<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO
FORM 10-Q
(MARK ONE)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
- ------ EXCHANGE ACT OF 1934.
For the quarterly period ended: May 4, 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 May 4, 1996 were 17,407,335 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 MAY 4, 1996 FEBRUARY 3, 1996
----------- ----------------
<S> <C> <C>
CURRENT ASSETS:
Cash and temporary cash investments $ 2,763 $ 1,923
Accounts receivable 7,583 8,373
Related party receivables 6,605 4,348
Inventories 131,139 122,008
Prepayments and other 1,208 720
Deferred income taxes 2,645 2,631
--------- ---------
TOTAL CURRENT ASSETS 151,943 140,003
--------- ---------
PROPERTY AND EQUIPMENT:
Land 628 628
Buildings 5,378 5,379
Equipment 16,621 16,044
Furniture and fixtures 21,461 21,272
Leasehold improvements 26,911 24,833
Construction-in-process 1,394 82
--------- ---------
72,393 68,238
Less-accumulated depreciation and amortization 20,961 18,985
--------- ---------
NET PROPERTY AND EQUIPMENT 51,432 49,253
--------- ---------
OTHER ASSETS:
Goodwill, net 1,610 1,621
Other 58 56
--------- ---------
TOTAL OTHER ASSETS 1,668 1,677
--------- ---------
TOTAL ASSETS $ 205,043 $ 190,933
========= =========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Accounts payable:
Trade $ 71,473 $ 69,697
Related party 3,415 1,940
Accrued expenses 8,878 13,112
Accrued income taxes - 561
Notes payable 10,000 -
--------- ---------
TOTAL CURRENT LIABILITIES 93,766 85,310
--------- ---------
LONG TERM DEBT 18,546 14,087
--------- ---------
DEFERRED INCOME TAXES 1,148 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,
17,407,335 and 17,387,102 shares issued and outstanding
at May 4, 1996, and February 3, 1996, respectively 174 174
Additional paid-in capital 62,803 62,656
Retained earnings 28,606 27,625
--------- ---------
TOTAL STOCKHOLDERS' INVESTMENT 91,583 90,455
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT $ 205,043 $ 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
-----------------------------
MAY 4, 1996 APRIL 29, 1995
------------ --------------
<S> <C> <C>
NET SALES $ 56,589 $ 44,014
Cost of products sold (including warehouse,
distribution and store occupancy costs)* 41,900 32,580
---------- --------------
GROSS PROFIT 14,689 11,434
Operating, selling and administrative expenses 10,637 8,459
Depreciation and amortization 2,064 1,319
---------- --------------
OPERATING INCOME 1,988 1,656
Interest (income) expense, net 406 (93)
---------- --------------
INCOME BEFORE INCOME TAXES 1,582 1,749
Provision for income taxes 601 665
---------- --------------
NET INCOME $ 981 $ 1,084
========== ==============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 17,395 17,345
========== ==============
NET INCOME PER SHARE $ 0.06 $ 0.06
========== ==============
</TABLE>
* Inventory purchases from related parties were $6,826
and $4,304, 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>
THIRTEEN WEEKS ENDED
-----------------------------
MAY 4, 1996 APRIL 29, 1995
------------ --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 981 $ 1,084
---------- --------------
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 2,064 1,319
Loss on disposal of property and equipment 5 3
Change in deferred income taxes 53 (56)
(Increase) decrease in current assets:
Accounts receivable 790 661
Related party receivables (2,257) 1,674
Inventories (9,131) (10,992)
Prepayments and other (490) (130)
Increase (decrease) in current liabilities:
Accounts payable 3,251 (10,473)
Accrued income taxes (561) (2,346)
Accrued expenses (4,231) (2,103)
---------- --------------
Total adjustments (10,507) (22,443)
---------- --------------
Net cash used in operating activities (9,526) (21,359)
---------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (4,309) (2,682)
Proceeds from sale of equipment 69 -
---------- --------------
Net cash used in investing activities (4,240) (2,682)
---------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under credit facilities 31,830 -
Repayments under credit facilities (17,371) -
Proceeds from sale of common stock, net 147 280
---------- --------------
Net cash provided by financing activities 14,606 280
---------- --------------
Net increase (decrease) in cash and temporary cash investments 840 (23,761)
Cash and temporary cash investments at beginning of period 1,923 26,870
---------- --------------
Cash and temporary cash investments at end of period $ 2,763 $ 3,109
========== ==============
</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
week period ended May 4, 1996, 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) considered necessary for a
fair presentation of the Company's financial position as of May 4, 1996, and
the results of its operations and cash flows for the thirteen week period
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. 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 fifty-three week period ended February 3, 1996, reflect this
store closing charge. The charge included amounts for lease termination
costs ($977,000), asset write-downs ($990,000) and other disposition costs
($978,000). As of the end of the first quarter of fiscal 1997 17 stores have
been closed, resulting in asset write-downs of $737,000, lease termination
costs of $71,000 and other disposition costs of $498,000, all of which were
charged against the store closing reserve. Additional lease termination
payments related to the stores already closed in fiscal 1996 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.
4. 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 28.6% to $56.6 million in the thirteen weeks ended
May 4, 1996, from $44.0 million in the thirteen weeks ended April 29, 1995. The
increase in net sales resulted from net sales from new stores. Comparable
store sales increased .1% for superstores but decreased .8% for all stores for
the thirteen weeks ended May 4, 1996. During the thirteen weeks ended May 4,
1996, four superstores were opened.
Gross profit increased $3.3 million, or 28.5% to $14.7 million in the
thirteen weeks ended May 4, 1996, from $11.4 million in the thirteen weeks
ended April 29, 1995. Gross profit as a percentage of net sales for the
thirteen weeks ended May 4, 1996, was 26.0% and was constant with the same
period last year.
Operating, selling and administrative expenses increased $2.1 million, or
25.7% to $10.6 million in the thirteen weeks ended May 4, 1996, from $8.5
million in the thirteen weeks ended April 29, 1995. Operating, selling and
administrative expenses as a percentage of net sales decreased to 18.8% during
the thirteen weeks ended May 4, 1996, from 19.2% in the same period last year.
The decrease in this percentage for the thirteen week period was due primarily
to lower store selling expenses as a percentage of net sales.
Depreciation and amortization increased $.8 million, or 56.5% to $2.1
million in the thirteen weeks ended May 4, 1996, from $1.3 million in the
thirteen weeks ended April 29, 1995. The increase in depreciation and
amortization is primarily the result of the increased number of superstores
operated by the Company.
Interest expense was $406,000 in the thirteen weeks ended May 4, 1996,
versus interest income of $93,000 for the thirteen weeks ended April 29, 1995.
This increase in expense resulted from borrowings incurred due primarily to
increased inventory and capital expenditures related to new stores opened in
the first quarter of fiscal 1997 and the last six months of fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
During the first thirteen 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 $10
million, which is subject to annual renewal. Borrowings outstanding under
these credit facilities were $21,046,000 as of May 4, 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 May 4, 1996, there was $7.5
million of borrowings outstanding under these loans at variable rates.
The Company's capital expenditures totaled $4.3 million during the first
thirteen 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 $25.0 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.
-6-
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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 $6.8 million and $4.3 million in the
thirteen weeks ended May 4, 1996 and April 29, 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 $2.2 million and $.9 million in the
thirteen weeks ended May 4, 1996, and April 29, 1995, respectively. This
increase in related party sales is primarily due to increased sales of bargain
books to related parties. Management believes these related party purchases
and sales do not have a significant impact on gross profit.
FINANCIAL POSITION
During the thirteen weeks ended May 4, 1996, the Company opened four
superstores. The store openings resulted in increased inventory, property and
equipment and debt balances at May 4, 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
* Date of Meeting - June 6, 1996
* Annual Meeting
* Name of each director re-elected at the meeting:
John E. Southwood
R. Lew Burdette
* Name of each other director whose term of office as director
continued after the meeting:
Charles C. Anderson
Clyde B. Anderson
Ronald G. Bruno
* Other matters voted on at Annual Meeting:
i) Ratify the appointment by the Audit Committee of the Board of
Directors of Arthur Andersen LLP to serve as the Company's
independent auditor for fiscal 1997.
* Results of votes
<TABLE>
Number of Votes Number of Votes Number of Votes
Cast For Cast Against Abstaining
-------- ------------ ----------
<S> <C> <C> <C>
Re-election of
John E. Southwood 16,107,349 227,151 0
Re-election of
R. Lew Burdette 16,107,223 227,277 0
Item i) above 16,305,084 9,485 19,931
</TABLE>
ITEM 5: Other Information
None
ITEM 6: Exhibits and Reports on Form 8-K
(A) Exhibits
Exhibit 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 May 4, 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: June 20, 1996
by: /s/ Clyde B. Anderson
-----------------------
Clyde B. Anderson
President and
Chief Executive Officer
Date: June 20, 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 MAY 4,
1996.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-START> FEB-04-1996
<PERIOD-END> MAY-04-1996
<CASH> 2,763
<SECURITIES> 0
<RECEIVABLES> 7,583
<ALLOWANCES> 0
<INVENTORY> 131,139
<CURRENT-ASSETS> 151,943
<PP&E> 72,393
<DEPRECIATION> 20,961
<TOTAL-ASSETS> 205,043
<CURRENT-LIABILITIES> 93,766
<BONDS> 18,546
0
0
<COMMON> 174
<OTHER-SE> 91,409
<TOTAL-LIABILITY-AND-EQUITY> 205,043
<SALES> 56,589
<TOTAL-REVENUES> 56,589
<CGS> 41,900
<TOTAL-COSTS> 52,537
<OTHER-EXPENSES> 2,064
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 406
<INCOME-PRETAX> 1,582
<INCOME-TAX> 601
<INCOME-CONTINUING> 981
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 981
<EPS-PRIMARY> 0.06
<EPS-DILUTED> 0.06
</TABLE>
