Consolidation of Variable Interest Entities--An Interpretation of ARB
51" (revised December 2003) ("FIN 46R"), which includes significant amendments
to previously issued FIN No. 46. Among other provisions, FIN 46R includes
revised transition dates for public entities. The Company adopted the provisions
of FIN 46R effective in the first quarter of fiscal 2005. The adoption of this
interpretation did not have an effect on the Company's financial position,
results of operations or cash flows.
9. DISCONTINUED OPERATIONS
Discontinued operations represent the closure in fiscal 2004 of four
retail stores in markets located in Georgia (two stores), Louisiana and North
Carolina where the Company does not expect another of its existing stores to
absorb the closed store's customers. These stores had sales of $928,000 and
pretax operating losses of $138,000 for the thirteen weeks ended May 3, 2003.
Included in the loss on discontinued operations are impairment losses of $12,000
for the thirteen weeks ended May 3, 2003. Also included in the loss on
discontinued operations are store closing costs of $22,000 for the thirteen
weeks May 3, 2003.
11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This document contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 that involve a
number of risks and uncertainties. A number of factors could cause actual
results, performance, achievements of the Company, or industry results to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. These factors include,
but are not limited to, the competitive environment in the book retail industry
in general and in the Company's specific market areas; inflation; economic
conditions in general and in the Company's specific market areas; the number of
store openings and closings; the profitability of certain product lines, capital
expenditures and future liquidity; liability and other claims asserted against
the Company; uncertainties related to the Internet and the Company's Internet
initiatives; and other factors referenced herein. In addition, such
forward-looking statements are necessarily dependent upon the assumptions,
estimates and dates that may be incorrect or imprecise and involve known and
unknown risks, uncertainties and other factors. Accordingly, any forward-looking
statements included herein do not purport to be predictions of future events or
circumstances and may not be realized. Given these uncertainties, shareholders
and prospective investors are cautioned not to place undue reliance on such
forward-looking statements. The Company disclaims any obligations to update any
such factors or to publicly announce the results of any revisions to any of the
forward-looking statements contained herein to reflect future events or
developments.
GENERAL
We were founded in 1917 and currently operate 202 retail bookstores,
including 163 superstores, concentrated in the southeastern United States.
Our growth strategy is focused on opening superstores in new and
existing market areas, particularly in the Southeast. In addition to opening
new stores, management intends to continue its practice of reviewing the
profitability trends and prospects of existing stores and closing or relocating
under-performing stores or converting stores to different formats.
Comparable store sales are determined each fiscal quarter during the
year based on all stores that have been open at least 12 full months as of the
first day of the fiscal quarter. Any stores closed during a fiscal quarter are
excluded from comparable store sales as of the first day of the quarter in which
they close.
RESULTS OF OPERATIONS
The following table sets forth statement of operations data expressed as a
percentage of net sales for the periods presented.
Thirteen Weeks Ended
--------------------
May 1, 2004 May 3, 2003
----------- -----------
Net sales............................ 100.0% 100.0%
Gross profit......................... 27.4% 25.3%
Operating, selling and administrative
expenses............................. 21.4% 21.9%
Depreciation and amortization........ 3.7% 4.1%
----- -----
Operating income (loss).............. 2.3% (0.7)%
Interest expense, net................ 0.5% 0.9%
----- -----
Income (Loss) from continuing
operations before income taxes....... 1.8% (1.6)%
Income taxes provision (benefit...... 0.7% (0.6)%
----- -----
Income (Loss) from continuing
operations........................... 1.1% (1.0)%
Loss from discontinued operations.... - (0.1)%
----- -----
Net income ( loss)................... 1.1% (1.1)%
===== =====
12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Net sales increased $10.0 million, or 10.2%, to $108.5 million in the
thirteen weeks ended May 1, 2004, from $98.5 million in the thirteen weeks ended
May 3, 2003. Comparable store sales in the thirteen weeks ended May 1, 2004
increased 7.1% when compared with the same thirteen week period for the prior
year. The increase in comparable store sales for the thirteen weeks was
primarily due to higher sales in the book and cafe departments. The book sales
increase was primarily driven by the improving economy, as well as strong sales
in categories such as Fiction, Children's and Inspirational. The cafe department
sales increase was led by the Company's new cold beverage product line of
frappes as well as increased store traffic. During the thirteen weeks ended May
1, 2004, the Company relocated two superstores.
Net sales for the retail trade segment increased $9.4 million, or 9.7%,
to $106.6 million in the thirteen weeks ended May 1, 2004 from $97.2 million in
the same period last year. The increase in sales was primarily due to higher
comparable store sales, which increased 7.1% for the thirteen weeks. Net sales
for the electronic commerce segment increased $1.1 million, or 21.0%, to $6.3
million in the thirteen weeks ended May 1, 2004, related primarily to higher
business to business order volume.
Gross profit increased $4.8 million, or 19.0%, to $29.7 million in the
thirteen weeks ended May 1, 2004 when compared with $24.9 million in the same
thirteen week period for the prior year. Gross profit as a percentage of net
sales for the thirteen weeks ended May 1, 2004 was 27.4% versus 25.3% in the
same period last year. The increase in gross profit stated as a percent of net
sales for the thirteen week period was due to less promotional activity,
improved sales mix to higher margin departments, including cafes, and lower
occupancy and warehouse distribution costs as a percentage of sales.
Operating, selling and administrative expenses were $23.2 million in
the thirteen week period ended May 1, 2004 compared to $21.6 million in the same
period last year. Operating, selling and administrative expenses as a percentage
of net sales for the thirteen weeks ended May 1, 2004 decreased to 21.4% from
21.9% in the same period last year. The decrease in operating, selling and
administrative expenses stated as a percent to sales was primarily due to higher
comparable store sales which improved leveraging of operating costs.
Depreciation and amortization was $4.0 million in each of the thirteen
week periods ended May 1, 2004 and May 3, 2003.
Consolidated operating income was $2.5 million for the thirteen weeks
ended May 1, 2004, compared to an operating loss of $0.7 million in the same
period last year. Operating income for the retail trade segment increased $3.1
million for the thirteen weeks ended May 1, 2004. The increase in operating
income for the quarter was due to strong profit growth driven by stronger
comparable store sales. The operating profit for the electronic commerce segment
increased $54,000 for the thirteen weeks ended May 1, 2004 compared to the same
period last year. The increase in profit was due to higher order volume in the
business to business category.
Interest expense was $518,000 in the thirteen weeks ended May 1, 2004
versus $869,000 in the same period last year. The decrease was primarily due to
lower average debt balances compared with prior year.
Discontinued operations represent the closure in fiscal 2004 of four
retail stores in markets located in Georgia (two stores), Louisiana and North
Carolina where the Company does not expect another of its existing stores to
absorb the closed store's customers. These stores had sales of $928,000 and
pretax operating losses of $138,000 for the thirteen weeks ended May 3, 2003.
Included in the loss on discontinued operations are impairment losses of $12,000
for the thirteen weeks ended May 3, 2003. Also included in the loss on
discontinued operations are store closing costs of $22,000 for the thirteen
weeks May 3, 2003.
13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are cash flows from
operations, including credit terms from vendors, and borrowings under its credit
facility. The Company has an unsecured revolving credit facility that allows
borrowings up to $100 million, for which no principal repayments are due until
the facility expires in July 2005. The credit facility has certain financial and
non-financial covenants, the most restrictive of which is the maintenance of a
minimum fixed charge coverage ratio. As of May 1, 2004 and January 31, 2004,
$25.1 million and $13.1 million, respectively, were outstanding under this
credit facility. The maximum and average outstanding balances during the
thirteen weeks ended May 1, 2004 were $33.2 million and $25.8 million,
respectively, compared to $73.9 million and $64.4 million, respectively for the
same period in the prior year. The decrese in the maximum and average
outstanding balance from the prior year was due to higher earnings, lower
capital expenditures and improved inventory management. The outstanding
borrowings as of May 1, 2004 had interest rates ranging from 1.86% to 2.75%.
Additionally, as of May 1, 2004 and January 31, 2004, the Company has
outstanding borrowings under an industrial revenue bond totaling $7.5 million,
which is secured by certain property.
Financial Position
Inventory balances at May 1, 2004 compared to January 31, 2004
increased due to seasonal fluctuation in inventory. Inventory levels are lowest
at January 31, 2004 due to large post holiday returns to vendors. Accrued
expenses at May 1, 2004 compared to January 31, 2004 decreased due to payment of
fiscal 2004 management bonuses in the first quarter of fiscal 2005.
Future Commitments
The following table lists the aggregate maturities of various classes
of obligations and expiration amounts of various classes of commitments related
to Books-A-Million, Inc. at May 1, 2004 (in thousands):
PAYMENTS DUE UNDER CONTRACTUAL OBLIGATIONS
Total FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 Thereafter
--------- -------- -------- -------- -------- -------- --------
Long-term debt-revolving
credit facility.......... $25,140 $ 9,612 $ 15,528 - - - -
Long-term debt
- -industrial
revenue bond............. 7,500 - 7,500 - - - -
--------- -------- -------- -------- -------- -------- --------
Subtotal of debt......... 32,640 9,612 23,028 - - - -
Operating leases......... 115,398 21,317 25,844 20,216 16,654 12,184 19,183
--------- -------- -------- -------- -------- -------- --------
Total of obligations..... $ 148,038 $ 30,929 $ 48,872 $ 20,216 $ 16,654 $ 12,184 $ 19,183
========= ======== ======== ======== ======== ======== ========
Guarantees
From time to time, the Company enters into certain types of agreements
that contingently require the Company to indemnify parties against third party
claims. Generally these agreements relate to: (a) agreements with vendors and
suppliers, under which the Company may provide customary indemnification to
its vendors and suppliers in respect of actions they take at the Company's
request or otherwise on its behalf, (b) agreements with vendors who publish
books or manufacture merchandise specifically for the Company to indemnify the
vendors against trademark and copyright infringement claims concerning the
books published or merchandise manufactured on behalf of the Company, (c) real
estate leases, under which the Company may agree to indemnify the lessors from
claims arising from the Company's use of the property, and (d) agreements with
the Company's directors, officers and employees, under which the Company may
agree to indemnify such persons for liabilities arising out of their
relationship with the Company. The Company has Directors and Officers
Liability Insurance, which, subject to the policy's conditions, provides
coverage for indemnification amounts payable by the Company with respect to
its directors and officers up to specified limits and subject to certain
deductibles.
14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The nature and terms of these types of indemnities vary. The events or
circumstances that would require the Company to perform under these indemnities
are transaction and circumstance specific. Generally, the Company's maximum
liability under such indemnities is not explicitly stated, and therefore the
overall maximum amount of the Company's obligations cannot be reasonably
estimated. Historically, the Company has not incurred significant costs related
to performance under these types of indemnities. No liabilities have been
recorded for these obligations on the Company's balance sheet at May 1, 2004 and
January 31, 2004 as such liabilities are considered de minimis.
Cash Flows
Operating activities used cash of $10.2 million and $25.1 million in
the thirteen week periods ended May 1, 2004 and May 3, 2003, respectively, and
included the following effects:
o Cash used for inventories in the thirteen week periods ended May 1,
2004 and May 3, 2003 was $6.7 million and $15.4 million, respectively.
The smaller usage in the current period was primarily due to higher
sales and improved inventory management versus last year.
o Cash used for accounts payable in the thirteen week periods ended May
1, 2004 and May 3, 2003 was $0.8 million and $7.4 million,
respectively. This change was due to improved leveraging of accounts
payable with vendors in the first quarter of fiscal 2005.
o Depreciation and amortization expenses were $4.0 million in each of the
thirteen week periods ended May 1, 2004 and May 3, 2003.
Cash flows used in investing activities reflected a $1.8 million and
$1.7 million net use of cash for the thirteen week periods ended May 1, 2004 and
May 3, 2003, respectively. Cash was used primarily to fund capital expenditures
for store relocations, renovation and improvements to existing stores, and
investments in management information systems.
Financing activities provided cash of $11.7 million and $26.1 million
in the thirteen week periods ended May 1, 2004 and May 3, 2003, respectively,
principally from net borrowings under the revolving credit facility.
OUTLOOK
For the thirteen weeks ended May 1, 2004, the Company has relocated two
stores and remodeled ten stores. For the remainder of fiscal 2005, the Company
expects to open eight to ten stores, complete remodels on approximately fifteen
to twenty stores, and close two to four stores. The Company's capital
expenditures totaled $1.8 million in the thirteen week period ended May 1, 2004.
Management estimates that capital expenditures for the remainder of fiscal 2005
will be approximately $12.8 million and that such amounts will be used primarily
for new stores and relocations, renovation and improvements to existing stores,
upgrades and expansion of warehouse distribution facilities, and investments in
management information systems. Management believes that existing cash balances
and net cash from operating activities, together with borrowings under the
Company's credit facilities, will be adequate to finance the Company's planned
capital expenditures and to meet the Company's working capital requirements for
the remainder of fiscal 2005.
RELATED PARTY ACTIVITIES
Charles C. Anderson and Terry C. Anderson, both directors of the
Company during the quarter, and Clyde B. Anderson, a director and officer of the
Company, have controlling ownership interests in other entities with which the
Company conducts business. Significant transactions between the Company and
these various other entities ("related parties") are summarized in the following
paragraphs.
The Company purchases a substantial portion of its magazines as well as
certain of their seasonal music and newspapers from Anderson Media Corporation
("Anderson Media"), an affiliate through common ownership. During the thirteen
weeks ended May 1, 2004 and May 3, 2003, purchases of these items from Anderson
Media totaled $10,561,000 and $11,172,000, respectively. The Company purchases
certain of its collectibles and books from Anderson Press, Inc. ("Anderson
Press"), an affiliate through common ownership. During the thirteen weeks ended
May 1, 2004 and May 3, 2003, such purchases from Anderson Press totaled $420,000
and $300,000, respectively. The Company purchases certain of its greeting cards
and gift products from C.R. Gibson, Inc., an affiliate through common ownership.
The purchases of these products during the thirteen weeks ended May 1, 2004 and
May 3, 2003 were $142,000 and $35,000, respectively. The Company purchases
certain magazine subscriptions from Magazines.com, an affiliate through common
ownership. During the thirteen weeks ended May 1, 2004 and May 3, 2003,
15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
purchases of these items were $24,000 and $22,000, respectively. The Company
purchases content for publication from Publication Marketing Corporation, an
affiliate through common ownership. During the thirteen weeks ended May 1, 2004
and May 3, 2003, purchases of these items were $18,000 and $18,000,
respectively. The Company utilizes import sourcing and consolidation services
from Anco Far East Importers, LTD ("Anco Far East"), an affiliate through common
ownership. The total paid to Anco Far East was $95,000 and $218,000 during the
thirteen weeks ended May 1, 2004 and May 3, 2003, respectively. These amounts
paid to Anco Far East primarily included the actual cost of the product, as well
as duty, freight and fees for sourcing and consolidation services. All costs
other than the sourcing and consolidation service fees were passed through from
other vendors. Anco Far East fees, net of the passed-through costs, were $7,000
and $15,000, respectively.
The Company sold books to Anderson Media in the amounts of $53,000 and
$81,000 during the thirteen weeks ended May 1, 2004 and May 3, 2003,
respectively. During the thirteen weeks ended May 1, 2004 and May 3, 2003, the
Company provided $47,000 and $57,000, respectively, of internet services to
Magazines.com.
The Company leases its principal executive offices from a trust, which
was established for the benefit of the grandchildren of Mr. Charles C. Anderson,
a member of the Board of Directors. The lease extends to January 31, 2006.
During the thirteen weeks ended May 1, 2004 and May 3, 2003, the Company paid
rent of $34,000 in each period to the trust under this lease. Anderson &
Anderson LLC ("A&A"), which is an affiliate through common ownership, also
leases three buildings to the Company. During the thirteen weeks ended May 1,
2004 and May 3, 2003, the Company paid A&A a total of $110,000 and $119,000,
respectively, in connection with such leases. Total minimum future rental
payments under all of these leases are $240,000 at May 1, 2004. The Company
subleases certain property to Hibbett Sporting Goods, Inc. ("Hibbett"), a
sporting goods retailer in the southeastern United States. The Company's
Executive Chairman, Clyde B. Anderson, is a member of Hibbett's board of
directors. During the thirteen weeks ended May 1, 2004 and May 3, 2003, the
Company received $48,000 and $40,000, respectively,in rent payments from
Hibbett.
The Company shares ownership of a plane, which the Company uses in the
operations of its business, with an affiliated company. The Company rents the
plane to affiliated companies at the approximate cost of usage. The total
amounts received from affiliated companies for use of the plane during the
thirteen weeks ended May 1, 2004 and May 3, 2003, was $63,000 and $119,000,
respectively. The cost of operating the plane during these years was
approximately the same as the revenue received.
16
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to interest rate fluctuations involving its
credit facilities. The average amount of debt outstanding under the Company's
credit facilities was $57.5 million during fiscal 2004. However, the Company
utilizes both fixed and variable debt to manage this exposure. The Company
entered into two separate $10 million swaps on July 24, 2002. Both expire August
2005 and effectively fix the interest rate on $20 million of variable debt at
5.13%. Also, on May 14, 1996, the Company entered into an interest rate swap
agreement, with a ten- year term, which carries a notional principal amount of
$7.5 million. The swap effectively fixes the interest rate on $7.5 million of
variable rate debt at 7.98%. The swap agreement expires on June 7, 2006. The
counter parties to the interest rate swaps are parties to the Company's
revolving credit facilities. The Company believes the credit and liquidity risk
of the counter parties failing to meet their obligations is remote as the
Company settles its interest position with the banks on a quarterly basis.
To illustrate the sensitivity of the results of operations to
changes in interest rates on its debt, the Company estimates that a 66% increase
in LIBOR rates would increase interest expense by approximately $10,000 for the
thirteen weeks ended May 1, 2004. Likewise, a 66% decrease in LIBOR rates would
decrease interest expense by $10,000 for the thirteen weeks ended May 1, 2004.
This hypothetical change in LIBOR rates was calculated based on the fluctuation
in LIBOR in 2002, which was the maximum LIBOR fluctuation in the last ten years.
The estimates do not consider the effect of the potential termination of the
interest rate swaps associated with the debt will have on interest expense.
17
CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures that are
designed to ensure that information required to be disclosed in the Company's
Exchange Act reports is recorded, processed, summarized and reported within the
time periods specified in the SEC's rules and forms, and that such information
is accumulated and communicated to the Company's management, including its Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure. In designing and evaluating the
disclosure controls and procedures, management recognized that any controls and
procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives, and management
necessarily was required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.
As required by SEC Rule 13a-15(b), the Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and the Company's
Chief Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures as of the end of the fiscal quarter
covered by this report. Based on the foregoing, the Company's Chief Executive
Officer and Chief Financial Officer concluded that the Company's disclosure
controls and procedures were effective at the reasonable assurance level. There
has been no change in the Company's internal controls over financial reporting
during the Company's most recent fiscal quarter that has materially affected, or
is reasonably likely to materially affect, the Company's internal controls over
financial reporting.
18
II - OTHER INFORMATION
ITEM 1: Legal Proceedings
The Company is a party to various legal proceedings incidental
to its business. In the opinion of management, after
consultation with legal counsel, the ultimate liability, if
any, with respect to those proceedings is not presently
expected to materially affect the financial position, results
of operations or cash flows of the Company.
ITEM 2: Changes in Securities, Use of Proceeds, and Issuer Purchases of
Securities
Issuer Purchases of Securities
In March 2004, the Board of Directors authorized a new common
stock repurchase program for up to an additional 10% of the
outstanding stock, or 1,646,624 shares. The following table
shows common stock repurchases under the program:
Maximum Number
Total Number of of Shares that May
Shares Purchased Yet Be Purchased
Total Number of Average Price Paid as Part of Publicly Under the Program at
Period Shares Purchased per Share Announced Program End of Period
-------------------- ----------------- ------------------- ------------------- --------------------
3/17/2004 to 4/3/2004 54,400 $6.3416 54,400 1,592,225
4/4/2004 to 5/1/2004 30,300 $6.5535 30,300 1,561,925
----------------- ------------------- ------------------- --------------------
Total 84,700 $6.4174 84,700
================== =================== =================== ====================
ITEM 3: Defaults Upon Senior Securities
None
ITEM 4: Submission of Matters of Vote of Security Holders
None
ITEM 5: Other Information
None
ITEM 6: Exhibits and Reports on Form 8-K
(A) Exhibits
Exhibit 3i Certificate of Incorporation of Books-A-Million,
Inc. (incorporated herein by reference to Exhibit 3.1 in the
Company's Registration Statement on Form S-1 (Capital
Registration No. 33-52256)
Exhibit 3ii By-Laws of Books-A-Million, Inc. (incorporated
herein by reference to Exhibit 3.2 in the Company's
Registration Statement on Form S-1 (Capital Registration No.
33-52256))
Exhibit 31.1 Certification of Clyde B. Anderson, Executive
Chairman of the Board of Books-A-Million, Inc., pursuant to
Rule 13a-14(a) under the Securities Exchange Act of 1934,
filed under Exhibit 31 of Item 601 of Regulation S-K.
Exhibit 31.2 Certification of Sandra B. Cochran, President and
Chief Executive Officer of Books-A-Million, Inc., pursuant to
Rule 13a-14(a) under the Securities Exchange Act of 1934,
filed under Exhibit 31 of Item 601 of Regulation S-K.
Exhibit 31.3 Certification of Richard S. Wallington, Chief
Financial Officer of Books-A-Million, Inc., pursuant to Rule
13a-14(a) under the Securities Exchange Act of 1934, filed
under Exhibit 31 of Item 601 of Regulation S-K.
19
Exhibit 32.1 Certification of Clyde B. Anderson, Executive
Chairman of the Board of Books-A-Million, Inc., pursuant to
18 U.S.C. Section 1350, filed under Exhibit 32 of Item 601 of
Regulation S-K.
Exhibit 32.2 Certification of Sandra B. Cochran, President
and Chief Executive Officer of Books-A-Million, Inc., pursuant
to 18 U.S.C. Section 1350, filed under Exhibit 32 of Item 601
of Regulation S-K.
Exhibit 32.3 Certification of Richard S. Wallington, Chief
Financial Officer of Books-A-Million, Inc., pursuant to 18
U.S.C. Section 1350, filed under Exhibit 32 of Item 601 of
Regulation S-K.
(B) Reports on Form 8-K
On March 19, 2004, the Company furnished a report on Form 8-K
pursuant to Items 7, 9 and 12 of such form announcing (1) its
earnings results for the fiscal quarter and year ended
January 31, 2004 and (2) the authorization from the Company's
Board of Directors to repurchase up to 10% of the Company's
outstanding stock.
Subsequent to the end of the first quarter of fiscal 2005, on
May 24, 2004, the Company furnished a report on Form 8-K
pursuant to Items 7 and 12 of such form announcing first
quarter fiscal 2005 earnings results.
20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned duly authorized.
BOOKS-A-MILLION, INC.
Date: June 14, 2004 by:/s/ Clyde B. Anderson
---------------------
Clyde B. Anderson
Executive Chairman of the Board
Date: June 14, 2004 by:/s/ Richard S. Wallington
-------------------------
Richard S. Wallington
Chief Financial Officer
Date: June 14, 2004 by:/s/ Sandra B. Cochran
---------------------
Sandra B. Cochran
President and Chief Executive Officer
21
Exhibit 31.1
CERTIFICATIONS
I, Clyde B. Anderson, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Books-A-Million, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the periods presented in this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this quarterly report.
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting.
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design
or operation of internal controls over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal control
over financial reporting.
Date: June 14, 2004
_/s/ Clyde B. Anderson
-----------------------
Clyde B. Anderson
Executive Chairman of the Board
22
Exhibit 31.2
CERTIFICATIONS
I, Sandra B. Cochran, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Books-A-Million, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the periods presented in this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this quarterly report.
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting.
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design
or operation of internal controls over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal control
over financial reporting.
Date: June 14, 2004 _/s/ Sandra B. Cochran
-----------------------
Sandra B. Cochran
President and Chief Executive Officer
23
Exhibit 31.3
CERTIFICATIONS
I, Richard S. Wallington, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Books-A-Million, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the periods presented in this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this quarterly report.
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting.
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design
or operation of internal controls over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal control
over financial reporting.
Date: June 14, 2004 _/s/ Richard S. Wallington
---------------------------
Richard S. Wallington
Chief Financial Officer
24
Exhibit 32.1
CERTIFICATION OF EXECUTIVE CHAIRMAN OF THE BOARD
Pursuant to 18 U.S.C. ss. 1350, as created by Section 906 of the
Sarbanes-Oxley Act of 2002, the undersigned officer of Books-A-Million, Inc.
(the "Company") hereby certifies, to the best of such officer's knowledge, that:
(i) the accompanying Quarterly Report on Form 10-Q of the Company for
the quarterly period ended May 1, 2004 (the "Report") fully complies with
the requirements of Section 13(a) or Section 15(d), as applicable, of the
Securities Exchange Act of 1934, as amended; and
(ii) the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
Dated: June 14, 2004 /s/ Clyde B. Anderson
----------------------
Clyde B. Anderson
Executive Chairman of the Board
25
Exhibit 32.2
CERTIFICATION OF PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to 18 U.S.C. ss. 1350, as created by Section 906 of the
Sarbanes-Oxley Act of 2002, the undersigned officer of Books-A-Million, Inc.
(the "Company") hereby certifies, to the best of such officer's knowledge, that:
(i) the accompanying Quarterly Report on Form 10-Q of the Company for
the quarterly period ended May 1, 2004 (the "Report") fully complies with
the requirements of Section 13(a) or Section 15(d), as applicable, of the
Securities Exchange Act of 1934, as amended; and
(ii) the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
Dated: June 14, 2004 /s/ Sandra B. Cochran
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Sandra B. Cochran
President and Chief Executive Officer
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Exhibit 32.3
CERTIFICATION OF CHIEF FINANCIAL OFFICER
Pursuant to 18 U.S.C. ss. 1350, as created by Section 906 of the
Sarbanes-Oxley Act of 2002, the undersigned officer of Books-A-Million, Inc.
(the "Company") hereby certifies, to the best of such officer's knowledge, that:
(i) the accompanying Quarterly Report on Form 10-Q of the Company for
the quarterly period ended May 1, 2004 (the "Report") fully complies with
the requirements of Section 13(a) or Section 15(d), as applicable, of the
Securities Exchange Act of 1934, as amended; and
(ii) the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
Dated: June 14, 2004 /s/ Richard S. Wallington
--------------------------
Richard S. Wallington
Chief Financial Officer
27