<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: May 3, 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 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 3, 1997 were 17,427,593 shares.
<PAGE> 2
PART 1. FINANCIAL INFORMAITON
ITEM 1. FINANCIAL STATEMENTS
BOOKS-A-MILLION, INC. & SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS May 3, 1997 February 1, 1997
----------- ----------------
CURRENT ASSETS:
<S> <C> <C>
Cash and temporary cash investments $ 4,720 $ 4,776
Accounts receivable 11,294 13,198
Related party receivables 6,940 5,854
Inventories 165,053 141,430
Prepayments and other 990 584
Deferred income taxes 3,120 2,913
-------- --------
TOTAL CURRENT ASSETS 192,117 168,755
======== ========
PROPERTY AND EQUIPMENT:
Land 628 628
Buildings 5,367 5,367
Equipment 22,885 22,690
Furniture and fixtures 28,644 28,535
Leasehold improvements 32,882 32,796
Construction-in-process 2,576 804
------- --------
92,982 90,820
Less-accumulated depreciation and amortization 30,339 27,673
------- --------
NET PROPERTY AND EQUIPMENT 62,643 63,147
------- --------
OTHER ASSETS:
Goodwill, net 1,570 1,581
Other 55 56
-------- --------
TOTAL OTHER ASSETS 1,625 1,637
-------- --------
TOTAL ASSETS $256,385 $233,539
======== ========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Accounts payable:
Trade $ 76,566 $ 79,127
Related party 6,019 2,270
Accrued expenses 12,418 14,768
Accrued income taxes 123 1,961
Notes payable 20,000 --
-------- --------
TOTAL CURRENT LIABILITIES 115,126 98,126
-------- --------
LONG TERM DEBT 42,906 37,645
DEFERRED INCOME TAXES 1,469 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 May 3, 1997 and February 1, 1997, respectively 174 174
Additional paid-in capital 62,924 62,829
Retained earnings 33,786 33,417
-------- --------
TOTAL STOCKHOLDERS' INVESTMENT 96,884 96,420
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT $256,385 $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
--------------------
May 3, 1997 May 4, 1996
----------- -----------
<S> <C> <C>
NET SALES $ 68,237 $ 56,589
Cost of products sold (including warehouse,
distribution and store occupancy costs)* 50,696 41,900
--------- --------
GROSS PROFIT 17,541 14,689
Operating, selling and administrative expenses 13,243 10,637
Depreciation and amortization 2,692 2,064
--------- --------
OPERATING INCOME 1,606 1,988
Interest expense, net 1,011 406
--------- --------
INCOME BEFORE INCOME TAXES 595 1,582
Provision for income taxes 226 601
--------- --------
NET INCOME $ 369 $ 981
========= ========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 17,419 17,395
========= ========
NET INCOME PER SHARE $ 0.02 $ 0.06
========= ========
</TABLE>
* Inventory purchases from related parties were $9,096 and $6,826,
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 3, 1997 MAY 4, 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 369 $ 981
----------- ----------
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 2,692 2,064
Loss on disposal of property and equipment 5 5
Change in deferred income taxes (86) 53
(Increase) decrease in current assets:
Accounts receivable 1,904 790
Related party receivables (1,086) (2,257)
Inventories (23,623) (9,131)
Prepayments and other (405) (490)
Increase (decrease) in current liabilities:
Accounts payable 1,188 3,251
Accrued income taxes (1,838) (561)
Accrued expenses (2,347) (4,231)
----------- ----------
Total adjustments (23,596) (10,507)
----------- ----------
Net cash used in operating activities (23,227) (9,526)
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (2,185) (4,309)
Proceeds from sale of equipment 0 69
----------- ----------
Net cash used in investing activities (2,185) (4,240)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under credit facilities 49,726 31,830
Repayments under credit facilities (24,465) (17,371)
Proceeds from sale of common stock, net 95 147
----------- ----------
Net cash provided by financing activities 25,356 14,606
----------- ----------
Net increase (decrease) in cash and temporary cash investments (56) 840
Cash and temporary cash investments at beginning of period 4,776 1,923
----------- ----------
Cash and temporary cash investments at end of period $ 4,720 $ 2,763
=========== ==========
</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 3, 1997, 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 May 3, 1997, 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. 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 Board issued
Statement 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
properly adopt SFAS No. 128 for fiscal year ending January 31, 1998 annual
reporting. Adoption of this statement will not affect the reported
earnings per share of the Company.
-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 20.6% to $68.2 million in the thirteen weeks ended
May 3, 1997, from $56.6 million in the thirteen weeks ended May 4, 1996.
The increase in net sales resulted primarily from net sales from new
stores. Comparable store sales increased 1.0% for superstores and increased
0.6% for all stores for the thirteen weeks ended May 3, 1997. During the
thirteen weeks ended May 3, 1997, two superstores were opened.
Gross profit increased $2.8 million or 19.4% to $17.5 million in the
thirteen weeks ended May 3, 1997 from $14.7 million in the thirteen weeks
ended May 4, 1996. Gross profit as a percentage of net sales for the
thirteen weeks ended May 3, 1997 was 25.7% versus 26.0% in the same period
last year. The slight decrease as a percentage of net sales was primarily
due to a change in merchandise sales mix.
Operating, selling and administrative expenses increased $2.6 million or
24.5% to $13.2 million in the thirteen weeks ended May 3, 1997 from $10.6
million in the thirteen weeks ended May 4, 1996. Operating, selling and
administrative expenses as a percentage of net sales for the thirteen weeks
ended May 3, 1997 increased to 19.4% from 18.8% 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 $.6 million or 30.4% to $2.7
million in the thirteen weeks ended May 3, 1997 from $2.1 million in the
thirteen weeks ended May 4, 1996. The increase in depreciation and
amortization is primarily the result of the increased number of superstores
operated by the Company.
Interest expense was $1.0 million in the thirteen weeks ended May 3,
1997, versus interest expense of $.4 million for 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 quarter of fiscal 1998 and the last nine months
of fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
During the first thirteen 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 to $100 million, from $70
million. Borrowings outstanding under these credit facilities were
$55,406,000 as of May 3, 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 (the "Bond"), which are secured by a mortgage
interest in these facilities. As of May 3, 1997, there was $7.5
million of borrowings outstanding under these loans at variable rates.
The Company's capital expenditures totaled $2.2 million during the first
thirteen weeks of fiscal 1998. These expenditures were primarily used to
open new stores and to perform renovations and improvements to existing
stores. Management estimates that capital expenditures for the remainder of
fiscal 1998 will be approximately $15.8 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 1998.
-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 $9.1 million and $6.8 million
in the thirteen weeks ended May 3, 1997 and May 4, 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 $1.3 million and $2.2 million in
the thirteen weeks ended May 3, 1997 and May 4, 1996, respectively. This
decrease in related party sales is primarily due to the timing of 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 3, 1997, the Company opened two
superstores. Inventory and debt balances at May 3, 1997 increased as
compared to February 1, 1997 due to seasonal fluctuations in inventory
levels and the two new superstores opened during the quarter. The store
openings also resulted in increased property and equipment balances at May
3, 1997, as compared to February 1, 1997.
-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 4, 1997
- Annual Meeting
- Name of each director re-elected at meeting:
Clyde B. Anderson
Ronald G. Bruno
- Name of each other director whose term of office as director
continued after the meeting:
Charles C. Anderson
R. Lew Burdette
John E. Southwood
- 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 1998.
- Results of votes
<TABLE>
<CAPTION>
Number of Votes Number of Votes Number of Votes
Cast For Cast Against Abstaining
-------- ------------ ----------
<S> <C> <C> <C>
Re-election of
Clyde B. Anderson 16,049,817 169,437 0
Re-election of
Ronald G. Bruno 16,055,151 164,103 0
Item i) above 16,130,424 69,853 18,977
</TABLE>
ITEM 5: Other Information
None
ITEM 6: Exhibits and Reports on Form 8-K
(A)Exhibits
Ex-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 3, 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: June 16, 1997
by:/s/ Clyde B. Anderson
------------------------
Clyde B. Anderson
President and
Chief Executive Officer
Date: June 16, 1997
by: /s/ Sandra B. Cochran
-------------------------
Sandra B. Cochran
Executive Vice President,
Chief Financial Officer
and Assistant Secretary
<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 THIRTEEN WEEKS ENDED MAY 3,
1997.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-02-1997
<PERIOD-END> MAY-03-1997
<CASH> 4,720
<SECURITIES> 0
<RECEIVABLES> 18,234
<ALLOWANCES> 0
<INVENTORY> 165,053
<CURRENT-ASSETS> 192,117<F1>
<PP&E> 92,982
<DEPRECIATION> 30,339
<TOTAL-ASSETS> 256,385<F2>
<CURRENT-LIABILITIES> 115,126
<BONDS> 0<F3>
0<F4>
0
<COMMON> 174
<OTHER-SE> 96,710
<TOTAL-LIABILITY-AND-EQUITY> 256,385
<SALES> 68,237
<TOTAL-REVENUES> 68,237
<CGS> 50,696
<TOTAL-COSTS> 63,939
<OTHER-EXPENSES> 2,692
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,011
<INCOME-PRETAX> 595
<INCOME-TAX> 226
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 369
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
<FN>
<F1>4,110 Other current assets.
<F2>1,625 Other assets.
<F3>42,906 Long term debt.
<F4>1,469 Deferred income taxes.
</FN>
</TABLE>
