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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: July 31, 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 [ ] No [X]

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 September 8, 2004 were 16,743,084 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 ................................. 13

Item 3. Quantitative and Qualitative Disclosures about Market Risk 18

Item 4. Controls and Procedures ................................... 19

PART II. OTHER INFORMATION

Item 1. Legal Proceedings ......................................... 20

Item 2. Changes in Securities ..................................... 20

Item 3. Defaults Upon Senior Securities ........................... 20

Item 4. Submission of Matters of Vote of Security-Holders ......... 20

Item 5. Other Information ......................................... 20

Item 6. Exhibits and Reports on Form 8-K .......................... 20






PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BOOKS-A-MILLION, INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)



AS OF JULY 31, 2004 AS OF JANUARY 31, 2004
------------------- ----------------------

ASSETS
CURRENT ASSETS:
Cash and cash equivalents ............................. $ 5,441 $ 5,348
Accounts receivable, net ............................. 7,477 7,271
Related party accounts receivable, net ............... 193 351
Inventories .......................................... 210,860 211,591
Prepayments and other ................................ 5,899 5,890
Deferred income taxes ................................ 4,696 4,446
---------- ----------
TOTAL CURRENT ASSETS ............................. 234,566 234,897
---------- ----------
PROPERTY AND EQUIPMENT:
Gross property and equipment ......................... 166,564 166,466
Less accumulated depreciation and amortization ....... 120,611 117,289
---------- ----------
NET PROPERTY AND EQUIPMENT ......................... 45,953 49,177
---------- ----------
OTHER ASSETS ............................................ 1,633 1,605
---------- ----------
TOTAL ASSETS ..................................... $ 282,152 $ 285,679
========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ..................................... $ 88,445 $ 87,984
Related party accounts payable ....................... 7,656 8,777
Accrued expenses ..................................... 30,380 30,189
Accrued income taxes ................................. 525 3,527
---------- ----------
TOTAL CURRENT LIABILITIES ........................ 127,006 130,477
---------- ----------
LONG-TERM DEBT .......................................... 18,700 20,640
DEFERRED INCOME TAXES ................................... 1,834 1,805
OTHER LONG-TERM LIABILITIES ............................. 969 1,507
---------- ----------
TOTAL NON-CURRENT LIABILITIES .................... 21,503 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, 18,664,901 and 18,465,387 shares issued at
July 31, 2004 and January 31, 2004, respectively...... 187 185
Additional paid-in capital ........................... 72,452 71,799
Less treasury stock, at cost (2,094,750 and 2,010,050
shares at July 31, 2004 and January 31, 2004,
respectively)......................................... (5,819) (5,271)
Deferred compensation ................................ (461) (284)
Accumulated other comprehensive loss, net of tax ..... (485) (707)
Retained earnings .................................... 67,769 65,528
---------- ----------
TOTAL STOCKHOLDERS' EQUITY ....................... 133,643 131,250
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ....... $ 282,152 $ 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 TWENTY-SIX WEEKS ENDED
-------------------- ----------------------
JULY 31, 2004 AUGUST 2, 2003 JULY 31, 2004 AUGUST 2, 2003
------------- -------------- ------------- --------------

NET SALES .............................................. $ 114,065 $ 113,081 $ 222,580 $ 211,586
Cost of products sold (including warehouse,
distribution and store occupancy costs) (1) ......... 83,618 82,269 162,449 155,837
----------- ----------- ----------- -----------
GROSS PROFIT ........................................... 30,447 30,812 60,131 55,749
Operating, selling and administrative expenses ...... 24,736 23,661 47,919 45,237
Depreciation and amortization ....................... 3,658 3,916 7,649 7,951
----------- ----------- ----------- -----------
OPERATING INCOME ....................................... 2,053 3,235 4,563 2,561
Interest expense, net ............................... 487 848 1,005 1,717
----------- ----------- ----------- -----------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES .. 1,566 2,387 3,558 844
Income tax provision ................................ 560 905 1,317 318
----------- ----------- ----------- -----------
INCOME FROM CONTINUING OPERATIONS ...................... 1,006 1,482 2,241 526
DISCONTINUED OPERATIONS (NOTE 9):
Loss from discontinued operations before income
taxes ............................................... -- (191) -- (329)
Income tax benefit .................................. -- 70 -- 122
----------- ----------- ----------- -----------
LOSS FROM DISCONTINUED OPERATIONS ................. -- (121) -- (207)
----------- ----------- ----------- -----------
NET INCOME ............................................. $ 1,006 $ 1,361 $ 2,241 $ 319
=========== =========== =========== ===========
NET INCOME PER COMMON SHARE:
BASIC:
INCOME FROM CONTINUING OPERATIONS .................. $ 0.06 $ 0.09 $ 0.14 $ 0.03
LOSS FROM DISCONTINUED OPERATIONS .................. -- (0.01) -- (0.01)
----------- ----------- ----------- -----------
NET INCOME .......................................... $ 0.06 $ 0.08 $ 0.14 $ 0.02
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC 16,497 16,248 16,471 16,234
=========== =========== =========== ===========
DILUTED:
INCOME FROM CONTINUING OPERATIONS .................. $ 0.06 $ 0.09 $ 0.13 $ 0.03
LOSS FROM DISCONTINUED OPERATIONS .................. -- (0.01) -- (0.01)
----------- ----------- ----------- -----------
NET INCOME .......................................... $ 0.06 $ 0.08 $ 0.13 $ 0.02
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING -
DILUTED.............................................. 17,225 16,518 17,220 16,435
=========== =========== =========== ===========


(1) Inventory purchases from related parties were $5,517, $6,563, $16,778 and
$18,327, 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)


TWENTY-SIX WEEKS ENDED
----------------------
JULY 31, 2004 AUGUST 2, 2003
------------- --------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .......................................................... $ 2,241 $ 319
--------- ---------
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization ..................................... 7,649 8,055
Deferred compensation amortization ................................ 63 --
Loss on impairment of assets ...................................... 3 420
(Gain)/Loss on disposal of property ............................... (12) 50
Change in deferred income taxes ................................... (221) 238
(Increase)/Decrease in inventories .............................. 731 (3,471)
Decrease in accounts payable .................................... (660) (15,196)
Changes in certain other assets and liabilities ................. (3,289) 393
--------- ---------
Total adjustments .............................................. 4,264 (9,511)
--------- ---------
Net cash provided by (used in) operating activities ............ 6,505 (9,192)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ................................................ (4,352) (3,507)
Proceeds from sale of equipment ..................................... 13 19
--------- ---------
Net cash used in investing activities .......................... (4,339) (3,488)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under credit facilities .................................. 95,120 108,220
Repayments under credit facilities .................................. (97,060) (95,442)
Purchase of treasury stock .......................................... (548) --
Proceeds from exercise of stock options and issuance of
common stock under the employee stock option plan............... 415 95
--------- ---------
Net cash provided by (used in) financing activities ............ (2,073) 12,873
--------- ---------
Net increase in cash and cash equivalents .............................. 93 193
Cash and cash equivalents at beginning of period ....................... 5,348 4,977
--------- ---------
Cash and cash equivalents at end of period ............................. $ 5,441 $ 5,170
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the thirteen week period for:
Interest ................................................... $ 1,013 $ 1,770
Income taxes, net of refunds ............................... $ 4,241 $ 1,704


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 and twenty-six week periods ended July 31, 2004 and August 2,
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 July 31, 2004, and the results of its
operations and cash flows for the thirteen and twenty-six week periods
ended July 31, 2004 and August 2, 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 July 31, 2004 and January 31, 2004, we had one stock option plan. We
account 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--Transition 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 For the Twenty-Six Weeks Ended
---------------------------- ------------------------------
In thousands July 31, 2004 August 2, 2003 July 31, 2004 August 2, 2003
------------- -------------- ------------- --------------

Net income (loss), as reported .... $ 1,006 $ 1,361 $ 2,241 $ 319
Deduct: Total stock-based employee
compensation expense determined
under fair value based method
for all awards, net of tax effects 341 328 682 656
---------- ---------- --------- --------
Pro forma net income (loss) ....... 665 1,033 1,559 (337)
Net income (loss) per common share:
Basic--as reported ................ $ 0.06 $ 0.08 $ 0.14 $ 0.02
Basic--pro forma .................. $ 0.04 $ 0.06 $ 0.09 $ (0.02)
Diluted--as reported .............. $ 0.06 $ 0.08 $ 0.13 $ 0.02
Diluted--pro forma ................ $ 0.04 $ 0.06 $ 0.09 $ (0.02)
========== ========== ========= ========


The fair value of the options granted under our 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 PER SHARE

Basic net income per share ("EPS") is computed by dividing net income
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 and twenty-six
week period. A reconciliation of the weighted average shares for basic and
diluted EPS is as follows:



For the Thirteen Weeks Ended
(in thousands)
----------------------------
July 31, 2004 August 2, 2003
------------- --------------

Weighted average shares outstanding:
Basic............................................. 16,497 16,248
Dilutive effect of stock options and
restricted stock outstanding................... 728 270
------ ------
Diluted........................................... 17,225 16,518
====== ======




For the Twenty-Six Weeks Ended
(in thousands)
----------------------------
July 31, 2004 August 2, 2003
------------- --------------

Weighted average shares outstanding:
Basic............................................. 16,471 16,234
Dilutive effect of stock options and
restricted stock outstanding.................... 749 201
------ ------
Diluted........................................... 17,220 16,435
====== ======



Options outstanding to purchase 796,000 and 1,132,000 shares of common
stock as of July 31, 2004 and August 2, 2003, respectively, were not
included in the table above as they were anti-dilutive under the treasury
stock method.

3. DERIVATIVE AND HEDGING ACTIVITIES

We are subject to interest rate fluctuations involving our credit
facilities and debt related to an Industrial Development Revenue Bond (the
"Bond"). However, we use fixed interest rate hedges to manage this
exposure. We entered into two separate $10 million swaps on July 24, 2002.
Both expire in August 2005 and effectively fix the interest rate on an
aggregate of $20 million of variable credit facility debt at 5.13% per
year. In addition, we 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% per year. The counter parties to the interest rate swaps
are two primary banks in our credit facility. We believe the credit and
liquidity risks of the counter parties failing to meet their obligation are
remote as we settle our interest position with the banks on a quarterly
basis.

Our 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 or in
earnings, depending on the type of hedging relationship. Over time, amounts
held in accumulated other comprehensive income will be reclassified to
earnings when the hedge transaction affects earnings.

Our 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 $969,000 and

7



BOOKS-A-MILLION, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

$1.5 million as of July 31, 2004 and January 31, 2004, respectively. For
the thirteen weeks ended July 31, 2004 and August 2, 2003, adjustment gains
of $131,000 (net of tax provision of $77,000) and $225,000 (net of tax
provision of $138,000), respectively, and in the twenty-six weeks ended
July 31, 2004 and August 2, 2003, adjustment gains of $226,000 (net of tax
provision of $133,000) and $288,000 (net of tax provision of $176,000),
respectively, were recorded in accumulated other comprehensive income 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, we de-designated the hedge. A pre-tax gain of $179,000
was recorded in earnings during the first twenty-six weeks of fiscal 2005
related to the de-designated hedge.


4. COMPREHENSIVE INCOME


Comprehensive income is net income or loss, plus certain other items
that are recorded directly to stockholders' equity. The only such items
currently applicable to us are the unrealized gains (losses) on the hedges
explained in Note 3, as follows:



COMPREHENSIVE INCOME Thirteen Weeks Ended Twenty-Six Weeks Ended
(in thousands) (in thousands)
-------------------- ----------------------
July 31, 2004 August 2, 2003 July 31, 2004 August 2, 2003
------------- -------------- ------------- --------------

Net income......................... $1,006 $1,361 $2,241 $319
Unrealized gains on hedges,
net of deferred tax provision
for the thirteen-week periods
of $77 and $138, respectively,
and the twenty-six week periods
of $133 and $176, respectively..... 131 225 226 288
------ ------ ------ ----
Total comprehensive income......... $1,137 $1,586 $2,467 $607
====== ====== ====== ====


5. COMMITMENTS AND CONTINGENCIES

We are a party to various legal proceedings incidental to our 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 our financial position, results of
operations or cash flows.

From time to time, we enter into certain types of agreements that
require us to indemnify parties against third party claims under certain
circumstances. Generally these agreements relate to: (a) agreements with
vendors and suppliers under which we may provide customary indemnification
to our vendors and suppliers in respect of actions they take at our request
or otherwise on our behalf, (b) agreements with vendors who publish books
or manufacture merchandise specifically for us to indemnify the vendors
against trademark and copyright infringement claims concerning the books
published or merchandise manufactured on behalf of us, (c) real estate
leases, under which we may agree to indemnify the lessors from claims
arising from our use of the property, and (d) agreements with our
directors, officers and employees, under which we may agree to indemnify
such persons for liabilities arising out of their relationship with us. We
have Directors and Officers Liability Insurance, which, subject to the
policy's conditions, provides coverage for indemnification amounts payable
by us with respect to our 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 us to perform under these indemnities are
transaction and circumstance specific. Generally, our maximum liability
under such indemnities is not explicitly stated, and therefore the overall
maximum amount of our obligations cannot be reasonably estimated.
Historically, we have not incurred significant costs related to performance
under these types of indemnities. No liabilities have been recorded for
these obligations on our balance sheet at July 31, 2004 and January 31,
2004 as such liabilities are considered de minimis.


8


BOOKS-A-MILLION, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)



6. INVENTORIES

Inventories were:
(In thousands) July 31, 2004 January 31, 2004
------------- ----------------
Inventories (at FIFO) $ 211,819 $ 212,251
LIFO reserve (959) (660)
----------- -----------
Net inventories $ 210,860 $ 211,591
=========== ===========


7. BUSINESS SEGMENTS

We have 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 our
distribution center operations, which predominately supplies merchandise to
our 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 our Fiscal 2004 Annual Report on Form 10-K. We evaluate
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)



Thirteen Weeks Ended Twenty-Six Weeks Ended
-------------------- ----------------------
NET SALES July 31, 2004 August 2, 2003 July 31, 2004 August 2, 2003
------------- -------------- ------------- --------------

Retail/Wholesale Trade .............. $ 112,076 $ 111,556 $ 218,677 $ 208,755
Electronic Commerce Trade ........... 6,377 6,289 12,675 11,496
Intersegment Sales Elimination ...... (4,388) (4,764) (8,772) (8,665)
---------- ---------- ---------- ----------
Net Sales ...................... $ 114,065 $ 113,081 $ 222,580 $ 211,586
========== ========== ========== ==========
OPERATING INCOME
Retail/Wholesale Trade .............. $ 1,711 $ 3,243 $ 4,003 $ 2,411
Electronic Commerce Trade ........... 167 (31) 252 --
Intersegment Elimination ............ 175 23 308 150
---------- ---------- ---------- ----------
Total Operating Income ......... $ 2,053 $ 3,235 $ 4,563 $ 2,561
========== ========== ========== ==========

As of As of
July 31, 2004 January 31, 2004
------------- ----------------
ASSETS
Retail/Wholesale Trade .............. $ 280,904 $ 284,718
Electronic Commerce Trade ........... 1,648 1,527
Intersegment Elimination ............ (400) (566)
---------- ----------
Total Assets ................... $ 282,152 $ 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, "Accounting for
Stock-Based Compensation - Transition and Disclosure - an Amendment of FASB No.
123" ("SFAS 148"). 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. We
have 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. We will continue to monitor communications on this subject
from the FASB in order to determine the impact on our 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. We 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 our 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 we do not expect another of our existing stores to absorb the
closed store's customers. Information regarding discontinued operations is as
follows (in thousands):


Thirteen Weeks Ended Twenty-Six Weeks Ended
-------------------- ----------------------
July 31, 2004 August 2, 2003 July 31, 2004 August 2, 2003
------------- -------------- ------------- --------------

Sales............................. $ - $ 808 $ - $ 1,736

Pretax operating losses........... - 191 - 329

Impairment losses (included above
in pretax operating loss amounts). - 106 - 118

Store closing costs (included
above in pretax operating loss
amounts).......................... - 3 - 25





11




BOOKS-A-MILLION, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

10. DEBT AND LINES OF CREDIT

We have an unsecured revolving credit facility that allows borrowings
up to $100 million. Our current credit facility was extended two years to
July 2007 by our bank group during the second quarter of fiscal 2005. No
principal repayments are due until the facility expires in July 2007.

11. STOCKHOLDERS' EQUITY

In March 2004, the Board of Directors authorized a common stock
repurchase program for up to $1.6 million shares, or 10% of the outstanding
stock. During the twenty-six weeks ended July 31, 2004, 84,700 shares have
been repurchased under this program.

Subsequent to the end of the current fiscal quarter, the Board of
Directors approved a one-time dividend of $0.12 per share and the
initiation of a quarterly dividend of $0.03 per share. The quarterly
dividend will be paid beginning with the quarter ended July 31, 2004. Both
the one-time dividend of $0.12 per share and the quarterly dividend of
$0.03 per share are payable on September 14, 2004, to stockholders of
record at the close of business on August 31, 2004. The Company will pay
quarterly cash dividends in the future subject to Board approval.



12



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 our actual
results, performance or achievements, 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 our specific market areas; inflation; economic conditions in general and
in our 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 us; uncertainties related
to the Internet and the our 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. We disclaim any obligation 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 164 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 Twenty-Six Weeks Ended
-------------------- ----------------------
July 31, 2004 August 2, 2003 July 31, 2004 August 2, 2003
------------- -------------- ------------- --------------

Net sales............................... 100.0% 100.0% 100.0% 100.0%
Gross profit............................ 26.7% 27.2% 27.0% 26.3%
Operating, selling and administrative
expenses................................ 21.7% 20.9% 21.5% 21.3%
Depreciation and amortization........... 3.2% 3.5% 3.4% 3.8%
----- ----- ----- -----
Operating income........................ 1.8% 2.8% 2.1% 1.2%
Interest expense, net................... 0.4% 0.7% 0.5% 0.8%
----- ----- ----- -----
Income from continuing operations
before income taxes..................... 1.4% 2.1% 1.6% 0.4%
Income tax provision.................... 0.5% 0.8% 0.6% 0.2%
----- ----- ----- -----
Income from continuing operations....... 0.9% 1.3% 1.0% 0.2%
Loss from discontinued operations....... - (0.1)% - (0.1)%
----- ----- ----- -----
Net income.............................. 0.9% 1.2% 1.0% 0.1%
===== ===== ===== =====




13



MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Net sales increased $1.0 million, or 0.9%, to $114.1 million in the
thirteen weeks ended July 31, 2004, from $113.1 million in the thirteen weeks
ended August 2, 2003. Net sales increased $11.0 million, or 5.2%, to $222.6
million in the twenty-six weeks ended July 31, 2004, from $211.6 million in the
twenty-six weeks ended August 2, 2003. Comparable store sales in the thirteen
weeks ended July 31, 2004 were flat when compared with the same thirteen week
period for the prior year. Comparable store sales increased 3.3% for the
twenty-six weeks ended July 31, 2004 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, Inspirational,
Biography and Social Science. The cafe department sales increase was led by our
new cold beverage product line of frappes as well as increased store traffic.
During the thirteen weeks ended July 31, 2004, we opened one superstore and
closed one traditional store.

Net sales for the retail trade segment increased $0.5 million, or 0.5%,
to $112.1 million in the thirteen weeks ended July 31, 2004 from $111.6 million
in the same period last year. Net sales for the retail trade segment increased
$9.9 million, or 4.7%, to $218.7 million in the twenty-six weeks ended July 31,
2004 due to higher comparable store sales. Net sales for the electronic commerce
segment increased $88,000, or 1.4%, to $6.4 million in the thirteen weeks ended
July 31, 2004. For the twenty-six weeks ended July 31, 2004, net sales for the
electronic commerce segment increased $1.2 million, or 10.4%, to $12.7 million
from $11.5 million in the same period last year, related primarily to higher
business to business order volume and increased search engine marketing which
increased traffic on our website.

Gross profit decreased $0.4 million, or 1.3%, to $30.4 million in the
thirteen weeks ended July 31, 2004 when compared with $30.8 million in the same
thirteen week period for the prior year. For the twenty-six weeks ended July 31,
2004, gross profit increased $4.4 million, or 7.9%, to $60.1 million from $55.7
million in the same period last year. Gross profit as a percentage of net sales
for the thirteen weeks ended July 31, 2004 was 26.7% versus 27.2% in the same
period last year. The decrease in gross profit as a percent of net sales for the
thirteen week period was primarily due to additional promotional activity,
including a one day sale and increased summer promotions. Gross profit as a
percentage of sales for the twenty-six weeks ended July 31, 2004 was 27.0%
versus 26.3% in the same period last year. The increase in gross profit stated
as a percent of net sales for the twenty-six week period was due to improved
sales mix to higher margin departments, including cafes, and lower occupancy and
warehouse distribution costs as a percentage of sales due to higher sales.

Operating, selling and administrative expenses were $24.7 million in
the thirteen week period ended July 31, 2004 compared to $23.7 million in the
same period last year. For the twenty-six weeks ended July 31, 2004, operating,
selling and administrative expenses were $47.9 million compared to $45.2 million
in the same period last year. Operating, selling and administrative expenses as
a percentage of net sales for the thirteen weeks ended July 31, 2004 increased
to 21.7% from 20.9% in the same period last year. Operating, selling and
administrative expenses as a percentage of net sales for the twenty-six weeks
ended July 31, 2004 increased to 21.5% from 21.3% in the same period last year.
The increase as a percentage of sales for the thirteen week period was primarily
due to advertising costs incurred for the "one day sale" this year and higher
store selling costs as a percentage of sales due to the flat comparable store
sales.

Depreciation and amortization was $3.7 million in the thirteen week
period ended July 31, 2004 compared to $3.9 million in the same period last
year. In the twenty-six week period ended July 31, 2004 depreciation and
amortization decreased 3.8% to $7.6 million from $8.0 million in the same period
last year.

Consolidated operating income was $2.1 million for the thirteen weeks
ended July 31, 2004, compared to $3.2 million in the same period last year. For
the twenty-six weeks ended July 31, 2004, consolidated operating income was $4.6
million compared $2.6 million in the same period last year. Operating income for
the retail trade segment decreased $1.5 million for the thirteen weeks ended
July 31, 2004, and operating income increased $1.6 million for the twenty-six
weeks ended July 31, 2004. The decrease in operating income for the thirteen
week period was due to reduced profits as a result of flat comparable store
sales and increased promotional activity. The increase in operating income for
the twenty-six week period was due to strong profit growth driven by stronger
comparable store sales. The operating profit for the electronic commerce segment
increased $0.2 million and $0.3 million for the thirteen and twenty-six week
periods ended July 31, 2004, respectively, compared to the same period last
year. The increase in profit was due to higher sales in the business to business
category and improved sales due to increased search engine marketing which
increased traffic on our website.

Interest expense was $487,000 in the thirteen weeks ended July 31, 2004
versus $848,000 in the same period last year and $1.0 million in the twenty-six
weeks ended July 31, 2004 versus $1.7 million in the same period

14


MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

last year. The decrease was primarily due to lower average debt balances
compared with the prior year due to higher earnings, improved inventory
management and better accounts payable leveraging.

Discontinued operations represent the closure in fiscal 2004 of four
retail stores in markets located in Georgia (two stores), Louisiana and North
Carolina where we do not expect another of our existing stores to absorb the
closed store's customers. Information regarding discontinued operations is as
follows (in thousands):



Thirteen Weeks Ended Twenty-Six Weeks Ended
-------------------- ----------------------
July 31, 2004 August 2, 2003 July 31, 2004 August 2, 2003
------------- -------------- ------------- --------------

Sales............................. $ - $ 808 $ - $ 1,736

Pretax operating losses........... - 191 - 329

Impairment losses (included above
in pretax operating loss amounts.. - 106 - 118

Store closing costs (included
above in pretax operating loss
amounts).......................... - 3 - 25



LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity are cash flows from operations,
including credit terms from vendors, and borrowings under our credit facility.
We have an unsecured revolving credit facility that allows borrowings up to $100
million. Our current credit facility was extended two years to July 2007 by our
bank group during the second quarter of fiscal 2005. No principal repayments are
due until the facility expires in July 2007. 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 July 31, 2004 and
January 31, 2004, $11.2 million and $13.1 million, respectively, were
outstanding under this credit facility. The maximum and average outstanding
balances during the thirteen weeks ended July 31, 2004 were $34.4 million and
$24.8 million, respectively, compared to $77.6 million and $68.7 million,
respectively for the same period in the prior year. The maximum and average
outstanding balances during the twenty-six weeks ended July 31, 2004 were $34.4
million and $25.3 million, respectively, compared to $77.6 million and $66.5
million, respectively for the same period in the prior year. The decrease in the
maximum and average outstanding balances from the prior year was due to higher
earnings, improved inventory management and better accounts payable leveraging.
The outstanding borrowings as of July 31, 2004 had interest rates ranging from
1.86% per year to 2.88% per year. Additionally, as of July 31, 2004 and January
31, 2004, we have outstanding borrowings under an industrial revenue bond
totaling $7.5 million, which is secured by certain property.

Future Commitments

The following table lists the aggregate maturities of various classes
of obligations and expiration amounts of our various classes of commitments at
July 31, 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............... $ 11,200 $ - $ - $ - $11,200 $ - $ -
Long-term debt -
industrial revenue
bond................... 7,500 - - 7,500 - - -
--------- -------- -------- -------- -------- -------- --------
Subtotal of debt....... 18,700 - - 7,500 11,200 - -
Operating leases....... 112,584 14,690 26,720 21,040 17,409 12,745 19,980
--------- -------- -------- -------- -------- -------- --------
Total of obligations... $ 131,284 $ 14,690 $ 26,720 $ 28,540 $ 28,609 $ 12,745 $ 19,980
========= ======== ======== ======== ======== ======== ========




15


MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Indemnification

From time to time, we enter into certain types of agreements that
require us to indemnify parties against third party claims under certain
circumstances. Generally these agreements relate to: (a) agreements with vendors
and suppliers under which we may provide customary indemnification to our
vendors and suppliers in respect of actions they take at our request or
otherwise on our behalf, (b) agreements with vendors who publish books or
manufacture merchandise specifically for us to indemnify the vendors against
trademark and copyright infringement claims concerning the books published or
merchandise manufactured on behalf of us, (c) real estate leases, under which we
may agree to indemnify the lessors from claims arising from our use of the
property, and (d) agreements with our directors, officers and employees, under
which we may agree to indemnify such persons for liabilities arising out of
their relationship with us. We have Directors and Officers Liability Insurance,
which, subject to the policy's conditions, provides coverage for indemnification
amounts payable by us with respect to our 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 us to perform under these indemnities are
transaction and circumstance specific. Generally, our maximum liability under
such indemnities is not explicitly stated, and therefore the overall maximum
amount of our obligations cannot be reasonably estimated. Historically, we have
not incurred significant costs related to performance under these types of
indemnities. No liabilities have been recorded for these obligations on our
balance sheet at July 31, 2004 and January 31, 2004 as such liabilities are
considered de minimis.


Cash Flows

Operating activities provided (used) cash of $6.5 million and ($9.2)
million in the twenty-six week periods ended July 31, 2004 and August 2, 2003,
respectively, and included the following effects:

o Cash provided (used) for inventories in the twenty-six week periods
ended July 31, 2004 and August 2, 2003 was $0.7 million and ($3.5)
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 twenty-six week periods ended
July 31, 2004 and August 2, 2003 was $0.7 million and $15.2 million,
respectively. This change was due to improved leveraging of accounts
payable with vendors in the first twenty-six weeks of fiscal 2005.
o Depreciation and amortization expenses were $7.6 million and $8.1
million in the twenty-six week periods ended July 31, 2004 and August
2, 2003, respectively.

Cash flows used in investing activities reflected a $4.4 million and
$3.5 million net use of cash for the twenty-six week periods ended July 31, 2004
and August 2, 2003, respectively. Cash was used primarily to fund capital
expenditures for new store openings, store relocations, renovation and
improvements to existing stores, and investments in management information
systems.

Financing activities provided (used) cash of ($2.1)million and $12.9
million in the twenty-six week periods ended July 31, 2004 and August 2, 2003,
respectively, principally from net borrowings (repayments) under the revolving
credit facility. The reduced borrowings under the credit facility during fiscal
2005 were due to the improved cash flows from operating activities.

OUTLOOK

For the twenty-six weeks ended July 31, 2004, we have opened one store,
closed one store, relocated two stores and remodeled sixteen stores. For the
remainder of fiscal 2005, we expect to open five to seven stores, complete
remodels on approximately ten to fifteen stores, and close one to three stores.
Our capital expenditures totaled $4.4 million in the twenty-six week period
ended July 31, 2004. Management estimates that capital expenditures for the
remainder of fiscal 2005 will be approximately $10.2 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 our credit facilities, will be
adequate to finance our planned capital expenditures and to meet our working
capital requirements for the remainder of fiscal 2005.

16


MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS


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 we
conduct business. Significant transactions between us and these various other
entities ("related parties") are summarized in the following paragraphs.

We purchase a substantial portion of our magazines as well as certain
of our seasonal music and newspapers from Anderson Media Corporation ("Anderson
Media"), an affiliate through common ownership. During the twenty-six weeks
ended July 31, 2004 and August 2, 2003, purchases of these items from Anderson
Media totaled $15,937,000 and $17,288,000, respectively. We purchase certain of
our collectibles and books from Anderson Press, Inc. ("Anderson Press"), an
affiliate through common ownership. During the twenty-six weeks ended July 31,
2004 and August 2, 2003, such purchases from Anderson Press totaled $224,000 and
$425,000, respectively. We purchase certain of our greeting cards and gift
products from C.R. Gibson, Inc., an affiliate through common ownership. The
purchases of these products during the twenty-six weeks ended July 31, 2004 and
August 2, 2003 were $230,000 and $87,000, respectively. We purchase certain
magazine subscriptions from Magazines.com, an affiliate through common
ownership. During the twenty-six weeks ended July 31, 2004 and August 2, 2003,
purchases of these items were $37,000 and $42,000, respectively. We purchase
content for publication from Publication Marketing Corporation, an affiliate
through common ownership. During the twenty-six weeks ended July 31, 2004 and
August 2, 2003, purchases of these items were $24,000 and $36,000, respectively.
We utilize 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 $322,000 and $449,000 during the twenty-six
weeks ended July 31, 2004 and August 2, 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 $23,000 and
$31,000, respectively.

We sold books to (received returns from) Anderson Media in the amounts of
($32,000) and $153,000 during the twenty-six weeks ended July 31, 2004 and
August 2, 2003, respectively. During the twenty-six weeks ended July 31, 2004
and August 2, 2003, we provided $47,000 and $129,000, respectively, of internet
services to Magazines.com. During the twenty-six weeks ended July 31, 2004 and
August 2, 2003, we provided $54,000 and $35,000, respectively, of internet
services to American Promotional Events.

We lease our 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 twenty-six weeks ended July 31, 2004 and August 2, 2003, we paid rent of
$69,000 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 us. During the twenty-six weeks ended July 31, 2004 and August 2,
2003, we paid A&A a total of $220,000 and $231,000, respectively, in connection
with such leases. Total minimum future rental payments under all of these leases
are $206,000 at July 31, 2004. We sublease certain property to Hibbett Sporting
Goods, Inc. ("Hibbett"), a sporting goods retailer in the southeastern United
States. Our Executive Chairman, Clyde B. Anderson, is a member of Hibbett's
board of directors. During the twenty-six weeks ended July 31, 2004 and August
2, 2003, we received $95,000 in rent payments from Hibbett.

We share ownership of a plane, which we use in the operations of our
business, with an affiliated company. We rent the plane to affiliated companies
at the approximate actual cost of usage. The total amounts received from
affiliated companies for use of the plane during the twenty-six weeks ended July
31, 2004 and August 2, 2003, was $130,000 and $335,000, respectively. The cost
of operating the plane during these periods was approximately the same as the
revenue received.



17


QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are subject to interest rate fluctuations involving our credit
facilities and debt related to the Bond. The average amount of debt outstanding
under our credit facilities was $57.5 million during fiscal 2004. However, we
utilize both fixed and variable debt to manage this exposure. We entered into
two separate $10 million swaps on July 24, 2002. Both expire August 2005 and
effectively fix the interest rate on an aggregate of $20 million of variable
rate debt at 5.13% per year. Also, on May 14, 1996, we 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 the Bond
at 7.98% per year. The swap agreement expires on June 7, 2006. The counter
parties to the interest rate swaps are parties to our revolving credit
facilities. We believe the credit and liquidity risk of the counter parties
failing to meet their obligations is remote as we settle our 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, we estimate that a 66% increase in LIBOR rates would
increase interest expense by approximately $11,000 for the thirteen weeks ended
July 31, 2004. Likewise, a 66% decrease in LIBOR rates would decrease interest
expense by $11,000 for the thirteen weeks ended July 31, 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.



18




CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure
that information required to be disclosed in our 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 our management, including our 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), we carried out an evaluation, under the
supervision and with the participation of the our management, including our
Chief Executive Officer and our Chief Financial Officer, of the effectiveness of
the design and operation of our disclosure controls and procedures as of the end
of the fiscal quarter covered by this report. Based on the foregoing, our Chief
Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures were effective at the reasonable assurance level as of
the end of the fiscal quarters covered by this report. There has been no change
in our internal controls over financial reporting during our most recent fiscal
quarter that has materially affected, or is reasonably likely to materially
affect, our internal controls over financial reporting.



19





II - OTHER INFORMATION

ITEM 1: Legal Proceedings

We are a party to various legal proceedings incidental to our
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 our financial position, results of
operations or cash flows.

ITEM 2: Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Securities

In March 2004, the Board of Directors authorized a new common
stock repurchase program for up to 10% of the outstanding
stock, or 1,646,624 shares. The following table shows common
stock repurchases under the program:



Maximum Number of
Total Number of Shares that May Yet
Shares Purchased as Be Purchased Under
Total Number of Average Price Paid Part of Publicly the Program at End
Period Shares Purchased per Share Announced Program of Period
- --------------------- ---------------- ------------------- ------------------- --------------------

3/17/2004 to 4/3/2004 54,400 $ 6.3416 54,400 1,592,224
4/4/2004 to 5/1/2004 30,300 $ 6.5535 30,300 1,561,924
5/2/2004 to 7/31/2004 -- -- -- 1,561,924
------ ------------ ------ ---------
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

Exhibits

Exhibit 3(i) 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 (Registration No.
33-52256)

Exhibit 3(ii) 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 (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, as
amended.

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,
as amended.

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, as
amended.

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, as amended.

20



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, as amended.

Exhibit 32.3 Certification of Richard S. Wallington, Chief
Financial Officer of Books-A-Million, Inc., pursuant to 18
U.S.C. Section 1350, as amended.





21




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: September 14, 2004 by:/s/ Clyde B. Anderson
---------------------
Clyde B. Anderson
Executive Chairman of the Board


Date: September 14, 2004 by:/s/ Richard S. Wallington
-------------------------
Richard S. Wallington
Chief Financial Officer


Date: September 14, 2004 by:/s/ Sandra B. Cochran
---------------------
Sandra B. Cochran
President and Chief Executive Officer



22




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: September 14, 2004



_/s/ Clyde B. Anderson
-----------------------
Clyde B. Anderson
Executive Chairman of the Board






23



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: September 14, 2004

_/s/ Sandra B. Cochran
----------------------
Sandra B. Cochran
President and Chief Executive Officer






24



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: September 14, 2004

_/s/ Richard S. Wallington
--------------------------
Richard S. Wallington
Chief Financial Officer


25




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 July 31, 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: September 14, 2004 /s/ Clyde B. Anderson
-----------------------
Clyde B. Anderson
Executive Chairman of the Board




26





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 July 31, 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: September 14, 2004 /s/ Sandra B. Cochran
------------------------
Sandra B. Cochran
President and Chief Executive Officer





27



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 July 31, 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: September 14, 2004 /s/ Richard S. Wallington
-------------------------
Richard S. Wallington
Chief Financial Officer


28