<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: August 3, 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 August 3, 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 AUGUST 3, 1996 FEBRUARY 3, 1996
-------------- ----------------
<S> <C> <C>
CURRENT ASSETS:
Cash and temporary cash investments $ 3,859 $ 1,923
Accounts receivable 5,285 8,373
Related party receivables 7,888 4,348
Inventories 150,629 122,008
Prepayments and other 1,360 720
Deferred income taxes 2,673 2,631
-------------- --------------
TOTAL CURRENT ASSETS 171,694 140,003
-------------- --------------
PROPERTY AND EQUIPMENT:
Land 628 628
Buildings 5,378 5,379
Equipment 18,124 16,044
Furniture and fixtures 23,694 21,272
Leasehold improvements 29,304 24,833
Construction-in-process 538 82
-------------- --------------
77,666 68,238
Less-accumulated depreciation and amortization 22,867 18,985
-------------- --------------
NET PROPERTY AND EQUIPMENT 54,799 49,253
-------------- --------------
OTHER ASSETS:
Goodwill, net 1,600 1,621
Other 58 56
-------------- --------------
TOTAL OTHER ASSETS 1,658 1,677
-------------- --------------
TOTAL ASSETS $ 228,151 $ 190,933
============== ==============
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Accounts payable:
Trade $ 76,749 $ 69,697
Related party 6,248 1,940
Accrued expenses 10,705 13,112
Accrued income taxes - 561
Notes payable 10,000 -
-------------- --------------
TOTAL CURRENT LIABILITIES 103,702 85,310
-------------- --------------
LONG TERM DEBT 31,134 14,087
-------------- --------------
DEFERRED INCOME TAXES 1,217 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 August 3, 1996, and February 3, 1996, respectively 174 174
Additional paid-in capital 62,810 62,656
Retained earnings 29,114 27,625
-------------- --------------
TOTAL STOCKHOLDERS' INVESTMENT 92,098 90,455
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT $ 228,151 $ 190,933
============== ==============
</TABLE>
See accompanying notes
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<PAGE> 3
BOOKS-A-MILLION, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
----------------------------- -----------------------------
AUGUST 3, 1996 JULY 29, 1995 AUGUST 3, 1996 JULY 29, 1995
-------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
NET SALES $ 60,455 $ 52,030 $ 117,044 $ 96,044
Cost of products sold (including warehouse,
distribution and store occupancy costs)* 44,840 38,050 86,740 70,629
------------ ------------- ------------ -------------
GROSS PROFIT 15,615 13,980 30,304 25,415
Operating, selling and administrative expenses 11,854 9,908 22,491 18,367
Depreciation and amortization 2,279 1,592 4,343 2,912
Store closing charge - 2,945 - 2,945
------------ ------------- ------------ -------------
OPERATING INCOME (LOSS) 1,482 (465) 3,470 1,191
Interest (income) expense, net 663 69 1,069 (24)
------------ ------------- ------------ -------------
INCOME (LOSS) BEFORE INCOME TAXES 819 (534) 2,401 1,215
Provision for income taxes 311 (203) 912 462
------------ ------------- ------------ -------------
NET INCOME (LOSS) $ 508 $ (331) $ 1,489 $ 753
============ ============= ============ =============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 17,408 17,370 17,402 17,357
============ ============= ============ =============
NET INCOME (LOSS) PER SHARE $ 0.03 $ (0.02) $ 0.09 $ 0.04
============ ============= ============ =============
</TABLE>
* Inventory purchases from related parties were $5,749, $4,354, $12,575 and
$8,658, 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>
Twenty-Six Weeks Ended
-------------------------------
August 3, 1996 July 29, 199
--------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,489 $ 753
------------ -------------
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 4,343 2,912
Loss on disposal of property and equipment 17 3
Change in deferred income taxes 94 (1,235)
(Increase) decrease in current assets:
Accounts receivable 3,088 (2,453)
Related party receivables (3,540) 997
Inventories (28,621) (21,091)
Prepayments and other (642) (207)
Increase (decrease) in current liabilities:
Accounts payable 11,360 5,986
Accrued income taxes (561) (2,929)
Accrued expenses (2,343) 2,027
------------ -------------
Total adjustments (16,805) (15,990)
------------ -------------
Net cash used in operating activities (15,316) (15,237)
------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (10,071) (7,778)
Proceeds from sale of equipment 122 72
------------ -------------
Net cash used in investing activities (9,949) (7,706)
------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt 27,047 -
Proceeds from sale of common stock, net 154 281
------------ -------------
Net cash provided by financing activities 27,201 281
------------ -------------
Net increase (decrease) in cash and temporary cash investments 1,936 (22,662)
Cash and temporary cash investments at beginning of period 1,923 26,870
------------ -------------
Cash and temporary cash investments at end of period $ 3,859 $ 4,208
============ =============
</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
twenty-six week periods ended August 3, 1996 and July 29, 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) considered necessary for a fair presentation of the Company's
financial position as of August 3, 1996 and July 29, 1995, and the results
of its operations and cash flows for the thirteen and twenty-six 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 (loss) per share for the period is calculated by dividing
net income (loss) 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 twenty-six week period ended July 29, 1995,
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 second quarter of fiscal
1997, 20 stores have been closed, resulting in asset write-downs of
$870,000, lease termination costs of $490,000 and other disposition costs of
$584,000, 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 16.2% to $60.5 million in the thirteen weeks ended
August 3, 1996, from $52.0 million in the thirteen weeks ended July 29, 1995.
Net sales increased 21.9% to $117.0 million in the twenty-six weeks ended
August 3, 1996, from $96.0 million in the twenty-six weeks ended July 29,1995.
For the thirteen and twenty-six weeks ended August 3, 1996, the increase in net
sales resulted from net sales from new stores. Comparable store sales
decreased 1.8% for superstores and 2.5% for all stores for the twenty-six
weeks ended August 3, 1996, and they decreased 3.3% for superstores and 4.0%
for all stores for the thirteen weeks ended August 3, 1996. During the
thirteen weeks ended August 3, 1996, seven superstores were opened and one
combination store and two traditional stores were closed.
Gross profit increased $1.6 million or 11.7% to $15.6 million in the
thirteen weeks ended August 3, 1996 from $14.0 million in the thirteen weeks
ended July 29, 1995, and in the twenty-six weeks ended August 3, 1996, gross
profit increased 19.2% to $30.3 million from $25.4 million in the same period
last year. Gross profit as a percentage of net sales for the thirteen weeks
ended August 3, 1996 decreased to 25.8% from 26.9% in the same period last
year. For the twenty-six week period gross profit as a percentage of net sales
decreased to 25.9% from 26.5% in the same period last year. The decreases in
this percentage for the thirteen and twenty-six week periods resulted primarily
from higher occupancy costs as a percentage of net sales.
Operating, selling and administrative expenses increased $2.0 million or
19.6% to $11.9 million in the thirteen weeks ended August 3, 1996 from $9.9
million in the thirteen weeks ended July 29, 1995, and in the twenty-six weeks
ended August 3, 1996, operating, selling and administrative expenses increased
22.5% to $22.5 million from $18.4 million in the same period last year.
Operating, selling and administrative expenses as a percentage of net sales for
the thirteen weeks ended August 3, 1996 increased to 19.6% from 19.0% in the
same period last year. For the twenty-six week period operating, selling and
administrative expenses as a percentage of net sales increased slightly to
19.2% from 19.1% in the same period last year. The increase in this percentage
for the thirteen week period was due primarily to higher store selling expenses
as a percentage of net sales.
Depreciation and amortization increased $.7 million or 43.2% to $2.3
million in the thirteen weeks ended August 3, 1996 from $1.6 million in the
thirteen weeks ended July 29, 1995, and in the twenty-six week period
depreciation and amortization increased $1.4 million , or 49.2% to $4.3
million from $2.9 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 $663,000 in the thirteen weeks ended August 3, 1996,
versus $69,000 for the same period last year, and in the twenty-six week period
interest expense increased to $1.1 million from interest income of $24,000 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 six months of fiscal
1997 and the last six months of fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
During the first twenty-six 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 $33,634,000 as of August 3, 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 August 3, 1996, there was $7.5
million of borrowings outstanding under these loans at variable rates.
-6-
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company's capital expenditures totaled $10.1 million during the first
twenty-six 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 $19.2 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 $12.6 million and $8.7 million in the
twenty-six weeks ended August 3, 1996 and July 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 $3.9 million and $3.3 million in the
twenty-six weeks ended August 3, 1996, and July 29, 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 twenty-six weeks ended August 3, 1996, the Company opened 11
superstores. The store openings resulted in increased inventory, property and
equipment and debt balances at August 3, 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 August 3, 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.
<TABLE>
<S> <C>
Date: September 11, 1996 by:/s/ Clyde B. Anderson
---------------------
Clyde B. Anderson
President and
Chief Executive Officer
Date: September 11, 1996 by: /s/ Sandra B. Cochran
---------------------
Sandra B. Cochran
Executive Vice President, Chief Financial Officer
and Assistant Secretary
</TABLE>
-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 AUGUST 3,
1996.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-START> FEB-04-1996
<PERIOD-END> AUG-03-1996
<EXCHANGE-RATE> 1
<CASH> 3,859
<SECURITIES> 0
<RECEIVABLES> 13,173
<ALLOWANCES> 0
<INVENTORY> 150,629
<CURRENT-ASSETS> 171,694<F1>
<PP&E> 77,666
<DEPRECIATION> 22,867
<TOTAL-ASSETS> 228,151<F2>
<CURRENT-LIABILITIES> 103,702
<BONDS> 0<F3>
0
0
<COMMON> 174
<OTHER-SE> 91,924
<TOTAL-LIABILITY-AND-EQUITY> 228,151<F4>
<SALES> 117,044
<TOTAL-REVENUES> 117,044
<CGS> 86,740
<TOTAL-COSTS> 109,231
<OTHER-EXPENSES> 4,343
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,069
<INCOME-PRETAX> 2,401
<INCOME-TAX> 912
<INCOME-CONTINUING> 1,489
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,489
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.09
<FN>
<F1><OTHER CURRENT ASSETS> 4,033
<F2><OTHER ASSETS> 1,658
<F3><LONG-TERM DEBT> 31,134
<F4><DEFERRED INCOME TAXES> 1,217
</FN>
</TABLE>
