<PAGE> 1
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: November 2, 1996
----------------
- 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 of (IRS Employer Identification No.)
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
report)
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 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 November 2, 1996 were 17,408,535 shares.
<PAGE> 2
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BOOKS-A-MILLION, INC. & SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
ASSETS November 2, 1996 February 3, 1996
---------------- ----------------
<S> <C> <C>
Current Assets:
Cash and temporary cash investments $ 4,281 $ 1,923
Accounts receivable 14,842 8,373
Related party receivables 7,406 4,348
Inventories 151,689 122,008
Prepayments and other 1,463 720
Deferred income taxes 2,665 2,631
-------- --------
Total Current Assets 182,346 140,003
-------- --------
Property and Equipment:
Land 628 628
Buildings 5,378 5,379
Equipment 19,873 16,044
Furniture and fixtures 25,467 21,272
Leasehold improvements 29,711 24,833
Construction-in-process 1,787 82
-------- --------
82,844 68,238
Less-accumulated depreciation and amortization 25,342 18,985
-------- --------
Net Property and Equipment 57,502 49,253
-------- --------
Other Assets:
Goodwill, net 1,592 1,621
Other 59 56
-------- --------
Total Other Assets 1,651 1,677
-------- --------
Total Assets $241,499 $190,933
======== ========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Accounts payable:
Trade $ 72,678 $ 69,697
Related party 7,020 1,940
Accrued expenses 11,163 13,112
Accrued income taxes - 561
Notes payable 20,000 -
-------- --------
Total Current Liabilities 110,861 85,310
-------- --------
Long Term Debt 37,255 14,087
-------- --------
Deferred Income Taxes 1,263 1,081
-------- --------
Stockholders' Investment:
Preferred stock, $.01 par value, 1,000,000
shares authorized, no shares outstanding - -
Common stock, $.01 par value, 30,000,000 shares authorized,
17,408,535 and 17,387,102 shares issued and outstanding
at November 2, 1996, and February 3, 1996, respectively 174 174
Additional paid-in capital 62,811 62,656
Retained earnings 29,135 27,625
-------- --------
Total Stockholders' Investment 92,120 90,455
-------- --------
Total Liabilities and Stockholders' Investment $241,499 $190,933
======== ========
</TABLE>
See accompanying notes
-2-
<PAGE> 3
BOOKS-A-MILLION, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-Nine Weeks Ended
--------------------------------- -----------------------------------
November 2, 1996 October 28, 1995 November 2, 1996 October 28, 1995
---------------- ---------------- ------------------ ----------------
<S> <C> <C> <C> <C>
Net Sales $64,505 $48,766 $181,549 $144,810
Cost of products sold (including warehouse,
distribution and store occupancy costs)* 48,862 35,746 135,602 106,375
------- ------- -------- --------
Gross Profit 15,643 13,020 45,947 38,435
Operating, selling and administrative expenses 12,232 9,999 34,723 28,366
Depreciation and amortization 2,533 1,751 6,876 4,663
Store closing charge - - - 2,945
------- ------- -------- --------
Operating Income 878 1,270 4,348 2,461
Interest expense, net 843 232 1,912 208
------- ------- -------- --------
Income Before Income Taxes 35 1,038 2,436 2,253
Provision for income taxes 14 394 926 856
------- ------- -------- --------
Net Income $ 21 $ 644 $ 1,510 $ 1,397
======= ======= ======== ========
Weighted Average Number of Shares Outstanding 17,409 17,381 $ 17,404 17,366
======= ======= ======== ========
Net Income Per Share $ 0.00 $ 0.04 $ 0.09 $ 0.08
======= ======= ======== ========
</TABLE>
* Inventory purchases from related parties were $8,031, $4,860, $20,606 and
$13,518, respectively, for each of the periods presented above.
See accompanying notes
-3-
<PAGE> 4
BOOKS-A-MILLION, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Thirty-Nine Weeks Ended
----------------------------------
November 2, 1996 October 28, 1995
---------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,510 $ 1,397
-------- ---------
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 6,875 4,663
(Gain) Loss on disposal of property and equipment 26 (189)
Change in deferred income taxes 148 (1,320)
(Increase) decrease in current assets:
Accounts receivable (6,469) (3,091)
Related party receivables (3,058) 255
Inventories (29,681) (41,165)
Prepayments and other (746) (973)
Increase (decrease) in current liabilities:
Accounts payable 8,061 13,960
Accrued income taxes (561) (2,929)
Accrued expenses (1,869) 1,785
-------- ---------
Total adjustments (27,274) (29,004)
-------- ---------
Net cash used in operating activities (25,764) (27,607)
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (15,326) (15,499)
Proceeds from sale of equipment 125 1,665
-------- ---------
Net cash used in investing activities (15,201) (13,834)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt 43,168 18,316
Proceeds from sale of common stock, net 155 387
-------- ---------
Net cash provided by financing activities 43,323 18,703
-------- ---------
Net increase (decrease) in cash and temporary cash investments 2,358 (22,738)
Cash and temporary cash investments at beginning of period 1,923 26,870
-------- ---------
Cash and temporary cash investments at end of period $ 4,281 $ 4,132
======== =========
</TABLE>
See accompanying notes
-4-
<PAGE> 5
BOOKS-A-MILLION, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of
Books-A-Million, Inc., and its Subsidiary ("The Company") for the thirteen
and thirty-nine week periods ended November 2, 1996 and October 28, 1995,
have been prepared in accordance with generally accepted accounting
principles 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 generally accepted accounting principles 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 February 3, 1996, included in the Company's 1996 Annual Report on Form
10-K. In the opinion of management, the consolidated financial statements
included herein contain all adjustments (consisting only of normal recurring
adjustments, with the exception of the store closing charge described in
footnote 4 below) considered necessary for a fair presentation of the
Company's financial position as of November 2, 1996 and October 28, 1995, and
the results of its operations and cash flows for the thirteen and thirty-nine
week periods then ended.
The Company has experienced, and expects 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.
2. NET INCOME PER SHARE
Net income per share for the period is calculated by dividing net income
by the weighted average number of shares of common stock outstanding. Common
stock equivalents, in the form of stock options, are excluded from the
calculation since they have no material dilutive effect on per share figures.
3. DEBT
During October, 1996, the Company amended its short-term credit
agreement (the "Facility") which increased the maximum borrowing availability
under the Facility to $20,000,000 from $10,000,000, and extended the
termination date of the Facility to June 30, 1997. The Company also has
$50,000,000 of borrowing availability under its existing revolving credit
facility (the "Revolving Facility"). The Company has total outstanding
borrowings of $49,755,000 as of November 2, 1996 under these Facilities,
which bear interest based on the LIBOR rate plus .75%, or pursuant to a
competitive bid facility, and have maturities of less than 12 months.
4. STORE CLOSING CHARGE
During the second quarter of fiscal 1996 the Company recorded a one-time
charge of $2.9 million for costs associated with the anticipated closing of
certain traditional mall-based bookstores. The consolidated statements of
income for the thirty-nine week period ended October 28, 1995, reflect this
store closing charge. The charge included amounts for lease termination
costs ($935,000), asset write-downs ($1,005,000) and other disposition costs
($1,005,000). As of the end of the third quarter of fiscal 1997, 20 stores
have been closed, resulting in asset write-downs of $909,000, lease
termination costs of $566,000 and other disposition costs of $878,000, all
of which were charged against the store closing reserve. Additional lease
termination payments related to the stores already closed in fiscal 1996 and
fiscal 1997 are expected to be incurred during fiscal 1997. The remaining
reserve for the store closing charge is included in accrued expenses under
current liabilities and is expected to be paid or settled within the 1997
fiscal year.
5. INCOME TAXES
The Company is currently being audited by the IRS. While the outcome of
the audit is not determinable at this time, the Company does not expect the
audit findings to have a material, adverse impact on the financial position
of the Company.
-5-
<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales increased 32.3% to $64.5 million in the thirteen weeks ended
November 2, 1996, from $48.8 million in the thirteen weeks ended October 28,
1995. Net sales increased 25.4% to $181.5 million in the thirty-nine weeks
ended November 2, 1996, from $144.8 million in the thirty-nine weeks ended
October 28, 1995. For the thirteen and thirty-nine weeks ended November 2,
1996, the increase in net sales resulted from net sales from new stores.
Comparable store sales decreased 1.6% for superstores and 2.4% for all stores
for the thirty-nine weeks ended November 2, 1996, and they decreased 1.4% for
superstores and 2.3% for all stores for the thirteen weeks ended November 2,
1996. During the thirteen weeks ended November 2, 1996, eight superstores, one
combination store and one traditional store were opened and one combination
store was closed.
Gross profit increased $2.6 million or 20.1% to $15.6 million in the
thirteen weeks ended November 2, 1996 from $13.0 million in the thirteen weeks
ended October 28, 1995, and in the thirty-nine weeks ended November 2, 1996,
gross profit increased 19.5% to $45.9 million from $38.4 million in the same
period last year. Gross profit as a percentage of net sales for the thirteen
weeks ended November 2, 1996 decreased to 24.3% from 26.7% in the same period
last year. For the thirty-nine week period gross profit as a percentage of net
sales decreased to 25.3% from 26.5% in the same period last year. The
decreases in this percentage for the thirteen and thirty-nine week periods
resulted primarily from changes in sales mix, as well as higher occupancy
costs as a percentage of net sales.
Operating, selling and administrative expenses increased $2.2 million or
23.2% to $12.2 million in the thirteen weeks ended November 2, 1996 from $10.0
million in the thirteen weeks ended October 28, 1995, and in the thirty-nine
weeks ended November 2, 1996, operating, selling and administrative expenses
increased 22.4% to $34.7 million from $28.4 million in the same period last
year. Operating, selling and administrative expenses as a percentage of net
sales for the thirteen weeks ended November 2, 1996 decreased to 19.0% from
20.5% in the same period last year. For the thirty-nine week period operating,
selling and administrative expenses as a percentage of net sales decreased
slightly to 19.1% from 19.6% in the same period last year. The decrease in
this percentage for the thirteen and thirty-nine week periods was due primarily
to lower store selling expenses as a percentage of net sales.
Depreciation and amortization increased $.7 million or 44.7% to $2.5
million in the thirteen weeks ended November 2, 1996 from $1.8 million in the
thirteen weeks ended October 28, 1995, and in the thirty-nine week period
depreciation and amortization increased $2.2 million , or 47.5% to $6.9
million from $4.7 million in the same period last year. The increase in
depreciation and amortization is primarily the result of the increased number
of stores operated by the Company.
Interest expense was $843,000 in the thirteen weeks ended November 2,
1996, versus $232,000 for the same period last year, and in the thirty-nine
week period interest expense increased to $1.9 million from $.2 million in the
same period last year. This increase in interest expense resulted from
borrowings incurred due primarily to increased inventory and capital
expenditures related to new stores opened in the first nine months of fiscal
1997 and the last three months of fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
During the first thirty-nine weeks of fiscal 1997, the Company's cash
requirements have been funded with net cash from operations and with borrowings
under the Company's credit facilities. Similar to many retailers, the
Company's business is seasonal, with its highest retail sales, gross profits
and net income traditionally occurring during the fourth fiscal quarter,
reflecting the increased demand for books and gifts during the year-end,
holiday selling season. Working capital requirements are generally 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 has a revolving credit facility allowing borrowings up to $50
million for which no principal repayments are due until the facility expires on
October 27, 2000, and a one year working capital line of credit for $20
million, which is subject to annual renewal (see note 3 in the Notes to
Consolidated Financial Statements). Borrowings outstanding under these credit
facilities were $49,755,000 as of November 2, 1996. The borrowings bear
interest at variable rates. During fiscal 1996 and fiscal 1995 the Company
financed the acquisition and construction of certain warehouse and distribution
facilities through loans obtained from the proceeds of an industrial
development revenue bond (the "Bond"), which are secured by a mortgage interest
in these facilities. As of November 2, 1996, there was $7.5 million of
borrowings outstanding under these loans at variable rates.
-6-
<PAGE> 7
The Company's capital expenditures totaled $15.3 million during the first
thirty-nine weeks of fiscal 1997. These expenditures were primarily used to
open new stores, to perform renovations and improvements to existing stores and
to continue investments in management information systems. Management
estimates that capital expenditures for the remainder of fiscal 1997 will be
approximately $11.0 million, and that such amounts will be used primarily for
new stores, renovations and remodeling of certain existing stores and
investments in management information systems. Management believes that
existing cash reserves and net cash from operating activities, together with
borrowings under the Company's credit facilities, will be adequate to finance
the Company's planned capital expenditures and to meet the Company's working
capital requirements for the remainder of fiscal 1997.
RELATED PARTY ACTIVITIES
Certain principal stockholders of the Company have controlling ownership
interests in other entities with which the Company conducts business.
Significant transactions between the Company and these various other entities
(described as "related parties") are summarized in the following paragraph.
The Company purchases a portion of its inventories for resale from related
parties; such purchases amounted to $20.6 million and $13.5 million in the
thirty-nine weeks ended November 2, 1996 and October 28, 1995, respectively.
This increase in related party purchases is primarily due to the sales growth
the Company has experienced. The Company sells a portion of its inventories to
related parties; such sales amounted to $5.2 million and $4.2 million in the
thirty-nine weeks ended November 2, 1996, and October 28, 1995, respectively.
This increase in related party sales is primarily due to the sales growth the
Company has experienced. Management believes these related party
purchases and sales do not have a significant impact on gross profit.
FINANCIAL POSITION
During the thirty-nine weeks ended November 2, 1996, the Company opened 19
superstores. The store openings resulted in increased inventory, property and
equipment and debt balances at November 2, 1996, as compared to February 3,
1996.
-7-
<PAGE> 8
PART II - OTHER INFORMATION
ITEM 1: Legal Proceedings
None
ITEM 2: Changes in Securities
None
ITEM 3: Defaults Upon Senior Securities
None
ITEM 4: Submission of Matters to Vote of Security-Holders
None
ITEM 5: Other Information
None
ITEM 6: Exhibits and Reports on Form 8-K
(A) Exhibits
27 - Financial Data Schedule (for SEC use only).
(B) Reports on Form 8-K
There were no reports filed on Form 8-K during the thirteen week
period ended November 2, 1996
-8-
<PAGE> 9
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: December 13, 1996
by:/s/ Clyde B. Anderson
------------------------
Clyde B. Anderson
President and
Chief Executive Officer
Date: December 13, 1996 by:/s/ Sandra B. Cochran
---------------------
Sandra B. Cochran
Executive Vice President,
Chief Financial Officer
and Assistant Secretary
-9-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
BOOKS-A-MILLION, INC. CONSOLIDATED BALANCE SHEETS, CONSOLIDATED STATEMENTS OF
INCOME AND CONSOLIDATED STATEMENTS OF CASH FLOWS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FORM 10-Q FOR THE QUARTERLY PERIOD ENDED NOVEMBER
2, 1996.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-START> FEB-04-1996
<PERIOD-END> NOV-02-1996
<EXCHANGE-RATE> 1
<CASH> 4,281
<SECURITIES> 0
<RECEIVABLES> 22,248
<ALLOWANCES> 0
<INVENTORY> 151,689
<CURRENT-ASSETS> 182,346<F1>
<PP&E> 82,844
<DEPRECIATION> 25,342
<TOTAL-ASSETS> 241,499<F2>
<CURRENT-LIABILITIES> 110,861
<BONDS> 0<F3>
0<F4>
0
<COMMON> 174
<OTHER-SE> 91,946
<TOTAL-LIABILITY-AND-EQUITY> 241,499
<SALES> 181,549
<TOTAL-REVENUES> 181,549
<CGS> 135,602
<TOTAL-COSTS> 170,325
<OTHER-EXPENSES> 6,876
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,912
<INCOME-PRETAX> 2,436
<INCOME-TAX> 926
<INCOME-CONTINUING> 1,510
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,510
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.09
<FN>
<F1>OTHER CURRENT ASSETS - 4,128
<F2>OTHER ASSETS - 1,651
<F3>LONG TERM DEBT - 37,255
<F4>DEFERRED INCOME TAXES - 1,263
</FN>
</TABLE>
