<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 1, 1997
----------------
- 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 Emplolyer
incorporation or organization Identification No.)
402 INDUSTRIAL LANE, BIRMINGHAM, ALABAMA 35211
---------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(205) 942-3737
--------------
(Registrant's phone number including area code)
NONE
----
(Former name, former address and former fiscal year,
if changed since last period)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- ------
Indicate 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 1, 1997 were 17,427,593 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 1, 1997 February 1, 1997
---------------- ----------------
<S> <C> <C>
CURRENT ASSETS: $ $
Cash and temporary cash investments 4,327 4,776
Accounts receivable 9,411 13,198
Related party receivables 8,727 5,854
Inventories 192,797 141,430
Prepayments and other 2,116 584
Deferred income taxes 3,280 2,913
-------- --------
TOTAL CURRENT ASSETS 220,658 168,755
-------- --------
PROPERTY AND EQUIPMENT:
Land 628 628
Buildings 5,367 5,367
Equipment 25,317 22,690
Furniture and fixtures 30,182 28,535
Leasehold improvements 36,952 32,796
Construction-in-process 2,796 804
-------- --------
101,242 90,820
Less-accumulated depreciation and amortization 36,026 27,673
-------- --------
NET PROPERTY AND EQUIPMENT 65,216 63,147
-------- --------
OTHER ASSETS:
Goodwill, net 1,549 1,581
Other 54 56
-------- --------
TOTAL OTHER ASSETS 1,603 1,637
-------- --------
TOTAL ASSETS $287,477 $233,539
======== ========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Accounts payable:
Trade $104,588 $ 79,127
Related party 8,012 2,270
Accrued expenses 13,106 14,768
Accrued income taxes -- 1,961
Notes payable 20,000 --
-------- --------
TOTAL CURRENT LIABILITIES 145,706 98,126
-------- --------
LONG TERM DEBT 42,960 37,645
-------- --------
DEFERRED INCOME TAXES 1,699 1,348
-------- --------
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 , 17,427,593 and
17,408,535 shares issued and outstanding at
November 1, 1997 and February 1, 1997, respectively 174 174
Additional paid-in capital 62,925 62,829
Retained earnings 34,013 33,417
-------- --------
TOTAL STOCKHOLDERS' INVESTMENT 97,112 96,420
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT $287,477 $233,539
======== ========
</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 1, November 2, November 1, November 2,
1997 1996 1997 1996
------------ ------------- ------------ --------------
<S> <C> <C> <C> <C>
NET SALES $ 71,613 $64,505 $211,717 $181,549
Cost of products sold (including warehouse
distribution and store occupancy costs)* 54,133 48,862 158,010 135,602
-------- ------- -------- --------
GROSS PROFIT 17,480 15,643 53,707 45,947
Operating, selling and administrative expenses 13,779 12,232 40,961 34,723
Depreciation and amortization 3,049 2,533 8,464 6,876
-------- ------- -------- --------
OPERATING INCOME 652 878 4,282 4,348
Interest expense, net 1,136 843 3,320 1,912
-------- ------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES (484) 35 962 2,436
Provision (benefit) for income taxes (184) 14 366 926
-------- ------- -------- --------
NET INCOME (LOSS) $ (300) $ 21 $ 596 $ 1,510
======== ======= ======== ========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 17,428 17,409 17,425 17,404
======== ======= ======== ========
NET INCOME (LOSS) PER SHARE $ (0.02) $ 0.00 $ 0.03 $ 0.09
======== ======= ======== ========
</TABLE>
*Inventory purchases from related parties were $10,288, $8,031, $26,087 and
$20,606 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 1, NOVEMBER 2,
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 596 $ 1,510
--------- ---------
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization 8,464 6,875
Loss on disposal of property and equipment 40 26
Change in deferred income taxes (16) 148
(Increase) decrease in current assets:
Accounts receivable 3,787 (6,469)
Related party receivables (2,873) (3,058)
Inventories (51,367) (29,681)
Prepayments and other (1,530) (746)
Increase (decrease) in current liabilities:
Accounts payable 31,203 8,061
Accrued income taxes (1,961) (561)
Accrued expenses (1,591) (1,869)
--------- ---------
Total adjustments (15,844) (27,274)
--------- ---------
Net cash used in operating activities (15,248) (25,764)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (10,633) (15,326)
Proceeds from sale of equipment 21 125
--------- ---------
Net cash used in investing activities (10,612) (15,201)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under credit facilities 108,456 122,563
Repayments under credit facilities (83,141) (79,395)
Proceeds from sale of common stock, net 96 155
--------- ---------
Net cash provided by financing activities 25,411 43,323
--------- ---------
Net increase (decrease) in cash and temporary cash investments (449) 2,358
Cash and temporary cash investments at beginning of period 4,776 1,923
--------- ---------
Cash and temporary cash investments at end of period $ 4,327 $ 4,281
========= =========
</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 1, 1997 and November 2, 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 1,
1997, included in the Company's 1997 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
November 1, 1997, 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 AND LINES OF CREDIT
The Company amended its revolving credit facility and working capital
line of credit effective June 4, 1997. The amended credit facilities increased
the maximum allowable borrowings to $100 million, from $70 million (see the
Liquidity and Capital Resources section of the Management's Discussion and
Analysis of Financial Condition for more details).
4. PENDING ACCOUNTING PRONOUNCEMENTS
During 1997, the Financial Accounting Standards Boards issued
Statements of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share". This statement supersedes Accounting Principles Board Opinion ("APB")
No. 15. SFAS No. 128 is effective for fiscal years ending after December 15,
1997, and early adoption is prohibited. The Company will adopt SFAS No. 128 for
fiscal year ending January 31, 1998 annual reporting. Under SFAS 128, the
Company's basic earnings per share for the thirteen and thirty-nine week
periods ended November 1, 1997 and November 2, 1996 would have been unchanged.
5
<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Certain of the statements set forth herein with respect to store
openings and closings, the profitability of certain product lines, capital
expenditures and future liquidity are forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
statements are based on management's current intentions, assumptions and
projections and are subject to risks and uncertainties that could cause actual
results to differ materially from those set forth in the forward-looking
statements. Factors that could cause actual results to differ materially from
those in the forward-looking statements include, among other things,
unanticipated increases in merchandise, salary and distribution costs and the
effects of increased competition on specific stores and the Company generally.
RESULTS OF OPERATIONS
Net sales increased 11.0% to $71.6 million in the thirteen weeks ended
November 1, 1997, from $64.5 million in the thirteen weeks ended November 2,
1996. Net sales increased 16.6% to $211.7 million in the thirty-nine weeks
ended November 1, 1997, from $181.5 million in the thirty-nine weeks ended
November 2, 1996. For the thirteen and thirty-nine weeks ended November 1,
1997, the increase in net sales resulted partially from higher comparable store
sales as well as net sales generated from new stores. Comparable store sales
increased 2.2% for superstores and 2.6% for all stores for the thirteen weeks
ended November 1, 1997, and they increased 1.9% for superstores and 1.9% for
all stores for the thirty-nine weeks ended November 1, 1997. During the
thirteen weeks ended November 1, 1997, eight superstores were opened.
Gross profit increased $1.9 million or 11.7% to $17.5 million in the
thirteen weeks ended November 1, 1997 from $15.6 million in the thirteen weeks
ended November 2, 1996, and in the thirty-nine weeks ended November 1, 1997,
gross profit increased 16.9% to $53.7 million from $45.9 million in the same
period last year. Gross profit as a percentage of net sales for the thirteen
weeks ended November 1, 1997 was relatively constant at 24.4% versus 24.3% in
the same period last year. For the thirty-nine week period, gross profit as a
percentage of net sales also stayed constant at 25.4% as compared to 25.3% in
the same period last year.
Operating, selling and administrative expenses increased $1.6 million
or 12.6% to $13.8 million in the thirteen weeks ended November 1, 1997 from
$12.2 million in the thirteen weeks ended November 2, 1996, and in the
thirty-nine weeks ended November 1, 1997, operating, selling and administrative
expenses increased 18.0% to $41.0 million from $34.7 million in the same period
last year. Operating, selling and administrative expenses as a percentage of
net sales for the thirteen weeks ended November 1, 1997 increased to 19.2% from
19.0% in the same period last year. For the thirty-nine week period, operating,
selling and administrative expenses as a percentage of net sales increased to
19.3% from 19.1% in the same period last year. The increase in this percentage
for the thirteen and thirty-nine week periods was due primarily to higher store
selling expenses as a percentage of net sales.
Depreciation and amortization increased $.5 million or 20.4% to $3.0
million in the thirteen weeks ended November 1, 1997 from $2.5 million in the
thirteen weeks ended November 2, 1996, and in the thirty-nine week period
depreciation and amortization increased $1.6 million, or 23.1% to $8.5 million
from $6.9 million in the same period last year. The increase in depreciation
and amortization is primarily the result of the increased number of superstores
operated by the Company.
Interest expense was $1.1 million in the thirteen weeks ended November
1, 1997, versus $.8 million for the same period last year, and in the
thirty-nine week period interest expense increased to $3.3 million from $1.9
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 three quarters
of fiscal 1998 and the fourth quarter of fiscal 1997.
6
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
During the first thirty-nine weeks of fiscal 1998, 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 amended its revolving credit facility and working capital
line of credit effective June 4, 1997. The amended credit facilities increased
the maximum allowable borrowings up to $100 million from $70 million.
Borrowings outstanding under these credit facilities were $55.5 million as of
November 1, 1997. 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, which are secured by a
mortgage interest in these facilities. As of November 1, 1997, there was $7.5
million of borrowings outstanding under these loans at variable rates.
The Company's capital expenditures totaled $10.6 million during the
first thirty-nine weeks of fiscal 1998. These expenditures were primarily used
to open new stores, perform renovations and improvements to existing stores and
investments in management information systems. Management estimates that
capital expenditures for the remainder of fiscal 1998 will be approximately
$6.0 million, and that such amounts will continue to 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 1998.
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 $26.1 million and $20.6 million in
the thirty-nine weeks ended November 1, 1997 and November 2, 1996,
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 $6.3 million and $5.2
million in the thirty-nine weeks ended November 1, 1997 and November 2, 1996,
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 thirty-nine weeks ended November 1, 1997, the Company
opened eleven superstores. Inventory and debt balances at November 1, 1997
increased as compared to February 1, 1997 due to seasonal fluctuations in
inventory levels and the eleven new superstores opened during the first
thirty-nine weeks of fiscal 1998. The store openings also resulted in increased
property and equipment balances at November 1, 1997, as compared to February 1,
1997.
7
<PAGE> 8
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 of Vote of Security-Holders
None
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 November 1, 1997
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: November 18, 1997
by:/s/ Clyde B. Anderson
-----------------------------
Clyde B. Anderson
President and
Chief Executive Officer
Date: November 18, 1997
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 THIRTY-NINE WEEKS ENDED NOVEMBER
1, 1997.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-02-1997
<PERIOD-END> NOV-01-1997
<EXCHANGE-RATE> 1
<CASH> 4,327
<SECURITIES> 0
<RECEIVABLES> 18,138
<ALLOWANCES> 0
<INVENTORY> 192,797
<CURRENT-ASSETS> 220,658<F1>
<PP&E> 101,242
<DEPRECIATION> 36,026
<TOTAL-ASSETS> 287,477<F2>
<CURRENT-LIABILITIES> 145,706
<BONDS> 0<F3>
0<F4>
0
<COMMON> 174
<OTHER-SE> 96,938
<TOTAL-LIABILITY-AND-EQUITY> 287,477
<SALES> 211,717
<TOTAL-REVENUES> 211,717
<CGS> 158,010
<TOTAL-COSTS> 198,971
<OTHER-EXPENSES> 8,464
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,320
<INCOME-PRETAX> 962
<INCOME-TAX> 366
<INCOME-CONTINUING> 596
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 596
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
<FN>
<F1>OTHER CURRENT ASSETS 5,396
<F2>OTHER ASSETS 1,603
<F3>LONG TERM DEBT 42,960
<F4>DEFERRED INCOME TAXES 1,699
</FN>
</TABLE>
