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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended February 1, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission File No. 0-20664
BOOKS-A-MILLION, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 63-0798460
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
402 INDUSTRIAL LANE
BIRMINGHAM, ALABAMA 35211
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (205) 942-3737
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class)
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
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CONTINUED
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [ ].
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
The aggregate market value of the voting stock held by non-affiliates
of the Registrant (assuming for these purposes, but without conceding, that all
executive officers and directors are "affiliates" of the Registrant) as of April
8, 2003 (based on the closing sale price as reported on the NASDAQ National
Market on such date), was $24,984,522.
The number of shares outstanding of the Registrant's Common Stock as of
April 8, 2003 was 16,243,161.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Stockholders for the fiscal year ended
February 1, 2003 are incorporated by reference into Part II of this report.
Portions of the Proxy Statement for the Annual Meeting of Stockholders
to be held on June 5, 2003 are incorporated by reference into Part III of this
report.
EXPLANATORY NOTE
This Form 10-K for fiscal 2003 reflects the restatement of our
consolidated financial statements for the years ended February 2, 2002 and
February 3, 2001. See Note 10 to the consolidated financial statements included
in our Annual Report to Stockholders for the fiscal year ended February 1, 2003
for further discussion of the restatement.
PART I
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
initiative ; and other factors referenced herein. In addition, such
forward-looking statements are necessarily dependent upon 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.
ITEM 1. BUSINESS
GENERAL
Books-A-Million, Inc. (the "Company" or the "Registrant") is a leading
book retailer in the southeastern United States. The Company, which was founded
in 1917, has developed several store formats to address the various market areas
it serves. Superstores, the first of which was opened in 1987, average
approximately 20,000 square feet and operate under the name "Books-A-Million"
and "Books and Co." Traditional bookstores are smaller stores operated under the
names "Bookland" and "Books-A-Million". These stores average approximately 3,900
square feet and are located primarily in enclosed malls. The Company also
operates newsstands under the name "Joe Muggs Newsstands". Newsstands average
approximately 2,300 square feet and are located in mostly larger markets. All
store formats, excluding newsstands, offer an extensive selection of best
sellers and other hardcover and paperback books, magazines, and newspapers. In
addition to the retail store formats, the Company offers its products over the
Internet at Booksamillion.com and Joemuggs.com. The Company is also a wholesaler
of books to, among others, bookstores, wholesale clubs, supermarkets, department
stores and mass merchandisers. Additionally, the Company has a subsidiary which
provides website development and maintenance services.
The Company was originally incorporated under the laws of the State of
Alabama in 1964 and was reincorporated in Delaware in September 1992. The
principal executive offices of the Company are located at 402 Industrial Lane,
Birmingham, Alabama 35211, and its telephone number is (205) 942-3737. Unless
the context otherwise requires, references to the Company include its wholly
owned subsidiaries, American Wholesale Book Company, Inc. ("American Wholesale")
and American Internet Services, Inc. ("AIS").
BUSINESS SEGMENTS
The Company has two reportable segments: electronic commerce trade and
retail trade. The retail trade segment is a strategic business segment that is
engaged in the retial trade of mostly book merchandise and includes the
Company's distribution center operations, which predominantly 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.
For additional information, see Note 8 "Business Segments" in the
Notes to Consolidated Financial Statements in the Annual Report to Stockholders
for the year ended February 1, 2003, incorporated herein by reference.
SUPERSTORES
The Company opened its first Books-A-Million superstore in 1987. The
Company developed its superstores to capitalize on the growing consumer demand
for the convenience, selection and value associated with the superstore
retailing format. Each superstore was designed to be a receptive and open
environment conducive to browsing and reading and includes ample space for
promotional events open to the public, including book autograph sessions and
children's storytelling. The Company operated 163 Superstores as of February 1,
2003.
Superstores emphasize selection, value and customer service.
Superstores offer an extensive selection of best sellers and other hardcover and
paperback books, bargain books, magazines, local newspapers and gifts.
Superstores also dedicate space to bargain books that are sold at a discount
from publishers' originally suggested retail prices. Each superstore has a
service center staffed with associates who are knowledgeable about the store's
merchandise and who are trained to answer customers' questions, assist customers
in locating books within the store and place special orders. The majority of the
superstores also include an espresso and coffee bar called Joe Muggs. The
Company's superstores are conveniently located on major, high-traffic roads and
in enclosed malls or strip shopping centers with adequate parking. Superstores
are generally open Mondays through Saturdays from 9:00 a.m. to 11:00 p.m. and
Sundays 9:00 am through 9:00 p.m.
TRADITIONAL STORES
The Company's traditional stores are tailored to the size, demographics
and competitive conditions of the particular market area. Traditional stores
average approximately 3,900 square feet and carry a broad selection of best
sellers and other hardcover and paperback books, bargain books, magazines and
gifts. The Company had 37 traditional stores as of February 1, 2003.
JOE MUGGS NEWSSTANDS
The Company's newsstands are concentrated in business and entertainment
districts and are tailored to the demographics of the particular market area.
Newsstands average approximately 2,300 square feet and carry a broad selection
of newspapers and magazines, along with hardcover and paperback books. The
newsstands also offer an espresso and coffee bar. The Company operated 7
newsstands as of February 1, 2003.
ACQUISITION OF STORES
During fiscal 2002, the Company acquired lease rights and inventory of
18 stores from Crown Books Corporation for $6.5 million. The stores are located
in the Chicago, Illinois and Washington, D.C. metropolitan areas. The results of
operations for these stores were reflected in the consolidated financial
statements beginning in the first quarter of fiscal 2002.
MERCHANDISING
The Company employs several value-oriented merchandising strategies.
Books on the Company's best-seller list, which is developed exclusively by the
Company based on its sales and customer demand in its stores, are generally sold
in the Company's superstores below publishers' suggested retail prices. In
addition, superstore customers can join the Millionaire's Club and save 10% on
all purchases in Books-A-Million stores, including already discounted
best-sellers. The Company's point-of-sale computer system provides the data
necessary to enable the Company to anticipate consumer demand and customize
store inventory selection to reflect local customer interest and demand.
MARKETING
The Company promotes its bookstores principally through the use of
geographically concentrated newspaper advertising and direct mail circulars, as
well as point-of-sale materials posted and distributed in the stores. In certain
markets, television advertising is also used on a selective basis. The Company
also arranges for special appearances and book autograph sessions with
recognized authors to attract customers and to build and reinforce customer
awareness of its stores. A substantial portion of the Company's advertising
expenses are reimbursed from publishers through their cooperative advertising
programs.
STORE OPERATIONS AND SITE SELECTION
In choosing specific store sites within a market area, the Company
applies standardized site selection criteria that take into account numerous
factors, including the local demographics, desirability of available leasing
arrangements, proximity to existing Company operations and overall level of
retail activity. In general, stores are located on major high-traffic roads
convenient to customers and have adequate parking. The Company generally
negotiates short-term leases with renewal options. The Company periodically
reviews the profitability trends and prospects of each of its stores and
evaluates whether or not any underperforming stores should be closed, converted
to a different format or relocated to more desirable locations.
2
INTERNET OPERATIONS
The Company, through its wholly owned subsidiary, AIS, sells a broad
range of products over the Internet under the name Booksamillion.com. Products
sold by Booksamillion.com are similar to those sold in the Company's
Books-A-Million superstores and include a wide selection of books, magazines and
gift items. Booksamillion.com also operates an online cafe on its web site under
the name Joemuggs.com. Joemuggs.com offers a wide selection of whole bean
coffee, confections and related gift items for purchase over the Internet.
The Company is assisted in its Internet development efforts through a wholly
owned subsidiary of AIS, NetCentral, Inc., which is based in Nashville,
Tennessee. In addition to providing web development and maintenance for all of
the Company's Internet sites and networking initiatives, NetCentral also serves
several outside customers by offering site development, web hosting and
technical services.
PURCHASING
The Company's purchasing decisions are centralized and are made by the
Company's merchandising department. The Company's buyers negotiate terms,
discounts and cooperative advertising allowances for all the Company's
bookstores and decide which books to purchase, in what quantity and for which
stores. The buyers use current inventory and sales information provided by the
Company's in-store point-of-sale computer system to make reorder decisions.
The Company purchases merchandise from over 500 vendors. The Company
purchases the majority of its collectors' supplies from one supplier and
substantially all of its magazines from another supplier, each of which is a
related party. No one vendor accounted for more than 10.0% of the Company's
overall merchandise purchases in the fiscal year ended February 1, 2003. In
general, in excess of 80% of the Company's inventory may be returned by the
Company for credit, which substantially reduces the Company's risk of inventory
obsolescence.
DISTRIBUTION CAPABILITIES
American Wholesale receives a substantial portion of its inventory
shipments, including substantially all of its books, at its two facilities
located in Florence and Tuscumbia, Alabama. Orders from the Company's bookstores
are processed by computer and assembled for delivery to the stores on
pre-determined weekly schedules. Substantially all deliveries of inventory from
American Wholesale's facilities are made by their dedicated transportation
fleet. At the time deliveries are made to each of the Company's stores, returns
of slow moving or obsolete books are picked up and returned to the American
Wholesale returns processing center. American Wholesale then returns these books
to publishers for credit.
COMPETITION
The retail bookstore industry is highly competitive and includes
competitors that have substantially greater financial and other resources than
the Company. The Company competes directly with national bookstore chains,
independent bookstores, booksellers on the Internet, certain mass merchandisers
and greeting card stores. The Company is the third largest retail bookstore
chain in the nation. In recent years, competing bookstore chains have been
expanding their businesses and certain leading regional and national chains have
developed and opened superstores and Internet web sites. The Company also
experiences indirect competition from retail specialty stores that offer books
in a particular area of specialty. Management believes that the key competitive
factors in the retail book industry are convenience of location, selection,
customer service and price.
SEASONALITY
Similar to many retailers, the Company's business is seasonal, with its
highest retail sales, gross profit and net income historically occurring in its
fourth fiscal quarter. This seasonal pattern reflects the increased demand for
books and gifts experienced during the year-end holiday selling season. Working
capital requirements are generally at their highest during the third fiscal
quarter and the early part of the fourth fiscal quarter due to the seasonality
of the Company's business. The Company's results of operations depend
significantly upon net sales generated during the fourth fiscal
3
quarter, and any significant adverse trend in the net sales of such period would
have a material adverse effect on the Company's results of operations for the
full year. In addition to seasonality, the Company's results of operations may
fluctuate from quarter to quarter as a result of the amount and timing of sales
and profits contributed by new stores as well as other factors. Accordingly, the
addition of a large number of new stores in a particular fiscal quarter could
adversely affect the Company's results of operations for that quarter.
TRADEMARKS
"Books-A-Million," "BAM!," "Bookland," "Books & Co.," "Millionaire's
Club," "Sweet Water Press," "Thanks-A-Million," "Big Fat Coloring Book," "Up All
Night Reader," "Read & Save Rebate", "Readables Accessories for Reader",
"Kids-A-Million," "Teachers First," "The Write-Price," "Bambeanos," "Book$mart",
"BAMM", "BAMM.com", "BOOKSAMILLION.com", "Chillatte", "Joe Muggs Newsstand" and
"NetCentral" are the primary registered trademarks of the Company. Management
does not believe that these trademarks are critical to the continuation of the
Company's operations.
EMPLOYEES
As of fiscal year end, the Company employed approximately 2,700
full-time associates and 2,400 part-time associates. The number of part-time
associates employed by the Company fluctuates based upon seasonal needs. None of
the Company's associates are covered by a collective bargaining agreement.
Management believes that the Company's relations with its associates are
excellent.
ITEM 2. PROPERTIES
The Company's bookstores are located either in enclosed malls or strip
shopping centers. All of the Company's stores are leased. Generally, these
leases have terms ranging from five to ten years and require the Company to pay
a fixed minimum rental fee and/or a rental fee based on a percentage of net
sales together with certain customary costs (such as property taxes, common area
maintenance and insurance).
The Company's principal executive offices are located in a 20,550
square foot leased building located in Birmingham, Alabama. The Company has an
additional 37,000 square foot leased building located in Irondale, Alabama. Both
leases involve related parties. The Birmingham, Alabama office space lease
extends to January 31, 2006, and the Irondale, Alabama office space is leased
month-to-month. In addition, the Company leases approximately 4,025 square feet
of office space in Nashville, Tennessee which extends to January 31, 2006.
American Wholesale owns its wholesale distribution center that is
located in an approximately 290,000 square foot facility located in Florence,
Alabama. During fiscal 1995 and 1996, the Company financed the acquisition and
construction of the wholesale distribution facility through loans obtained from
the proceeds of an industrial revenue bond, which are secured by a mortgage
interest in this facility. The Company also leases, from a related party, a
second warehouse facility, which is located in an approximately 210,000 square
foot facility in Tuscumbia, Alabama. In addition, the Company leases all of the
tractors that pull the company owned trailers, which comprise its transportation
fleet.
ITEM 3. 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 or results of
operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information under the heading "Market and Dividend Information" on
page 28 (inside back cover) of the Annual Report to Stockholders for the year
ended February 1, 2003 is incorporated herein by reference.
4
ITEM 6. SELECTED FINANCIAL DATA
The information under the heading "Selected Consolidated Financial
Data" for the years ended January 30, 1999, through February 1, 2003 on page 4
of the Annual Report to Stockholders for the year ended February 1, 2003, is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information under the heading "Management's Discussion & Analysis
of Financial Condition & Results of Operations" on pages 6 through 10 of the
Annual Report to Stockholders for the year ended February 1, 2003 is
incorporated herein by reference.
ITEM 7.A. 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 $65.9 million during fiscal 2003. However, the Company
utilizes both fixed and variable debt to manage this exposure. On February 9,
1998, the Company entered into an interest rate swap agreement, with a five-year
term, which carries a notional principal amount of $30.0 million. The swap
effectively fixes the interest rate on $30.0 million of variable rate debt at
7.41%. The swap agreement expired on February 11, 2003. 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. All of the Company's
financial instruments that are sensitive to market risk are entered into for
purposes other than trading.
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 $326,000 for the
year ending January 31, 2004. Likewise, a 66% decrease in LIBOR rates would
decrease interest expense by $326,000 for the year ending January 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 also assume a level of debt consistent with the year-ended
February 1, 2003 level and do not consider the effect of the potential
termination of the interest rate swaps associated with the debt will have on
interest expense.
The information in note 3 "Debt and Lines of Credit" in the Notes to
Consolidated Financial Statements on page 20 of the Annual Report to
Stockholders for the year ended February 1, 2003 is incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements of the Registrant and its
subsidiaries included in the Annual Report to Stockholders for the year ended
February 1, 2003 are incorporated herein by reference:
Consolidated Balance Sheets as of February 1, 2003 and February 2, 2002
(as restated).
Consolidated Statements of Operations for the Fiscal Years Ended
February 1, 2003, February 2, 2002 (as restated), and February 3,
2001 (as restated).
Consolidated Statements of changes in Stockholders' Equity for the
Fiscal Years Ended February 1, 2003, February 2, 2002 (as restated),
and February 3, 2001 (as restated).
Consolidated Statements of Cash Flows for the Fiscal Years Ended
February 1, 2003, February 2, 2002 (as restated), and February 3,
2001 (as restated).
Notes to Consolidated Financial Statements.
Independent Auditors' Report.
The information under the heading "Summary of Quarterly Results
(Unaudited)" on page 26 of the Annual Report to Stockholders for the
Fiscal Years Ended February 1, 2003 and February 2, 2002 (as
restated) is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Arthur Andersen, LLP was the Company's independent accountants
for fiscal 2002 and had been its independent accountants since its
initial public offering in 1992. The Company dismissed Arthur Andersen,
LLP as its independent accountants on April 26, 2002. The decision to
dismiss Arthur Andersen as the Company's independent accountants was
recommended and approved by the Audit Committee of the Board of
Directors. Arthur Andersen's report on the Company's financial
statements for the past two years did not contain an adverse opinion or
a disclaimer of opinion, and was not qualified or modified as to
uncertainty, audit scope or accounting principles. In addition, during
the two most recent fiscal years and since the end of fiscal year 2002,
there were no disagreements with Arthur Andersen, LLP on any matter of
accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements, if not resolved to
the satisfaction of Arthur Andersen would have caused Arthur Andersen
to make reference to the subject matter of the disagreement in
connection with its report.
The Company engaged Deloitte & Touche LLP as its independent
auditors for fiscal 2003 in May 2002.
5
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
The sections under the heading "Proposal I-Election of Directors"
entitled "Nominee for Election - Term Expiring 2006", "Incumbent Directors -
Term Expiring 2004" and "Incumbent Directors - Term Expiring 2005" on pages 3
and 4 of the Proxy Statement for the Annual Meeting of Stockholders to be held
June 5, 2003, are incorporated herein by reference for information on the
directors of the Registrant.
EXECUTIVE OFFICERS
All executive officers of the Company are elected annually by and serve
at the discretion of the Board of Directors. The executive officers of the
Company are listed below:
- ----------------------- -------- --------------------------------------------------------
NAME AGE POSITION WITH THE COMPANY
- ----------------------- -------- --------------------------------------------------------
Clyde B. Anderson 42 Chairman of the Board and Chief Executive Officer
Sandra B. Cochran 44 President and Secretary
Terrance G. Finley 49 Executive Vice President of Books-A-Million, Inc. and
President of American Internet Services, Inc.
Richard S. Wallington 44 Chief Financial Officer
Clyde B. Anderson has served as a director of the Company since August
1987. Mr. Anderson has served as the Chairman of the Board of the Company since
January 2000 and the Chief Executive Officer of the Company since July 1992. Mr.
Anderson served as the President of the Company from November 1987 to August
1999. From November 1987 to March 1994, Mr. Anderson also served as the
Company's Chief Operating Officer. Mr. Anderson serves on the Board of Directors
and the Compensation Committee of Hibbett Sporting Goods, Inc., a sporting goods
retailer. Mr. Anderson is the son of Charles C. Anderson and the brother of
Terry C. Anderson, both members of the Company's Board of Directors.
Sandra B. Cochran has served as President of the Company since August
1999 and Secretary since June 1998. Ms. Cochran served as the Executive Vice
President from February 1996 to August 1999 and as Chief Financial Officer from
September 1993 to August 1999. Ms. Cochran previously served as Vice President
and Assistant Secretary of the Company from August 1992 to September 1993. Prior
to joining the Company, Ms. Cochran served as a Vice President (as well as in
other capacities) of SunTrust Securities, Inc., a subsidiary of SunTrust Banks,
Inc. for more than five years.
Terrance G. Finley has served as Executive Vice President of the
Company since October 2001 and as the President of American Internet Services,
Inc. since December 1998. Mr. Finley served as Senior Vice President -
Merchandising from January 1998 to December 1998. Mr. Finley served as Vice
President - Merchandising from April 1994 to January 1998 and was named an
executive officer of the Company in March 1995. Mr. Finley served as the General
Manager of Book$mart from February 1992 to April 1994. Prior to joining the
Company, Mr. Finley served as the Vice President - Sales for Smithmark
Publishers.
Richard S. Wallington has served as the Chief Financial Officer of the
Company since August 1999. Mr. Wallington served as Vice President and
Controller from September 1993 to August 1999. Prior to joining the Company, Mr.
Wallington served as the Director of Financial Reporting for Woodward & Lothrop,
a retail department store company.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires the Company's directors, executive officers and persons who own
beneficially more than 10% of the Company's Common Stock to file reports of
ownership and changes in ownership of such stock with the Securities and
Exchange Commission (the "SEC") and the NASDAQ Stock Market, Inc. Directors,
executive officers and greater than 10% stockholders are required by SEC
6
regulations to furnish the Company with copies of all such forms they file. To
the Company's knowledge, based solely on a review of the copies of such reports
furnished to the Company and written representations that no other reports were
required, its directors, executive officers and greater than 10% stockholders
complied with all applicable Section 16(a) filing requirements during fiscal
2003.
ITEM 11. EXECUTIVE COMPENSATION
The sections under the heading "Executive Compensation," other than
those entitled "Report on Executive Compensation", "Compensation Committee
Interlocks and Insider Participation", "Certain Relationships and Related
Transactions" and "Performance Graph", on pages 12 through 20 of the Proxy
Statement for the Annual Meeting of Stockholders to be held June 5, 2003 are
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The section under the heading "Proposal I-Election of Directors"
entitled "Beneficial Ownership of Common Stock" on pages 5 and 6 of the Proxy
Statement for the Annual Meeting of Stockholders to be held June 5, 2003 is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The sections under the heading "Executive Compensation" entitled
"Compensation Committee Interlocks and Insider Participation" and "Certain
Relationships and Related Transactions" on pages 14 and 15 of the Proxy
Statement for the Annual Meeting of Stockholders to be held June 5, 2003 are
incorporated herein by reference.
ITEM 14. 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.
Within 90 days prior to the date of this report, 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. 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.
There have been no significant changes in the Company's internal controls or in
other factors that could significantly affect the internal controls subsequent
to the date the Company completed its evaluation.
7
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The following Consolidated Financial Statements of Books-A-Million,
Inc. and its subsidiaries, included in the Registrant's Annual Report
to Stockholders for the fiscal year ended February 1, 2003 are
incorporated by reference in Part II, Item 8:
Consolidated Balance Sheets as of February 1, 2003 and February 2, 2002
(as restated).
Consolidated Statements of Operations for the Fiscal Years Ended
February 1, 2003, February 2, 2002 (as restated), and February 3,
2001 (as restated).
Consolidated Statements of Changes in Stockholders' Equity for the
Fiscal Years Ended February 1, 2003, February 2, 2002 (as restated),
and February 3, 2001 (as restated).
Consolidated Statements of Cash Flows for the Fiscal Years Ended
February 1, 2003, February 2, 2002 (as restated), and February 3,
2001 (as restated).
Notes to Consolidated Financial Statements.
Independent Auditors' Report.
2. Financial Statement Schedule:
Independent Auditors' Report on Financial Statement Schedule.
The following consolidated financial statement schedule of
Books-A-Million, Inc. is attached hereto:
Schedule 2 Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are not applicable, and therefore
have been omitted.
8
3. Exhibits
Exhibit Number
--------------
3.1 -- Certificate of Incorporation of the Registrant
(incorporated by reference to Exhibit 3.1 to
Registration Statement on Form S-1, File No.
33-52256, originally filed September 21, 1992).
3.2 -- Bylaws of the Registrant (incorporated by reference
to Exhibit 3.2 to Registration Statement on Form S-1,
File No. 33-52256, originally filed September 21,
1992).
4.1 -- See Exhibits 3.1 and 3.2 hereto incorporated herein
by reference to the Exhibits of the same number to
Registration Statement on Form S-1, File No.
33-52256, originally filed September 21, 1992.
10.1 -- Lease Agreement between First National Bank of
Florence, Alabama, as Trustee, and Bookland Stores,
Inc. (which is a predecessor of the Registrant), an
Alabama corporation, dated January 30, 1991
(incorporated by reference to Exhibit 10.1 to
Registration Statement on Form S-1, File No.
33-52256, originally filed September 21, 1992).
10.2 -- Amended and Restated Stock Option Plan (incorporated
by reference to Exhibit 10.2 to Annual Report on Form
10-K for the fiscal year ended January 30, 1999, File
No. 0-20664, filed on April 30, 1999).
10.3 -- Employee Stock Purchase Plan (incorporated by
reference to Exhibit 10.7 to Registration Statement
on Form S-1, File No. 33-52256, originally filed
September 21, 1992). 10.4 -- Amendment to Employee
Stock Purchase Plan (incorporated by reference to
Exhibit 10.6 to Annual Report on Form 10-K for the
fiscal year ended January 29, 1994, File No. 0-20664,
filed on April 29, 1994).
10.5 -- 1999 Amended and Restated Employee Stock Purchase
Plan (incorporated by reference to Exhibit 10.5 to
Annual Report on Form 10-K for the fiscal year ended
January 29, 2000, File No. 0-20664, filed on April
28, 2000).
10.6 -- 401(k) Plan (together with related documents)
(incorporated by reference to Exhibit 10.9 to
Registration Statement on Form S-1, File No.
33-52256, originally filed September 21, 1992).
10.7 -- Shareholders Agreement dated as of September 1, 1992
(incorporated by reference to Exhibit 10.9 to Annual
Report on Form 10-K for the fiscal year ended January
31, 1993, File No. 0-20664, filed May 3, 1993).
10.8 -- Executive Incentive Plan (incorporated by reference
to Exhibit 10.8 to Annual Report on Form 10-K for the
fiscal year ended January 28, 1995, File No. 0-20664,
filed April 28, 1995).
10.19 -- Stock Option Plans for Booksamillion.com, American
Internet Service, Inc., Netcentral, Inc. and
Faithpoint, Inc. (incorporated by reference to
Exhibit 10.19 to Annual Report on Form 10-K for the
fiscal year ended February 3, 2001, File No. 0-20664,
filed on May 4, 2001).
10.20 -- Credit agreement dated as of July 1, 2002, between
the Company and Bank of America, N.A., Suntrust Bank,
N.A., Wells Fargo Bank, N.A., Southtrust Bank, N.A.
and Amsouth Bank, N.S. (incorporated by reference to
Exhibit 10.20 to Form 10-Q for the quarter ended
August 3, 2002).
9
13 -- Portions of the Annual Report to Stockholders for the
year ended February 1, 2003 that are expressly
incorporated by reference into Part II of this
Report.
21 -- Subsidiaries of the Registrant (incorporated by
reference to Exhibit 21 to Annual Report on Form 10-K
for the fiscal year ended February 3, 2001, File No.
0-20664, filed May 4, 2001).
23 -- Consent of Independent Public Accountants to the
incorporation of their report on the Company's
consolidated financial statements for the fiscal year
ended February 1, 2003, into the Registration
Statements on Form S-8. (File Nos. 33-72812 and
33-86980).
Reports on Form 8-K
None.
(c) See Item 15(a)(3), the Exhibit Index and the Exhibits attached hereto.
(d) See Item 15(a)(2).
10
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BOOKS-A-MILLION, INC.
by: /s/ Clyde B. Anderson
-----------------------------------
Clyde B. Anderson
Chairman of the Board and Chief
Executive Officer
Date: May 2, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
PRINCIPAL EXECUTIVE OFFICER:
/s/ Clyde B. Anderson
- ------------------------------------------------------------
Clyde B. Anderson
Chairman of the Board and Chief Executive Officer
Date: May 2, 2003
PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER:
/s/ Richard S. Wallington
- --------------------------------------------
Richard S. Wallington
Chief Financial Officer
Date: May 2, 2003
DIRECTORS:
/s/ Clyde B. Anderson
- --------------------------------------------
Clyde B. Anderson
Date: May 2, 2003
/s/ Charles C. Anderson
- --------------------------------------------
Charles C. Anderson
Date: May 2, 2003
DIRECTORS:
/s/ Ronald G. Bruno
- -------------------------------------------
Ronald G. Bruno
Date: May 2, 2003
/s/ J. Barry Mason
- -------------------------------------------
J. Barry Mason
Date: May 2, 2003
/s/ Terry C. Anderson
- --------------------------------------------
Terry C. Anderson
Date: May 2, 2003
/s/ William H. Rogers, Jr.
- --------------------------------------------
William H. Rogers, Jr.
Date: May 2, 2003
CERTIFICATIONS
I, Clyde B. Anderson, certify that:
1. I have reviewed this annual report on Form 10-K of Books-A-Million,
Inc.;
2. Based on my knowledge, this annual 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 period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual 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-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures 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 annual report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: May 2, 2003
/s/ Clyde B. Anderson
-----------------------
Clyde B. Anderson
Chief Executive Officer
I, Richard S. Wallington, certify that:
1. I have reviewed this annual report on Form 10-K of Books-A-Million,
Inc.;
2. Based on my knowledge, this annual 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 period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual 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-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures 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 annual report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: May 2, 2003
/s/ Richard S. Wallington
---------------------------
Richard S. Wallington
Chief Financial Officer
INDEPENDENT AUDITORS' REPORT
To Board of Directors of Books-A-Million, Inc.:
We have audited the consolidated financial statements of Books-A-Million, Inc.
and subsidiaries as of February 1, 2003 and February 2, 2002 and for each of the
three fiscal years in the period ended February 1, 2003, and have issued our
report thereon dated April 30, 2003 (which report expresses an unqualified
opinion and includes explanatory paragraphs relating to the restatement
described in Note 10 and the adoption of a new accounting principle as described
in Note 1 to the consolidated financial statements); such financial statements
and report are included in your fiscal 2003 Annual Report to Stockholders and
are incorporated herein by reference. Our audits also included the financial
statement schedule of Books-A-Million, Inc. listed in Item 15. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
such financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
/s/ DELOITTE & TOUCHE LLP
Birmingham, Alabama
April 30, 2003
S-1
SCHEDULE 2.
BOOKS-A-MILLION, INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED FEBRUARY 3, 2001, FEBRUARY 2, 2002, AND FEBRUARY 1, 2003
CHARGED/
BALANCE AT (CREDITED) (DEDUCTIONS)/
BEGINNING TO COSTS RECOVERIES BALANCE AT
OF YEAR AND EXPENSES NET END OF YEAR
---------- ------------ ------------- -----------
FOR THE YEAR ENDED FEBRUARY 3, 2001:
Allowance for doubtful accounts $1,488,897 $218,044 $(920,060) $786,881
FOR THE YEAR ENDED FEBRUARY 2, 2002:
Allowance for doubtful accounts $ 786,881 $567,913 $(569,902) $784,892
FOR THE YEAR ENDED FEBRUARY 1, 2003:
Allowance for doubtful accounts $ 784,892 $276,459 $(349,396) $711,955
S-2