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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended January 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ________________ to ________________
Commission File No. 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
incorporation or organization) Identification No.)
402 INDUSTRIAL LANE
BIRMINGHAM, ALABAMA 35211
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (205) 942-3737
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class)
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
------ ------
CONTINUED
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [ ].
The aggregate market value of the voting stock held by non-affiliates
of the Registrant (assuming for these purposes, but without conceding, that all
executive officers and directors are "affiliates" of the Registrant) as of
April 19, 1999 (based on the closing sale price as reported on the NASDAQ
National Market on such date), was $102,023,442.
The number of shares outstanding of the Registrant's Common Stock as
of April 19, 1999 was 18,059,486.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Stockholders for the fiscal year
ended January 30, 1999 are incorporated by reference into Part II of this
report.
Portions of the Proxy Statement for the Annual Meeting of Stockholders
to be held on June 3, 1999 are incorporated by reference into Part III of this
report.
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PART I
SAFE HARBOR STATEMENT UNDER
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This document contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995, that involve a
number of risks and uncertainties. A number of factors could cause actual
results, performance, achievements of the Company, or industry results to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. These factors include,
but are not limited to, the competitive environment in the book retail industry
in general and in the Company's specific market area; inflation; economic
conditions in general and in the Company's specific market areas; the number of
store openings and closings; the profitability of certain product lines,
capital expenditures and future liquidity; liability and other claims asserted
against the Company; uncertainties related to Year 2000 issues; and other
factors referenced herein. In addition, such forward-looking statements are
necessarily dependent upon assumptions, estimates and dates that may be
incorrect or imprecise and involve known and unknown risks, uncertainties and
other factors. Accordingly, any forward-looking statements included herein do
not purport to be predictions of future events or circumstances and may not be
realized. Given these uncertainties, shareholders and prospective investors are
cautioned not to place undue reliance on such forward-looking statements. The
Company disclaims any obligations to update any such factors or to publicly
announce the results of any revisions to any of the forward-looking statements
contained herein to reflect future events or developments.
ITEM 1. BUSINESS
GENERAL
Books-A-Million, Inc. (the "Company" or the "Registrant") is a leading
book retailer and is one of the dominant book retailers in the southeastern
United States. The Company, which was founded in 1917, has developed three
distinct store formats to address the various market areas it serves.
Superstores, the first of which was opened in 1988, average approximately
20,000 square feet and operate under the name "Books-A-Million." Combination
book and greeting card stores, which are operated under the name "Bookland,"
have approximately 4,500 square feet and are generally located in smaller
markets that do not readily sustain stand-alone book and greeting card stores.
"Traditional" bookstores, also operated under the name "Bookland," have
approximately 3,500 square feet and are located primarily in malls. All store
formats offer an extensive selection of best sellers and other hardcover and
paperback books, magazines, newspapers, cards and gifts. In addition to the
retail store formats, the Company began to offer its products over the Internet
with the launch of its Booksamillion.com web site in November 1998 and
Joemuggs.com web site in March 1999. The Company is also a wholesaler of books
to, among others, bookstores, wholesale clubs, supermarkets, department stores
and mass merchandisers.
The Company was originally incorporated under the laws of the State of
Alabama in 1964 and was reincorporated in Delaware in September 1992. The
principal executive offices of the Company are located at 402 Industrial Lane,
Birmingham, Alabama 35211, and its telephone number is (205) 942-3737. Unless
the context otherwise requires, references to the Company include its wholly
owned subsidiaries, American Wholesale Book Company, Inc. ("American
Wholesale"), American Internet Services, Inc. ("AIS") and NetCentral, Inc.
BOOKS-A-MILLION SUPERSTORES
The Company opened its first Books-A-Million superstore in April 1988.
The Company developed its superstores to capitalize on the growing consumer
demand for the convenience, selection and value associated with the superstore
retailing format. Each superstore is designed to be a receptive and open
environment conducive to browsing and reading and includes ample space for
promotional events open to the public, including book autograph sessions and
children's storytelling. The Company operates 124 Books-A-Million superstores
as of January 30, 1999.
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Books-A-Million superstores emphasize selection, value and customer
service. Books-A-Million superstores offer an extensive selection of best
sellers and other hardcover and paperback books, magazines, local and
out-of-town newspapers, greeting cards and gifts. Books-A-Million superstores
also dedicate space to bargain books that are sold at a discount from
publishers' originally suggested retail prices. Each Books-A-Million superstore
has a centrally located service center staffed with associates who are
knowledgeable about the store's merchandise and who are trained to answer
customers' questions, assist customers in locating books within the store and
place special orders. The majority of the superstores also include an espresso
and coffee bar called Joe Muggs. The Company's superstores are conveniently
located on major, high-traffic roads and in enclosed malls or strip shopping
centers with adequate parking. Books-A-Million superstores are generally open
seven days a week from 9:00 a.m. to 11:00 p.m.
BOOKLAND STORES
The Company's Bookland stores utilize two formats, the combination and
traditional store formats, which are tailored to the size, demographics and
competitive conditions of the particular market area. Combination stores
average approximately 4,500 square feet and carry a broad selection of best
sellers and other hardcover and paperback books, bargain books, magazines,
gifts and greeting cards. Because of the increased customer traffic it
generates, the combination store format has been particularly successful in
smaller market areas that do not readily sustain stand-alone book and greeting
card stores. The Company has 27 combination stores as of January 30, 1999.
The Company's traditional bookstores average approximately 3,500
square feet and offer a wide selection of best sellers and other hardcover and
paperback books, magazines and newspapers. The Company's traditional bookstores
are located in multiple types of market areas, but are generally located in
market areas that are larger than those in which combination stores are
located. The Company has 22 traditional bookstores as of January 30, 1999.
MERCHANDISING
The Company employs several value-oriented merchandising strategies.
Books on the Company's best-seller list, which is developed exclusively by the
Company based on its sales and customer demand in its stores, are generally
sold in the Company's superstores at 33% below publishers' suggested retail
prices. In addition, superstore customers can join the Millionaire's Club and
save 10% on all purchases in Books-A-Million superstores, including already
discounted best-sellers. Bookland store customers can join the Read & Save Club
and enjoy similar discounts. The Company's point-of-sale computer system
provides the data necessary to enable the Company to anticipate consumer demand
and customize store inventory selection to reflect local customer interest and
demand.
MARKETING
The Company maintains a regional focus, which involves dedicating
space in its stores to books of regional and local interest and creating
special departments such as regional literature, cooking and religious books.
Store managers are given the flexibility to select titles that are responsive
to consumer demand in that particular market area, and the Company continuously
modifies its title selection in each bookstore to tailor selection to local
consumer preferences. The Company offers frequent promotions that have a
regional flavor, including book autograph sessions with popular regional
authors.
The Company promotes its bookstores principally through the use of
geographically concentrated newspaper advertising and direct mail circulars, as
well as point-of-sale materials posted and distributed in the stores. In
certain markets, television advertising is also used on a selective basis.
Store managers are instrumental in tailoring certain promotions for their
particular market area and in designing store displays. The Company also
arranges for special appearances and book autograph sessions with recognized
authors to attract customers and to build and reinforce customer awareness of
its stores. A substantial portion of the Company's advertising expenses are
reimbursed from publishers through their cooperative advertising programs.
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STORE OPERATIONS AND SITE SELECTION
In choosing specific store sites within a market area, the Company
applies standardized site selection criteria that take into account numerous
factors, including the local demographics, desirability of available leasing
arrangements, proximity to existing Company operations and overall level of
retail activity. In general, stores are located on major high-traffic roads
convenient to customers and have adequate parking. The Company generally
negotiates short-term leases with renewal options. The Company periodically
reviews the profitability trends and prospects of each of its stores and
evaluates whether or not any underperforming stores should be closed, converted
to a different format or relocated to more desirable locations.
INTERNET INITIATIVE
The Company, through its wholly owned subsidiary, AIS, sells a broad
range of products over the Internet under the name Booksamillion.com. Products
sold by Booksamillion.com are similar to that sold in the Company's
Books-A-Million superstores and include a wide selection of books, magazines
and gift items. Booksamillion.com also operates an online cafe on its web site
under the name Joemuggs.com. Joemuggs.com offers a wide selection of whole bean
coffee, confections and related gift items for purchase over the Internet. In
January of 1999, the Company acquired NetCentral, Inc., an Internet development
company in order to assist the Company in its Internet development efforts.
PURCHASING
The Company's purchasing decisions are centralized and are made by the
Company's merchandising department. The Company's buyers negotiate terms,
discounts and cooperative advertising allowances for all the Company's
bookstores and decide which books to purchase, in what quantity and for which
stores. The buyers use current inventory and sales information provided by the
Company's in-store point-of-sale computer system to make reorder decisions.
Although the majority of purchases are made by the Company's merchandising
department, individual store managers have the flexibility to influence
purchasing decisions in order to respond to local demand.
The Company purchases merchandise from over 500 vendors. The Company
purchases the majority of its collectors' supplies from one supplier, the
majority of its music inventory from one supplier and substantially all of its
magazines from another supplier, each of which is a related party. No one
vendor accounted for more than 12.9% of the Company's overall merchandise
purchases in the fiscal year ended January 30, 1999. In general, approximately
80% of the Company's inventory may be returned by the Company for full credit,
which substantially reduces the Company's risk of inventory obsolescence.
DISTRIBUTION CAPABILITIES
American Wholesale receives a substantial portion of its inventory
shipments, including substantially all of its books, at its two facilities
located in Florence and Tuscumbia, Alabama. Orders from the Company's
bookstores are processed by computer and assembled for delivery to the stores
on pre-determined weekly schedules. Substantially all deliveries of inventory
from American Wholesale's facilities are made by their dedicated transportation
fleet. At the time deliveries are made to each of the Company's stores, returns
of slow moving or obsolete books are picked up and returned to the American
Wholesale returns processing center. American Wholesale then returns these
books to publishers for credit.
COMPETITION
The retail bookstore industry is highly competitive and includes
competitors that have substantially greater financial and other resources than
the Company. The Company competes directly with national and regional bookstore
chains, independent bookstores, booksellers on the Internet, certain mass
merchandisers and greeting card stores. The Company is one of the top three
retail bookstore chains in the nation. In recent years, competing bookstore
chains have been expanding their businesses and certain leading regional and
national chains have developed and opened superstores and Internet web sites.
The Company also experiences indirect competition from retail specialty stores
that offer books in a particular area of specialty. Management believes that
the key competitive factors in the retail book industry are convenience of
location, selection, customer service and price.
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SEASONALITY
Similar to many retailers, the Company's business is seasonal, with
its highest retail sales, gross profit and net income historically occurring in
its fourth fiscal quarter. This seasonal pattern reflects the increased demand
for books and gifts experienced during the year-end holiday selling season.
Working capital requirements are generally at their 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's results of operations
depend significantly upon net sales generated during the fourth fiscal quarter,
and any significant adverse trend in the net sales of such period would have a
material adverse effect on the Company's results of operations for the full
year. In addition to seasonality, the Company's results of operations may
fluctuate from quarter to quarter as a result of the amount and timing of sales
and profits contributed by new stores as well as other factors. Accordingly,
the addition of a large number of new stores in a particular fiscal quarter
could adversely affect the Company's results of operations for that quarter.
TRADEMARKS
"Books-A-Million," "BAM!," "Bookland," "Books & Co.," "Millionaire's
Club," "Sweet Water Press," "Thanks-A-Million," "Big Fat Coloring Book," "Up
All Night Reader," "Kids-A-Million," "Teachers First", "The Write-Price,"
"Book$mart" and "NetCentral" are the primary registered trademarks of the
Company. Management does not believe that these trademarks are crucial to the
continuation of the Company's operations.
EMPLOYEES
As of fiscal year end, the Company employed approximately 2,700
full-time associates and 1,800 part-time associates. The number of part-time
associates employed by the Company fluctuates based upon seasonal needs. None
of the Company's associates are covered by a collective bargaining agreement,
and management believes that the Company's relations with its associates are
excellent.
ITEM 2. PROPERTIES
The Company's bookstores are located either in enclosed malls or strip
shopping centers. All of the Company's stores are leased. Generally, these
leases have terms ranging from five to ten years and require the Company to pay
a fixed minimum rental fee and/or a rental fee based on a percentage of net
sales together with certain customary costs (such as property taxes, common
area maintenance and insurance).
The Company's principal executive offices are located in a 20,550
square foot leased building located in Birmingham, Alabama. The lease, which is
with a related party, extends to January 31, 2001, and the Company has an
option to extend the lease for an additional five years.
American Wholesale owns its wholesale distribution center that is
located in an approximately 252,000 square foot facility located in Florence,
Alabama. During fiscal 1995 and 1996, the Company financed the acquisition and
construction of the wholesale distribution facility through loans obtained from
the proceeds of an industrial revenue bond, which are secured by a mortgage
interest in this facility. The Company also leases, from a related party, a
second warehouse facility, which is located in an approximately 286,000 square
foot facility in Tuscumbia, Alabama. In addition, the Company leases all of its
tractor trailers, which comprise its transportation fleet.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to various legal proceedings incidental to its
business. In the opinion of management, after consultation with legal counsel,
the ultimate liability, if any with respect to those proceedings is not
presently expected to materially affect the financial position or results of
operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The information under the heading "Market and Dividend Information" on
the inside back cover of the Annual Report to Stockholders for the year ended
January 30, 1999 is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information under the heading "Selected Consolidated Financial
Data" for the years ended January 28, 1995, through January 30, 1999 on page 6
of the Annual Report to Stockholders for the year ended January 30, 1999, is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information under the heading "Management's Discussion & Analysis
of Financial Condition & Results of Operations" on pages 7 through 11 of the
Annual Report to Stockholders for the year ended January 30, 1999 is
incorporated herein by reference.
ITEM 7.A. MARKET RISK
The Company is subject to market risk from interest rate fluctuations
involving its credit facilities. The average amount of debt outstanding under
the Company's credit facilities was $59.0 million during fiscal 1999. However,
the Company utilizes both fixed and variable debt to manage this exposure. On
February 9, 1998, the Company entered into an interest rate swap agreement which
carries a notional principal amount of $30.0 million. The swap effectively fixes
the interest rate on $30.0 million of variable rate debt at 6.73%. The swap
agreement expires on February 9, 2003. A hypothetical increase or decrease of
10% in interest rates would not have a material impact on the Company's
financial condition and results of operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements of the Registrant and its
subsidiaries included in the Annual Report to Stockholders for the year ended
January 30, 1999 are incorporated herein by reference:
Consolidated Balance Sheets as of January 30, 1999 and January 31,
1998.
Consolidated Statements of Income for the Fiscal Years Ended January
30, 1999, January 31, 1998 and February 1, 1997.
Consolidated Statements of Stockholders' Investment for the Fiscal
Years Ended January 30, 1999, January 31, 1998 and February 1,
1997.
Consolidated Statements of Cash Flows for the Fiscal Years Ended
January 30, 1999, January 31, 1998 and February 1, 1997.
Notes to Consolidated Financial Statements.
Report of Independent Public Accountants.
The information under the heading "Summary of Quarterly Results
(Unaudited)" on page 24 of the Annual Report to Stockholders for
the year ended January 30, 1999 is incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
The sections under the heading "Proposal I-Election of Directors"
entitled "Nominee for Election - Term Expiring 2002", "Incumbent Directors -
Term Expiring 2000" and "Incumbent Directors Term Expiring 2001" on pages 2
through 4 of the Proxy Statement for the Annual Meeting of Stockholders to be
held June 3, 1999, are incorporated herein by reference for information on the
directors of the Registrant.
EXECUTIVE OFFICERS
All executive officers of the Company are elected annually by and
serve at the discretion of the Board of Directors. The executive officers of
the Company are listed below:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
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<S> <C> <C>
Charles C. Anderson 64 Chairman of the Board of Directors
Clyde B. Anderson 38 Chief Executive Officer, President and Director
Sandra B. Cochran 40 Executive Vice President, Chief Financial Officer
and Secretary
Terrance G. Finley 45 President, Booksamillion.com
</TABLE>
Charles C. Anderson has served as the Chairman of the Board of
Directors of the Company for more than 29 years. He also served as the Chief
Executive Officer of the Company from 1964 until July 1992. Mr. Anderson is the
father of Clyde B. Anderson, the Company's Chief Executive Officer and a member
of the Company's Board of Directors, and Terry C. Anderson, a member of the
Company's Board of Directors.
Clyde B. Anderson has served as the President of the Company since
November 1987 and as Chief Executive Officer of the Company since July 1992.
Mr. Anderson joined the Company in 1983 and served as the Chief Operating
Officer of the Company from November 1987 to March 1994. Mr. Anderson has
served as a director of the Company since August 1987 and serves on the Board
of Directors and the Compensation Committee of Hibbett Sporting Goods, Inc., a
sporting goods retailer. Mr. Anderson is the son of Charles C. Anderson, the
Chairman of the Company's Board of Directors, and the brother of Terry C.
Anderson, a member of the Company's Board of Directors.
Sandra B. Cochran has served as Secretary since June 1998, Executive
Vice President since February 1996, Chief Financial Officer since September
1993, and previously served as Vice President and Assistant Secretary of the
Company since August 1992. Prior to joining the Company, Ms. Cochran served as
a Vice President (as well as in other capacities) of SunTrust Securities, Inc.,
a subsidiary of SunTrust Banks, Inc. for more than five years.
Terrance G. Finley has served as the President of Booksamillion.com
since December 1998. Mr. Finley served as Senior Vice President - Merchandising
from January 1998 to December 1998. Mr. Finley served as Vice President -
Merchandising from April 1994 to January 1998 and was named an executive
officer of the Company in March 1995. Mr. Finley served as the General Manager
of Book$mart from February 1992 to April 1994. Prior to joining the Company,
Mr. Finley served as the Vice President - Sales for Smithmark Publishers.
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COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires the Company's directors, executive officers and persons who own
beneficially more than 10% of the Company's Common Stock to file reports of
ownership and changes in ownership of such stock with the Securities and
Exchange Commission (the "SEC") and the NASDAQ Stock Market, Inc. Directors,
executive officers and greater than 10% stockholders are required by SEC
regulations to furnish the Company with copies of all such forms they file. To
the Company's knowledge, based solely on a review of the copies of such reports
furnished to the Company and written representations that no other reports were
required, its directors, executive officers and greater than 10% stockholders
complied with all applicable Section 16(a) filing requirements during fiscal
1999.
ITEM 11. EXECUTIVE COMPENSATION
The sections under the heading "Executive Compensation," other than
those entitled "Report on Executive Compensation", "Compensation Committee
Interlocks and Insider Participation", "Certain Relationships and Related
Transactions" and "Performance Graph", on pages 8 through 16 of the Proxy
Statement for the Annual Meeting of Stockholders to be held June 3, 1999 are
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The section under the heading "Proposal I-Election of Directors"
entitled "Beneficial Ownership of Common Stock" on pages 6 and 7 of the Proxy
Statement for the Annual Meeting of Stockholders to be held June 3, 1999 is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The sections under the heading "Executive Compensation" entitled
"Compensation Committee Interlocks and Insider Participation" and "Certain
Relationships and Related Transactions" on pages 10 and 11 of the Proxy
Statement for the Annual Meeting of Stockholders to be held June 3, 1999 are
incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The following Consolidated Financial Statements of
Books-A-Million, Inc. and its subsidiaries, included in the
Registrant's Annual Report to Stockholders for the fiscal year ended
January 30, 1999 are incorporated by reference in Part II, Item 8:
Consolidated Balance Sheets as of January 30,1999 and January
31, 1998.
Consolidated Statements of Income for the Fiscal Years Ended
January 30, 1999, January 31, 1998 and February 1, 1997.
Consolidated Statements of Stockholders' Investment for the
Fiscal Years Ended January 30, 1999, January 31, 1998 and
February 1, 1997.
Consolidated Statements of Cash Flows for the Fiscal Years
Ended January 30, 1999, January 31, 1998 and February 1,
1997.
Notes to Consolidated Financial Statements.
Report of Independent Public Accountants.
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2. Financial Statement Schedule:
The following consolidated financial statement schedule of
Books-A-Million, Inc. is attached hereto:
Schedule 2 Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are not applicable, and therefore
have been omitted.
3. Exhibits **
<TABLE>
<CAPTION>
Exhibit
Number
- -------
<S> <C>
3.1 -- Certificate of Incorporation of the Registrant (incorporated
by reference to Exhibit 3.1 to Registration Statement on Form
S-1, File No. 33-52256, originally filed September 21, 1992).
3.2 -- Bylaws of the Registrant (incorporated by reference to
Exhibit 3.2 to Registration Statement on Form S-1, File No.
33-52256, originally filed September 21, 1992).
4.1 -- See Exhibits 3.1 and 3.2 hereto incorporated herein by
reference to the Exhibits of the same number to Registration
Statement on Form S-1, File No. 33-52256, originally filed
September 21, 1992.
10.1 -- Lease Agreement between First National Bank of Florence,
Alabama, as Trustee, and Bookland Stores, Inc. (which is a
predecessor of the Registrant), an Alabama corporation, dated
January 30, 1991 (incorporated by reference to Exhibit 10.1
to Registration Statement on Form S-1, File No. 33-52256,
originally filed September 21, 1992).
*10.2 -- Amended and Restated Stock Option Plan.
*10.3 -- Employee Stock Purchase Plan (incorporated by reference to
Exhibit 10.7 to Registration Statement on Form S-1, File No.
33-52256, originally filed September 21, 1992).
*10.4 -- Amendment to Employee Stock Purchase Plan (incorporated by
reference to Exhibit 10.6 to Annual Report on Form 10-K for
the fiscal year ended January 29, 1994, File No. 0-20664,
filed on April 29, 1994).
*10.5 -- 1999 Amended and Restated Employee Stock Purchase Plan
(incorporated by reference to Appendix A of the Registrant's
Proxy Statement, File No. 0-20664, dated April 26, 1999, for
the Annual Meeting of the Registrant's Stockholders to be
held June 3, 1999).
*10.6 -- 401(k) Plan (together with related documents) (incorporated
by reference to Exhibit 10.9 to Registration Statement on
Form S-1, File No. 33-52256, originally filed September 21,
1992).
10.7 -- Shareholders Agreement dated as of September 1, 1992
(incorporated by reference to Exhibit 10.9 to Annual Report
on Form 10-K for the fiscal year ended January 31, 1993, File
No. 0-20664, filed May 3, 1993).
*10.8 -- Executive Incentive Plan (incorporated by reference to
Exhibit 10.8 to Annual Report on Form 10-K for the fiscal
year ended January 28, 1995, File No. 0-20664, filed April
28, 1995).
</TABLE>
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<TABLE>
<S> <C>
10.9 -- Short-Term Credit Agreement dated as of October 27, 1995,
between the Company and AmSouth Bank, N.A. (incorporated by
reference to Exhibit 10.6 to Annual Report on Form 10-K for
the fiscal year ended February 3, 1996, File No. 0-20664,
filed May 3, 1996).
10.10 -- Revolving Loan Agreement dated as of October 27, 1995 between
the Company and AmSouth Bank, N.A. (incorporated by reference
to Exhibit 10.10 to Annual Report on Form 10-K for the fiscal
year ended February 3, 1996, File 0-20664, filed May 3,
1996).
10.11 -- First amendment to Short-Term Credit Agreement, dated as of
November 1, 1996 between the Company and AmSouth Bank, N.A.
(incorporated by reference to Exhibit 10.11 to Annual Report
on Form 10-K for the fiscal year ended February 1, 1997, File
0-20664, filed May 2, 1997).
10.12 -- First amendment to Revolving Loan Agreement dated June 4,
1997 between the Company and AmSouth Bank of Alabama,
SunTrust Bank, Atlanta and NationsBank, N.A. and Master
Assignment and Acceptance Agreement dated November 7, 1997
between AmSouth Bank, NationsBank, N.A., SunTrust Bank,
Atlanta and SouthTrust Bank, N. A. (incorporated by reference
to Exhibit 10.11 to Annual Report on Form 10-K for the fiscal
year ended January 31, 1998, File 0-20664, filed May 1,
1998).
10.13 -- Second amendment to Short-Term Credit Agreement, dated June
4, 1997 between the Company and AmSouth Bank of Alabama
(incorporated by reference to Exhibit 10.12 to Annual Report
on Form 10-K for the fiscal year ended January 31, 1998, File
0-20664, filed May 1, 1998).
10.14 -- Second amendment to Revolving Loan Agreement dated June 19,
1998 between the Company and AmSouth Bank of Alabama,
SunTrust Bank, Atlanta and NationsBank, N.A. and Master
Assignment and Acceptance Agreement dated November 7, 1997
between AmSouth Bank, NationsBank, N.A., SunTrust Bank,
Atlanta and SouthTrust Bank, N. A.
10.15 -- Third amendment to Short-Term Credit Agreement, dated June 3,
1998 between the Company and AmSouth Bank of Alabama.
13 -- Portions of the Annual Report to Stockholders for the
year ended January 30, 1999 that are expressly incorporated
by reference into Part II of this Report.
21 -- Subsidiaries of the Registrant.
23 -- Consent of Independent Public Accountants to the
incorporation of their report on the Company's consolidated
financial statements for the fiscal year ended January 30,
1999, into the Registration Statements on Form S-8. (File
Nos. 33-72812 and 33-86980).
27 -- Financial Data Schedule (for SEC use only).
</TABLE>
* The indicated exhibit is a compensatory plan required to be filed as
an exhibit to this Annual Report on Form 10-K.
** The Company has financed certain capital expenditures with proceeds of
an industrial development revenue bond (the "Bond"), for which the outstanding
balance as of January 30, 1999, is less than 10% of the Company's total assets.
The Bond documents have not been included as an exhibit hereto but the Company
will provide such documents to the Securities and Exchange Commission upon
request.
(b) Reports on Form 8-K
Not applicable.
(c) See Item 14(a) (3), the Exhibit Index and the Exhibits attached
hereto.
(d) See Item 14(a) (2).
9
<PAGE> 12
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
BOOKS-A-MILLION, INC.
by: /s/ Clyde B. Anderson
-----------------------------------------
Clyde B. Anderson
Chief Executive Officer and President
Date: April 29, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
PRINCIPAL EXECUTIVE OFFICER:
/s/ Clyde B. Anderson
- -----------------------------------------------------
Clyde B. Anderson
Chief Executive Officer and President
Date: April 29, 1999
PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER:
/s/ Sandra B. Cochran
- -----------------------------------------------------
Sandra B. Cochran
Executive Vice President, Chief Financial
Officer and Secretary
Date: April 29, 1999
DIRECTORS:
/s/ Charles C. Anderson
- -----------------------------------------------------
Charles C. Anderson
Date: April 29, 1999
/s/ Clyde B Anderson
- -----------------------------------------------------
Clyde B. Anderson
Date: April 29, 1999
<PAGE> 13
DIRECTORS:
/s/ Ronald G. Bruno
- -----------------------------------------------------
Ronald G. Bruno
Date: April 29, 1999
/s/ John E. Southwood
- -----------------------------------------------------
John E. Southwood
Date: April 29, 1999
/s/ J. Barry Mason
- -----------------------------------------------------
J. Barry Mason
Date: April 29, 1999
/s/ Terry C. Anderson
- -----------------------------------------------------
Terry C. Anderson
Date: April 29, 1999
<PAGE> 14
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Books-A-Million, Inc.:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements of BOOKS-A-MILLION, INC. (A Delaware
corporation) AND ITS SUBSIDIARIES incorporated by reference in this Form 10-K
and have issued our report thereon dated March 16, 1999. Our audit was made for
the purpose of forming an opinion on the basic financial statements taken as a
whole. The schedule listed in the accompanying index is the responsibility of
the Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Birmingham, Alabama
March 16, 1999
S-1
<PAGE> 15
SCHEDULE 2.
BOOKS-A-MILLION, INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED FEBRUARY 1, 1997, JANUARY 31, 1998 AND JANUARY 30, 1999
<TABLE>
<CAPTION>
CHARGED/
BALANCE AT (CREDITED) (DEDUCTIONS)/
BEGINNING TO COSTS RECOVERIES BALANCE AT
OF YEAR AND EXPENSES NET END OF YEAR
---------- ------------ ------------- -----------
<S> <C> <C> <C> <C>
FOR THE YEAR ENDED FEBRUARY 1, 1997:
Allowance for doubtful accounts $ 149,997 $ 180,101 $ -- $ 330,098
FOR THE YEAR ENDED JANUARY 31, 1998:
Allowance for doubtful accounts $ 330,098 $ 25,416 $ -- $ 355,514
FOR THE YEAR ENDED JANUARY 30, 1999:
Allowance for doubtful accounts $ 355,514 $ 691,870 $(108,761) $ 938,623
</TABLE>
S-2
<PAGE> 16
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number
- -------
<S> <S>
3.1 -- Certificate of Incorporation of the Registrant (incorporated
by reference to Exhibit 3.1 to Registration Statement on Form
S-1, File No. 33-52256, originally filed September 21, 1992).
3.2 -- Bylaws of the Registrant (incorporated by reference to
Exhibit 3.2 to Registration Statement on Form S-1, File No.
33-52256, originally filed September 21, 1992).
4.1 -- See Exhibits 3.1 and 3.2 hereto incorporated herein by
reference to the Exhibits of the same number to Registration
Statement on Form S-1, File No. 33-52256, originally filed
September 21, 1992.
10.1 -- Lease Agreement between First National Bank of Florence,
Alabama, as Trustee, and Bookland Stores, Inc. (which is a
predecessor of the Registrant), an Alabama corporation, dated
January 30, 1991 (incorporated by reference to Exhibit 10.1
to Registration Statement on Form S-1, File No. 33-52256,
originally filed September 21, 1992).
*10.2 -- Amended and Restated Stock Option Plan.
*10.3 -- Employee Stock Purchase Plan (incorporated by reference to
Exhibit 10.7 to Registration Statement on Form S-1, File No.
33-52256, originally filed September 21, 1992).
*10.4 -- Amendment to Employee Stock Purchase Plan (incorporated by
reference to Exhibit 10.6 to Annual Report on Form 10-K for
the fiscal year ended January 29, 1994, File No. 0-20664,
filed on April 29, 1994).
*10.5 -- 1999 Amended and Restated Employee Stock Purchase Plan
(incorporated by reference to Appendix A of the Registrant's
Proxy Statement, File No. 0-20664, dated April 26, 1999, for
the Annual Meeting of the Registrant's Stockholders to be
held June 3, 1999).
*10.6 -- 401(k) Plan (together with related documents) (incorporated
by reference to Exhibit 10.9 to Registration Statement on
Form S-1, File No. 33-52256, originally filed September 21,
1992).
10.7 -- Shareholders Agreement dated as of September 1, 1992
(incorporated by reference to Exhibit 10.9 to Annual Report
on Form 10-K for the fiscal year ended January 31, 1993, File
No. 0-20664, filed May 3, 1993).
*10.8 -- Executive Incentive Plan (incorporated by reference to
Exhibit 10.8 to Annual Report on Form 10-K for the fiscal
year ended January 28, 1995, File No. 0-20664, filed April
28, 1995).
10.9 -- Short-Term Credit Agreement dated as of October 27, 1995,
between the Company and AmSouth Bank, N.A. (incorporated by
reference to Exhibit 10.6 to Annual Report on Form 10-K for
the fiscal year ended February 3, 1996, File No. 0-20664,
filed May 3, 1996).
10.10 -- Revolving Loan Agreement dated as of October 27, 1995 between
the Company and AmSouth Bank, N.A. (incorporated by reference
to Exhibit 10.10 to Annual Report on Form 10-K for the fiscal
year ended February 3, 1996, File 0-20664, filed May 3,
1996).
10.11 -- First amendment to Short-Term Credit Agreement, dated as of
November 1, 1996 between the Company and AmSouth Bank, N.A.
(incorporated by reference to Exhibit 10.11 to Annual Report
on Form 10-K for the fiscal year ended February 1, 1997, File
0-20664, filed May 2, 1997).
10.12 -- First amendment to Revolving Loan Agreement dated June 4,
1997 between the Company and AmSouth Bank of Alabama,
SunTrust Bank, Atlanta and NationsBank, N.A. and Master
Assignment and Acceptance Agreement dated November 7, 1997
between AmSouth Bank, NationsBank, N.A., SunTrust Bank,
Atlanta and SouthTrust Bank, N. A. (incorporated by reference
to Exhibit 10.11 to Annual Report on Form 10-K for the fiscal
year ended January 31, 1998, File 0-20664, filed May 1,
1998).
10.13 -- Second amendment to Short-Term Credit Agreement, dated June
4, 1997 between the Company and AmSouth Bank of Alabama
(incorporated by reference to Exhibit 10.12 to Annual Report
on Form 10-K for the fiscal year ended January 31, 1998, File
0-20664, filed May 1, 1998).
10.14 -- Second amendment to Revolving Loan Agreement dated June 19,
1998 between the Company and AmSouth Bank of Alabama,
SunTrust Bank, Atlanta and NationsBank, N.A. and Master
Assignment and Acceptance Agreement dated November 7, 1997
between AmSouth Bank, NationsBank, N.A., SunTrust Bank,
Atlanta and SouthTrust Bank, N. A.
10.15 -- Third amendment to Short-Term Credit Agreement, dated June 3,
1998 between the Company and AmSouth Bank of Alabama.
13 -- Portions of the Annual Report to Stockholders for the year
ended January 30, 1999 that are expressly incorporated by
reference into Part II of this Report.
21 -- Subsidiaries of the Registrant.
23 -- Consent of Independent Public Accountants to the
incorporation of their report on the Company's consolidated
financial statements for the fiscal year ended January 30,
1999, into the Registration Statements on Form S-8. (File
Nos. 33-72812 and 33-86980).
27 -- Financial Data Schedule (for SEC use only).
</TABLE>
<PAGE> 17
MARKET AND DIVIDEND INFORMATION
Common Stock
The Common Stock of Books-A-Million, Inc., is traded in the Nasdaq
National Market under the symbol BAMM. The chart below sets forth the high and
low stock prices for each quarter of the fiscal years ending January 30, 1999,
and January 31, 1998.
<TABLE>
<CAPTION>
Quarter Ended High Low
- ----------------------------------------
<S> <C> <C>
January, 1999 $47 $2 11/16
October, 1998 5 2 1/4
July, 1998 7 1/2 4 1/8
April, 1998 6 5/8 5 1/32
January, 1998 7 3/8 5 3/8
October, 1997 7 1/4 4 33/64
July, 1997 5 3/8 4 1/2
April, 1997 5 7/8 4 1/8
</TABLE>
The closing price on April 13, 1999, was $ 9 15/16. No cash dividends
have been declared since completion of the Company's initial public offering.
As of April 13, 1999, Books-A-Million, Inc., had approximately 25,300
stockholders based on the number of individual participants represented by
security position listings.
ANNUAL MEETING OF STOCKHOLDERS
The annual meeting of stockholders will be held on June 3, 1999, at
10:00 a.m. central time at The Harbert Center, 2019 Fourth Avenue North,
Birmingham, Alabama 35203. Stockholders of record as of April 19, 1999, are
invited to attend this meeting.
<PAGE> 18
SELECTED CONSOLIDATED FINANCIAL DATA
(In thousands, except per share data)
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------------------------------------
1/30/99 1/31/98 2/1/97 2/3/96 1/28/95
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales $347,877 $324,762 $278,613 $229,801 $ 172,366
Cost of products sold 256,793 238,342 206,269 164,124 124,107
-----------------------------------------------------------------
Gross profit 91,084 86,420 72,344 65,677 48,259
Operating, selling and
administrative expenses 66,394 59,260 50,636 43,559 31,580
Depreciation and amortization 12,974 11,588 9,540 6,833 4,256
Store closing charge -- -- -- 2,945 --
-----------------------------------------------------------------
Operating profit 11,716 15,572 12,168 12,340 12,423
Interest expense (income), net 4,435 4,331 2,826 474 (601)
-----------------------------------------------------------------
Income before income taxes 7,281 11,241 9,342 11,866 13,024
Provision for income taxes 2,767 4,272 3,550 4,390 4,949
-----------------------------------------------------------------
Net income $ 4,514 $ 6,969 $ 5,792 $ 7,476 $ 8,075
=================================================================
Weighted average number of
shares outstanding - basic 17,497 17,425 17,405 17,371 17,322
Net income per share - basic $ 0.26 $ 0.40 $ 0.33 $ 0.43 $ 0.47
=================================================================
Weighted average number of
shares outstanding - diluted 17,554 17,428 17,580 17,641 17,509
Net income per share - diluted $ 0.26 $ 0.40 $ 0.33 $ 0.42 $ 0.46
=================================================================
As of
-----------------------------------------------------------------
1/30/99 1/31/98 2/1/97 2/3/96 1/28/95
- ------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA:
Working capital $ 84,022 $ 82,771 $ 70,629 $ 54,693 $ 50,193
Property and equipment, net 67,377 65,814 63,147 49,253 35,864
Total assets 271,551 245,816 233,539 190,933 163,403
Long-term debt 36,944 45,240 37,645 14,087 4,600
Stockholders' investment 115,022 103,485 96,420 90,455 82,444
</TABLE>
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This document contains certain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995, that involve a number of
risks and uncertainties. A number of factors could cause actual results,
performance, achievements of the Company, or industry results to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. These factors include, but are not
limited to, the competitive environment in the book retail industry in general
and in the Company's specific market area; inflation; economic conditions in
general and in the Company's specific market areas; the number of store
openings and closings; the profitability of certain product lines, capital
expenditures and future liquidity; liability and other claims asserted against
the Company; uncertainties related to Year 2000 issues; and other factors
referenced herein. In addition, such forward-looking statements are necessarily
dependent upon assumptions, estimates and dates that may be incorrect or
imprecise and involve known and unknown risks, uncertainties and other factors.
Accordingly, any forward-looking statements included herein do not purport to
be predictions of future events or circumstances and may not be realized. Given
these uncertainties, shareholders and prospective investors are cautioned not
to place undue reliance on such forward-looking statements. The Company
disclaims any obligations to update any such factors or to publicly announce
the results of any revisions to any of the forward-looking statements contained
herein to reflect future events or developments.
<PAGE> 19
MANAGEMENT'S DISCUSSION & ANALYSIS OF
FINANCIAL CONDITION & RESULTS OF OPERATIONS
GENERAL
The Company was founded in 1917 and currently operates 179 retail
bookstores, including 130 superstores, concentrated in the southeastern United
States.
The Company's growth strategy is focused on opening superstores in new
and existing market areas, particularly in the Southeast. In addition to
opening new stores, management intends to continue its practice of reviewing
the profitability trends and prospects of existing stores and closing or
relocating underperforming stores or converting stores to different formats.
RESULTS OF OPERATIONS
The following table sets forth statement of income data expressed as a
percentage of net sales for the periods presented.
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------
1/30/99 1/31/98 2/1/97
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Gross profit 26.2% 26.6% 26.0%
Operating, selling, and administrative expenses 19.1% 18.2% 18.2%
Depreciation and amortization 3.7% 3.6% 3.4%
Operating profit 3.4% 4.8% 4.4%
Interest expense, net 1.3% 1.3% 1.0%
Income before income taxes 2.1% 3.5% 3.4%
Provision for income taxes 0.8% 1.3% 1.3%
Net income 1.3% 2.2% 2.1%
</TABLE>
FISCAL 1999 COMPARED WITH FISCAL 1998
Net sales increased $23.1 million, or 7.1%, to $347.9 million in
fiscal 1999 from $324.8 million in fiscal 1998. Comparable store sales
decreased 2.8% for fiscal year 1999. The increase in net sales resulted from
net sales generated by 16 new stores opened during fiscal 1999, and 16 new
stores opened in the second half of fiscal 1998. In addition, the Company
closed eight underperforming stores in fiscal 1999.
The factors affecting the future trend of comparable store sales
include, among others, overall demand for products the Company sells, the
Company's marketing program, pricing strategies, store operations and
competition.
Gross profit increased $4.7 million, or 5.4%, to $91.1 million in
fiscal 1999 from $86.4 million in fiscal 1998. Gross profit as a percentage of
net sales decreased to 26.2% in fiscal 1999 from 26.6% in fiscal 1998,
primarily due to increased occupancy costs and higher warehouse distribution
costs as a percentage of net sales.
Operating, selling and administrative expenses increased $7.1 million,
or 12.0%, to $66.4 million in fiscal 1999, from $59.3 million in fiscal 1998.
Operating, selling and administrative expenses as a percentage of net sales
increased to 19.1% in fiscal 1999 from 18.2% in fiscal 1998, primarily due to
higher store selling expenses.
Depreciation and amortization increased $1.4 million, or 12.0%, to
$13.0 million in fiscal 1999 from $11.6 million in fiscal 1998. Depreciation
and amortization as a percentage of net sales increased to 3.7% in fiscal 1999
from 3.6% in fiscal 1998, primarily as a result of the capital expenditures for
new stores during fiscal 1999 and the second half of fiscal 1998.
Net interest expense was relatively constant with last year at $4.4
million in fiscal 1999 versus net interest expense of $4.3 million in fiscal
1998.
<PAGE> 20
MANAGEMENT'S DISCUSSION & ANALYSIS OF
FINANCIAL CONDITION & RESULTS OF OPERATIONS
FISCAL 1998 COMPARED WITH FISCAL 1997
Net sales increased $46.2 million, or 16.6%, to $324.8 million in
fiscal 1998 from $278.6 million in fiscal 1997. Comparable store sales
increased 1.4% for fiscal 1998. The increase in net sales resulted from net
sales generated by 21 new stores opened during fiscal 1998 (including 16
superstores), and 18 new stores opened in the second half of fiscal 1997. In
addition, the Company closed seven underperforming stores in fiscal 1998.
The factors affecting the future trend of comparable store sales
include, among others, overall demand for products the Company sells, the
Company's marketing programs, pricing strategies, store operations and
competition.
Gross profit increased $14.1 million, or 19.5%, to $86.4 million in
fiscal 1998 from $72.3 million in fiscal 1997. Gross profit as a percentage of
net sales increased to 26.6% in fiscal 1998 from 26.0% in fiscal 1997,
primarily due to decreased promotional activity and lower warehouse
distribution costs as a percentage of net sales.
Operating, selling and administrative expenses increased $8.7 million,
or 17.0%, to $59.3 million in fiscal 1998, from $50.6 million in fiscal 1997.
Operating, selling and administrative expenses as a percentage of net sales
remained constant with fiscal 1997 at 18.2%.
Depreciation and amortization increased $2.1 million, or 21.5%, to
$11.6 million in fiscal 1998 from $9.5 million in fiscal 1997. Depreciation and
amortization as a percentage of net sales increased to 3.6% in fiscal 1998 from
3.4% in fiscal 1997, primarily as a result of the significant capital
expenditures for new stores during fiscal 1998 and the second half of fiscal
1997.
Net interest expense was $4.3 million in fiscal 1998 versus net
interest expense of $2.8 million in fiscal 1997. The increased interest expense
resulted from long-term borrowings incurred primarily to fund capital
expenditures and inventory purchases related to new stores opened during fiscal
1998.
SEASONALITY AND QUARTERLY RESULTS
Similar to many retailers, the Company's business is seasonal, with
its highest retail sales, gross profit and net income historically occurring in
the fourth fiscal quarter. This seasonal pattern reflects the increased demand
for books and gifts experienced 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.
In addition, the Company's results of operations may fluctuate from
quarter to quarter as a result of the amount and timing of sales and profits
contributed by new stores as well as other factors. New stores require the
Company to incur pre-opening expenses and often require several months of
operation before generating acceptable sales volumes. Accordingly, the addition
of a large number of new stores in a particular quarter could adversely affect
the Company's results of operations for that quarter.
LIQUIDITY AND CAPITAL RESOURCES
During fiscal 1998, the Company increased borrowing availability under
its revolving credit facility (the "Revolving Facility") to $90.0 million from
$50.0 million. The Company also amended its short-term credit agreement (the
"Facility") to $10.0 million of borrowing availability from $20.0 million. As
of January 30, 1999, $29.4 million was outstanding under these facilities.
Additionally, as of January 30, 1999, the Company has outstanding borrowings
associated with the issuance of an industrial revenue bond totaling $7.5
million.
The Company's capital expenditures totaled $15.7 million in fiscal
1999. These expenditures were primarily used to open new stores, perform
renovations and make improvements to
<PAGE> 21
MANAGEMENT'S DISCUSSION & ANALYSIS OF
FINANCIAL CONDITION & RESULTS OF OPERATIONS
existing stores and investments in management information systems. Management
estimates that capital expenditures for fiscal 2000 will be approximately $14.0
million and that such amounts will be used primarily for new stores, renovation
and improvements to existing stores and investments in management information
systems. Management believes that existing cash balances 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 fiscal
2000.
RELATED-PARTY ACTIVITIES
As discussed in Note 6 of Notes to Consolidated Financial Statements,
the Company conducts business with other entities in which certain officers,
directors and principal stockholders of the Company have controlling ownership
interests. The most significant related-party transactions include inventory
purchases from, and sales to, related parties. As the Company has expanded, the
related-party inventory purchase transactions have grown proportionately.
Related-party sales transactions decreased in fiscal 1999 due to lower bargain
book sales to related parties. Management believes the terms of these
related-party transactions are substantially equivalent to those available from
unrelated parties and, therefore, have no significant impact on gross profit.
FINANCIAL POSITION
During fiscal 1999, the Company opened 16 new stores, including 15
superstores. The store openings resulted in increased inventory and property
and equipment balances at January 30, 1999, compared with January 31, 1998.
YEAR 2000 COMPLIANCE
During fiscal 1999, the Company has continued to evaluate its
management information systems to identify and address Year 2000 issues. As
part of this evaluation, the Company has classified its Year 2000 issues into
the following categories:
1. Key information systems that are required for standard
operations (including major merchandising, financial, distribution and
warehouse systems).
2. Other information systems that are important but not required
for daily operations (electronic data transfer of purchase orders and
invoices, selling cost tracking reports, automated sales tax
reporting, etc.).
3. Non-information systems items (phone system, security system,
heating and air conditioning systems, etc.).
4. Third party compliance (vendors, wholesale customers, service
organizations such as banks and utilities, etc.).
<PAGE> 22
MANAGEMENT'S DISCUSSION & ANALYSIS OF
FINANCIAL CONDITION & RESULTS OF OPERATIONS
The Company has reviewed the Year 2000 compliance issues and developed
an implementation program that is classified into the following categories:
1. Evaluation and Initial Assessment
2. Remediation/Reprogramming
3. Testing
4. Contingency Planning
The Company has plans in place to complete the evaluation and
assessment of all systems during the quarter ending May 1,1999, and expects to
complete Year 2000 reprogramming and testing of all systems during the quarter
ending July 31, 1999. The Company plans to continue to rely primarily on
internal resources in order to complete these steps. However, third-party
services will be employed as necessary to meet deadlines.
The Company's financial systems (excluding sales audit) are
third-party vendor software programs which are being upgraded and will be, upon
completion of upgrades in the quarter ending May 1, 1999, certified as Year
2000 compliant by the software vendors. These upgrades were previously planned
and were not accelerated due to Year 2000 issues.
The sales audit system is an in-house program which is not Year 2000
compliant. The system evaluation will be completed during the quarter ending
May 1, 1999, with the necessary reprogramming and testing completed during the
quarter ending July 31, 1999.
The Company's distribution systems (excluding the returns system) are
third-party vendor software programs which are certified as Year 2000 compliant
by the software vendor.
The returns system was evaluated during fiscal 1999. Few
date-sensitive processes were identified in the programs, which mitigates the
Year 2000 compliance risk. The system will be modified as necessary to make the
programs Year 2000 compliant during the quarter ending July 31, 1999.
The Company's merchandising systems are supported by a combination of
in-house developed software and third-party software. All third-party
merchandising software programs are certified as Year 2000 compliant by the
software vendor. The in-house merchandising programs are not currently Year
2000 compliant. An evaluation of the in-house programs will be completed during
the quarter ending May 1, 1999, and reprogramming and testing of the necessary
changes to the system for Year 2000 compliance will be completed during the
quarter ending July 31, 1999.
The Company's point-of-sale system operates the cash registers in the
stores. The registers run on a personal computer system using a third-party
software. Although the point-of-sale operating system is not Year 2000
compliant, the software has been upgraded in order to accept credit cards with
expiration dates beyond December 31, 1999. The system evaluation will be
completed during the quarter ending May 1, 1999, with the necessary
reprogramming and testing completed during the quarter ending July 31, 1999.
Other information systems that are not critical to daily operations
will be assessed during the quarter ending May 1, 1999, and will be upgraded,
if necessary, during calendar year 1999.
The Company has not deferred any significant information technology
projects in order to address the Year 2000 issue.
Based on present information, the Company believes that its current
plans, as outlined above, will substantially mitigate the risk of a material
disruption in the Company's operations due to internal Year 2000 factors.
However, possible consequences of the Company not being Year 2000 compliant
include, but are not limited to, loss of revenues, loss of communication
<PAGE> 23
MANAGEMENT'S DISCUSSION & ANALYSIS OF
FINANCIAL CONDITION & RESULTS OF OPERATIONS
capability with stores, inability to process or quantify merchandise, and
inability to engage in other operational and financial activities.
At the present time, the Company has not established a contingency
plan for possible Year 2000 issues. The Company expects to consider contingency
plans based on the results of its Year 2000 testing and its assessment of
related risks.
Additionally, the Company is in the process of communicating with
third parties in order to assess their Year 2000 readiness and the extent to
which the Company may be vulnerable to any third party's failure to remediate
their Year 2000 issues. The Company is trying to obtain written confirmation of
third parties' Year 2000 compliance. However, the Company cannot assure timely
compliance of third parties and may be adversely affected by failure of a
significant third party to become Year 2000 compliant.
Amounts expended to date related to Year 2000 compliance have been
immaterial. The Company currently expects that the total costs of Year 2000
compliance for the Company's current systems will not exceed $400,000, which
may include the lease or purchase of a system on which to conduct Year 2000
testing. These costs are not expected to have a significant impact on the
Company's financial reporting.
The costs associated with Year 2000 compliance are based on
management's current views with respect to future events and may be updated as
additional information becomes available. Please refer to the Special Note
Regarding Forward-looking Statements.
<PAGE> 24
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
As of
------------------------
1/30/99 1/31/98
- --------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and temporary cash investments $ 4,322 $ 3,909
Accounts receivable, net of allowance for doubtful accounts
of $939 and $356, respectively 12,282 11,732
Related party receivables 3,998 7,559
Inventories 175,211 151,312
Prepayments and other 2,938 816
Deferred income taxes 3,715 3,098
------------------------
TOTAL CURRENT ASSETS 202,466 178,426
------------------------
PROPERTY AND EQUIPMENT:
Land 628 628
Buildings 7,142 5,367
Equipment 33,087 28,558
Furniture and fixtures 34,416 31,894
Leasehold improvements 41,434 37,552
Construction in process 299 783
------------------------
117,006 104,782
Less accumulated depreciation and amortization 49,629 38,968
------------------------
NET PROPERTY AND EQUIPMENT 67,377 65,814
------------------------
Other Assets:
Goodwill, net 1,495 1,538
Other 213 38
------------------------
TOTAL OTHER ASSETS 1,708 1,576
------------------------
TOTAL ASSETS $ 271,551 $245,816
========================
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Accounts payable:
Trade $ 94,249 $ 71,439
Related party 9,014 7,493
Accrued income taxes 476 2,730
Accrued expenses 14,705 13,993
------------------------
TOTAL CURRENT LIABILITIES 118,444 95,655
------------------------
LONG-TERM DEBT 36,944 45,240
------------------------
DEFERRED INCOME TAXES 1,141 1,436
------------------------
COMMITMENTS AND CONTINGENCIES -- --
------------------------
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,
18,016,525 and 17,427,593 shares issued and outstanding
at January 30, 1999 and January 31, 1998, respectively 180 174
Additional paid-in capital 70,124 62,925
Treasury stock at cost (81,600 shares at January 30, 1999) (252) --
Retained earnings 44,970 40,386
------------------------
Total Stockholders' Investment 115,022 103,485
------------------------
Total Liabilities and Stockholders' Investment $ 271,551 $245,816
========================
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
<PAGE> 25
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
<TABLE>
<CAPTION>
Fiscal Year Ended
------------------------------------
1/30/99 1/31/98 2/1/97
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $347,877 $324,762 $278,613
Cost of products sold, including warehouse
distribution and store occupancy costs(1) 256,793 238,342 206,269
------------------------------------
GROSS PROFIT 91,084 86,420 72,344
Operating, selling and administrative expenses 66,394 59,260 50,636
Depreciation and amortization 12,974 11,588 9,540
------------------------------------
OPERATING PROFIT 11,716 15,572 12,168
Interest expense, net 4,435 4,331 2,826
------------------------------------
INCOME BEFORE INCOME TAXES 7,281 11,241 9,342
Provision for income taxes 2,767 4,272 3,550
------------------------------------
NET INCOME $ 4,514 $ 6,969 $ 5,792
====================================
Weighted average number of shares
outstanding - basic 17,497 17,425 17,405
------------------------------------
NET INCOME PER SHARE - BASIC $ 0.26 $ 0.40 $ 0.33
====================================
Weighted average number of shares
outstanding - diluted 17,554 17,428 17,580
------------------------------------
NET INCOME PER SHARE - DILUTED $ 0.26 $ 0.40 $ 0.33
====================================
</TABLE>
(1) Inventory purchases from related parties were $36,836, $32,303 and $23,120,
respectively, for the periods presented above.
The accompanying notes are an integral part of these consolidated statements.
<PAGE> 26
CONSOLIDATED STATEMENTS
OF STOCKHOLDERS' INVESTMENT
(In thousands)
<TABLE>
<CAPTION>
Common Treasury
Stock Additional Stock
------------------ Paid-In ----------------- Retained
Shares Amount Capital Shares Amount Earnings
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, FEBRUARY 3, 1996 17,387 $ 174 $62,656 -- $ -- $27,625
Net income -- -- -- -- -- 5,792
Issuance of stock for employee
stock purchase plan 15 -- 102 -- -- --
Exercise of stock options 7 -- 71 -- -- --
-------------------------------------------------------------------
BALANCE, FEBRUARY 1, 1997 17,409 174 62,829 -- -- 33,417
Net income -- -- -- -- -- 6,969
Issuance of stock for employee
stock purchase plan 19 -- 96 -- -- --
-------------------------------------------------------------------
BALANCE, JANUARY 31, 1998 17,428 174 62,925 -- -- 40,386
Net income -- -- -- -- -- 4,514
Issuance of stock for employee
stock purchase plan 16 -- 78 -- -- --
Purchase of treasury stock -- -- -- 82 (252) --
Exercise of stock options 460 5 4,132 -- -- --
Tax benefit from exercise
of stock options -- -- 2,333 -- -- --
Issuance of stock for acquisition
accounted for as pooling
of interests 112 1 2 -- -- 70
Contributions from certain
stockholders -- -- 1,054 -- -- --
Tax provision for contributions
from certain stockholders -- -- (400) -- -- --
-------------------------------------------------------------------
BALANCE, JANUARY 30, 1999 18,016 $ 180 $70,124 82 $(252) $44,970
===================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE> 27
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------------
1/30/99 1/31/98 2/1/97
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,514 $ 6,969 $ 5,792
Adjustments to reconcile net income to net -----------------------------------------
cash provided by operating activities:
Depreciation and amortization 12,974 11,588 9,540
(Gain) loss on sale of property (472) 44 114
Deferred income tax provision, net (912) (97) (15)
(Increase) decrease in assets:
Accounts receivable (550) 1,466 (4,825)
Related party receivables 3,561 (1,705) (1,506)
Inventories (23,899) (9,882) (19,422)
Prepayments and other (2,223) (214) 136
Increase (decrease) in liabilities:
Accounts payable 24,331 (2,465) 9,760
Accrued income taxes (321) 769 1,419
Accrued expenses 744 (718) 1,696
----------------------------------------
Total adjustments 13,233 (1,214) (3,103)
----------------------------------------
Net cash provided by operating activities 17,747 5,755 2,689
CASH FLOWS FROM INVESTING ACTIVITIES: ----------------------------------------
Proceeds from sale of property and equipment 1,627 42 126
Capital expenditures (15,682) (14,355) (23,674)
----------------------------------------
Net cash used in investing activities (14,055) (14,313) (23,548)
CASH FLOWS FROM FINANCING ACTIVITIES: ----------------------------------------
Proceeds from exercise of stock options and
purchase of shares under employee stock
purchase plan 4,215 96 154
Contributions from certain stockholders 1,054 -- --
Purchase of treasury stock (252) -- --
Borrowings under credit facilities 153,475 152,296 142,933
Repayments under credit facilities (161,771) (144,701) (119,375)
-----------------------------------------
Net cash provided by (used in)
financing activities (3,279) 7,691 23,712
-----------------------------------------
NET INCREASE (DECREASE) IN CASH AND TEMPORARY
CASH INVESTMENTS 413 (867) 2,853
CASH AND TEMPORARY CASH INVESTMENTS AT
BEGINNING OF YEAR 3,909 4,776 1,923
-----------------------------------------
CASH AND TEMPORARY CASH INVESTMENTS AT
END OF YEAR $ 4,322 $ 3,909 $ 4,776
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: =========================================
Cash paid during the year for:
Interest $ 4,625 $ 4,276 $ 2,693
Income taxes, net of refunds $ 4,026 $ 4,023 $ 2,146
=========================================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE> 28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
Books-A-Million, Inc., and its subsidiaries (the "Company") are
principally engaged in the sale of books, magazines and related items through a
chain of retail bookstores. The Company presently operates 179 bookstores in 17
states, which are predominantly located in the southeastern United States. The
Company also serves as a wholesale book distributor for certain other retailers
and wholesalers. The Company presently consists of Books-A-Million, Inc., and
its wholly owned subsidiaries, American Wholesale Book Company, Inc. ("American
Wholesale"), American Internet Services, Inc. and NetCentral, Inc. All
significant intercompany balances and transactions have been eliminated in
consolidation.
BASIS OF PRESENTATION
The Company operates on a 52-53 week year, with the fiscal year ending
on the Saturday closest to January 31. Fiscal years 1999, 1998 and 1997 were
52-week periods.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
INVENTORIES
Inventories are valued at the lower of cost or market using the retail
method, with cost determined on a first-in, first-out ("FIFO") basis and market
based on the lower of replacement cost or estimated realizable value. The
Company includes certain distribution and other expenses in its inventory
costs.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation on equipment
and furniture and fixtures is provided on the straight-line method over the
estimated service lives, which range from three to seven years. Depreciation of
leasehold improvements is provided on the straight-line basis over the periods
of the applicable leases.
Maintenance and repairs are charged to expense as incurred. Costs of
renewals and betterments are capitalized by charges to property accounts and
depreciated using applicable annual rates. The cost and accumulated
depreciation of assets sold, retired or otherwise disposed of are removed from
the accounts, and the related gain or loss is credited or charged to income.
GOODWILL
The Company amortizes goodwill on a straight-line basis over 40 years.
As of January 30, 1999 and January 31, 1998, accumulated amortization of
goodwill was $210,000 and $167,000, respectively. The Company continually
evaluates whether events or circumstances have occurred that indicate the
remaining estimated useful life of goodwill may warrant revision or that the
remaining balance of goodwill may not be recoverable. When factors indicate
that goodwill should be evaluated for possible impairment, the Company uses an
estimate of the related operating profits over the remaining life of the
goodwill in measuring recoverability.
STORE OPENING COSTS
Non-capital expenditures incurred in preparation for opening new
retail stores are expensed in the first full month of the stores' operations.
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INSURANCE ACCRUALS
The Company is subject to large deductibles under its workers'
compensation policy. Insurance coverage is maintained for cumulative losses in
amounts management considers adequate. Amounts are accrued currently for the
estimated cost of claims incurred.
INCOME TAXES
The Company recognizes deferred tax assets and liabilities for the
expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred tax assets and
liabilities are determined based on the differences between the financial
statement and tax bases of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to reverse.
STATEMENTS OF CASH FLOWS
For purposes of the consolidated statements of cash flows, the Company
considers all short-term, highly liquid investments with original maturities of
90 days or less to be cash equivalents.
EARNINGS PER SHARE
Basic net income per share ("EPS") excludes dilution and is computed
by dividing income available to common shareholders by the weighted average
number of common shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to issue
common stock are exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the Company.
Diluted EPS has been computed based on the average number of shares outstanding
including the effect of outstanding stock options, if dilutive, in each
respective year. A reconciliation of the weighted average shares for basic and
diluted EPS is as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
(in thousands)
1/30/99 1/31/98 2/1/97
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 17,497 17,425 17,405
Dilutive effect of stock options outstanding 57 3 175
-------------------------------
Diluted 17,554 17,428 17,580
===============================
</TABLE>
Options outstanding of 619,000, 1,557,000, and 371,000 for the years
ended January 30, 1999, January 31, 1998 and February 1, 1997, respectively,
were not included in the table above as they were anti-dilutive.
DISCLOSURE OF FAIR VALUE OF FINANCIAL INSTRUMENTS
In the opinion of management, the carrying value of all financial
instruments approximates fair value.
LEGAL
The Company is a party to various legal proceedings incidental to its
business. In the opinion of management, after consultation with legal counsel,
the ultimate liability, if any, with respect to those proceedings is not
presently expected to materially affect the financial position or results of
operations of the Company.
<PAGE> 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NEW ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, Reporting
Comprehensive Income, which establishes standards for reporting and display of
"comprehensive income," which is the total of net income and all other
non-owner changes in stockholders' equity and its components. This standard was
adopted in fiscal 1999 and did not have an impact on the Company's financial
reporting.
In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments
of an Enterprise and Related Information. SFAS No. 131, which supersedes SFAS
Nos. 14, 18, 24 and 30, establishes new standards for segment reporting, using
the "management approach," in which reportable segments are based on the same
criteria that management disaggregates a business for making operating
decisions and assessing performance. This standard was adopted in fiscal 1999
and did not have a significant impact on the Company's financial reporting.
In February 1998, the FASB issued SFAS No. 132, Employers' Disclosures
About Pensions and Other Post-retirement Benefits. SFAS No. 132, which
supersedes SFAS Nos. 87, 88 and 106, standardizes the disclosure requirements
for pensions and other post-retirement benefits to the extent practicable,
requires additional information on changes in the benefit obligations and fair
values of plan assets that will facilitate financial analysis, and eliminates
certain disclosures that are no longer as useful as they were when SFAS Nos.
87, 88 and 106 were issued. The Company adopted the new rules in fiscal 1999
with no impact on the its financial reporting.
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, which establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. This statement is
effective for fiscal years beginning after June 15, 1999. This statement is not
expected to have a material effect on the Company's financial statements.
In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-1, Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use. This statement
requires capitalization of certain costs of internal-use software. The Company
will adopt this statement in fiscal 2000 and does not anticipate a significant
impact on the Company's financial statements.
The AICPA has issued SOP 98-5, Reporting on the Costs of Start-up
Activities. This statement provides guidance on the financial reporting of
start-up costs and organization costs, and requires these costs to be expensed
as incurred. The new rules are not expected to have a significant impact on the
Company's financial statements.
BUSINESS COMBINATION
The acquisition of NetCentral, Inc. was accounted for as a pooling of
interests; however, the Company's previously reported consolidated results have
not been restated to include the effect of the acquisition prior to the
acquisition date of January 5, 1999, since the effect is not material.
CONTRIBUTIONS FROM CERTAIN SHAREHOLDERS
In fiscal 1999, contributions of short-swing profits from certain
stockholders were received by the Company totaling $1,054,000 with a related
tax provision of $400,000 charged to paid-in capital.
PRIOR-YEAR RECLASSIFICATIONS
Certain prior-year amounts have been reclassified to conform to the
current year presentation.
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. INCOME TAXES
A summary of the components of the income tax provision is as follows
(dollars in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------
1/30/99 1/31/98 2/1/97
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 3,337 $ 3,831 $ 3,325
State 342 538 240
-----------------------------------
3,679 4,369 3,565
-----------------------------------
Deferred taxes arising from:
Depreciation (321) 61 463
Accruals (443) 4 (330)
Inventory 25 (181) (436)
Other (173) 19 288
-----------------------------------
(912) (97) (15)
-----------------------------------
Provision for income taxes $ 2,767 $ 4,272 $ 3,550
===================================
A reconciliation of the federal statutory income tax rate to the
effective income tax rate is as follows:
Fiscal Year Ended
-----------------------------------
1/30/99 1/31/98 2/1/97
- ---------------------------------------------------------------------
Federal statutory income tax rate 34.0% 34.0% 34.0%
State income tax provision 3.1% 3.2% 3.0%
Other 0.9% 0.8% 1.0%
-----------------------------------
Effective income tax rate 38.0% 38.0% 38.0%
===================================
</TABLE>
Temporary differences which created deferred tax assets and
liabilities at January 30, 1999, and January 31, 1998, are detailed below
(dollars in thousands):
<TABLE>
<CAPTION>
As of 1/30/99 As of 1/31/98
------------------------------------------------
Current Noncurrent Current Noncurrent
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Depreciation $ -- $(1,005) $ -- $(1,326)
Accruals 2,614 -- 2,171 --
Inventory 765 -- 790 --
Other 336 (136) 137 (110)
------------------------------------------------
Deferred tax asset (liability) $3,715 $(1,141) $3,098 $(1,436)
================================================
</TABLE>
No valuation allowance is deemed necessary by management, as the
realization of recorded deferred tax assets is considered more likely than not.
3. DEBT AND LINES OF CREDIT
The Company has a revolving credit facility that allows borrowings of
up to $90 million for which no principal repayments are due until the facility
expires on June 18, 2003, and an unsecured working capital line of credit for
$10 million, which is subject to annual renewal. Both credit facilities have
certain financial and nonfinancial covenants with which the Company is in
<PAGE> 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
compliance. As of January 30, 1999 and January 31, 1998, $29.4 million and
$37.7 million, respectively, were outstanding under these credit facilities.
The maximum and average outstanding balances during fiscal 1999 were $77.7
million and $59.0 million, respectively. The outstanding borrowings as of
January 30, 1999, had interest rates ranging from 5.53% to 6.06%.
The Company is subject to interest rate fluctuations involving its
credit facilities. However, the Company utilizes both fixed and variable debt
to manage this exposure. On February 9, 1998, the Company entered into an
interest rate swap agreement which carries a notional principal amount of $30.0
million. The swap effectively fixes the interest rate on $30.0 million of
variable rate debt at 6.73% The swap agreement expires on February 9, 2003. A
hypothetical increase or decrease of 10% in interest rates would not cause the
Company's interest expense to increase or decrease significantly.
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 January 30, 1999 and January 31, 1998, there was $7.5 million
of borrowings outstanding under these arrangements, at variable rates. The Bond
has a maturity date of December 1, 2019, with a purchase provision obligating
the Company to repurchase the Bond on December 1, 2003, unless extended by the
bondholder. Such an extension may be renewed annually by the bondholder, at the
Company's request, to a date no more than five years from the renewal date.
In the opinion of management, the carrying value of all debt
instruments at January 30, 1999, approximates fair value.
4. LEASES
The Company leases the premises for its retail bookstores under
operating leases which expire in various years through the year 2011. Many of
these leases contain renewal options and require the Company to pay executory
costs (such as property taxes, maintenance, and insurance). In addition to
fixed minimum rentals, some of the Company's leases require contingent rentals
based on a percentage of sales which the Company records throughout the year
based upon the best available information.
The Company also leases certain office, warehouse and retail store
space from related parties. Effective April 1, 1998, a lease agreement was
entered into with a related party for 280,450 square feet of warehouse space in
Tuscumbia, Alabama. Rental expense under these leases was approximately
$624,000, $411,000 and $407,000 in fiscal 1999, 1998 and 1997, respectively.
Total minimum future rental payments under these leases are $687,000.
Minimum future rental payments under noncancelable operating leases
having remaining terms in excess of one year as of January 30, 1999, are as
follows (in thousands):
<TABLE>
<CAPTION>
Fiscal Year
------------------------------
<S> <C>
2000 $ 20,378
2001 19,700
2002 18,478
2003 17,129
2004 13,759
Subsequent years 51,301
--------
$140,745
========
</TABLE>
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Rental expense for all operating leases consisted of the following (in
thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------
1/30/99 1/31/98 2/1/97
- ----------------------------------------------------------------
<S> <C> <C> <C>
Minimum rentals $21,151 $18,171 $14,627
Contingent rentals 425 690 493
---------------------------------
$21,576 $18,861 $15,120
=================================
</TABLE>
5. EMPLOYEE BENEFIT PLANS
401(K) PROFIT-SHARING PLAN
The Company and its subsidiaries maintain a 401(k) plan covering all
employees who have completed 12 months of service and who are at least 21 years
of age, and permit participants to contribute from 2% to 15% of compensation to
the plan. Company matching and supplemental contributions are made at
management's discretion. The expenses under this plan were $333,000, $238,000
and $341,000 in fiscal 1999, 1998 and 1997, respectively.
STOCK OPTION PLAN
The Company maintains a stock option plan reserving 3,300,000 shares
of the Company's common stock for grants to executive officers, directors, and
key employees. The reserve was increased by 1,500,000 shares at the fiscal 1998
annual meeting of the stockholders from 1,800,000 shares. Options granted
generally vest over a five-year period, expire on the sixth anniversary of the
grant date, and have exercise prices generally equal to the fair market value
of the common stock on the date of grant.
A summary of the status of the Company's stock option plan is as
follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
------------------------------------------------------------------------------------
January 30, 1999 January 31, 1998 February 1, 1997
Weighted Weighted Weighted
Average Average Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year 1,571,130 $ 7.57 1,164,060 $ 8.32 834,730 $ 9.61
Granted 431,850 10.83 458,250 5.80 389,200 5.81
Exercised (460,550) 8.98 -- -- (6,600) 7.94
Forfeited (207,030) 7.25 (51,180) 9.20 (53,270) 12.13
------------------------------------------------------------------------------------
Outstanding at end
of year 1,335,400 $ 8.25 1,571,130 $ 7.57 1,164,060 $ 8.32
------------------------------------------------------------------------------------
Exercisable at end
of year 315,280 $ 8.58 573,448 $ 8.86 408,336 $ 9.35
------------------------------------------------------------------------------------
Weighted average fair
value of options granted $ 9.30 $ 2.89 $ 5.34
====================================================================================
</TABLE>
The following table summarizes information about stock options
outstanding at January 30, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-----------------------------------------------------------------------------------
Weighted
Number Average Number
Outstanding at Remaining Weighted Exercisable at Weighted
Range of January 30, Contractual Average January 30, Average
Exercise Price 1999 Life (Years) Exercise Price 1999 Exercise Price
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$3.38-$8.00 814,960 3.50 $ 6.06 202,390 $ 6.15
$8.00-$16.88 520,440 3.97 $11.68 112,890 $12.92
</TABLE>
<PAGE> 34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In October 1995, the FASB issued SFAS No. 123, Accounting for
Stock-Based Compensation. SFAS No. 123 established financial accounting and
reporting standards for stock-based compensation and for transactions in which
an entity issues its equity instruments to acquire goods and services for
nonemployees. In accordance with SFAS No. 123, the Company continues to account
for and record compensation expense under APB No. 25. However, the Company
adopted the disclosure only provisions of SFAS No. 123, as required. If the
Company had recorded compensation expense in accordance with SFAS No. 123 under
the fair value based method, the Company's net income and net income per share
would have been as indicated below (in thousands, except per share data):
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------------
1/30/99 1/31/98 2/1/97
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income-as reported $ 4,514 $ 6,969 $ 5,792
Net income-pro forma 4,257 6,788 5,727
Net income per share-diluted, as reported 0.26 0.40 0.33
Net income per share-diluted, pro forma 0.24 0.39 0.33
</TABLE>
For the purposes of the foregoing calculation, the fair value of each
option grant is estimated on the date of grant using the Black-Scholes option
pricing model. The assumptions used in connection with this model show no
expected dividend yield, a five-year expected life of the options, and an
expected stock price volatility rate of 1.35 with risk-free interest rates
ranging from 4.53% to 5.79%. During fiscal years 1999, 1998, and 1997, the
Company recognized tax benefits related to the exercise of stock options in the
amount of $2,333,000, $0, and $19,000, respectively. The tax benefits were
credited to paid-in capital in the respective years.
EMPLOYEE STOCK PURCHASE PLAN
The Company maintains an employee stock purchase plan under which
100,000 shares of the Company's common stock are reserved for purchase by
employees at 85% of the fair market value of the common stock. Of the total
reserved shares, 63,698 shares have been purchased as of January 30, 1999.
6. RELATED-PARTY TRANSACTIONS
Certain majority stockholders of the Company have controlling
ownership interests in other entities with which the Company conducts business.
Transactions between the Company and these various other entities ("related
parties") are summarized in the following paragraphs and Note 4.
The Company purchases a portion of its inventories for resale from
related parties; such purchases amounted to $36,836,000, $32,303,000 and
$23,120,000 in fiscal 1999, 1998, and 1997, respectively. The Company sells a
portion of its inventories to related parties; such sales amounted to
$5,301,000, $10,273,000 and $9,819,000 in fiscal 1999, 1998 and 1997,
respectively. The Company purchases promotional marketing material from a
related party; such purchases amounted to $29,000, $202,000 and $47,000 in
fiscal 1999, 1998 and 1997, respectively. The Company utilizes the logistics
services of a related party; such services amounted to $128,000, $0 and $0 in
fiscal 1999, 1998 and 1997, respectively.
<PAGE> 35
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Books-A-Million, Inc.:
We have audited the accompanying consolidated balance sheets of
Books-A-Million, Inc. (a Delaware corporation), and its subsidiaries as of
January 30, 1999, and January 31, 1998, and the related consolidated statements
of income, stockholders' investment, and cash flows for each of the three
fiscal years in the period ended January 30, 1999. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Books-A-Million,
Inc., and its subsidiaries as of January 30, 1999, and January 31, 1998, and
the results of their operations and their cash flows for each of the three
fiscal years in the period ended January 30, 1999, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Birmingham, Alabama
March 16, 1999
<PAGE> 36
SUMMARY OF QUARTERLY RESULTS
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Fiscal Year Ended January 30, 1999
-------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $74,469 $77,955 $78,962 $116,491 $347,877
Gross profit 18,995 19,413 18,720 33,956 91,084
Operating profit 1,135 351 (1,026) 11,256 11,716
Net income (loss) 10 (514) (1,459) 6,477 4,514
Net income (loss) per share - basic 0.00 (0.03) (0.08) 0.37 0.26
Net income (loss) per share - diluted (1) 0.00 (0.03) (0.08) 0.36 0.26
Fiscal Year Ended January 31, 1998
-------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
- ---------------------------------------------------------------------------------------------------------------
Net sales $68,237 $ 71,867 $ 71,613 $113,045 $324,762
Gross profit 17,541 18,686 17,480 32,713 86,420
Operating profit 1,606 2,024 652 11,290 15,572
Net income (loss) 369 527 (300) 6,373 6,969
Net income (loss) per share - basic 0.02 0.03 (0.02) 0.37 0.40
Net income (loss) per share - diluted 0.02 0.03 (0.02) 0.37 0.40
</TABLE>
(1) The sum of the quarterly per share amounts are different from the
annual per share amounts because of differences in the weighted
average number of common and common equivalent shares used in the
quarterly and annual computations.
<PAGE> 1
EXHIBIT 10.2
BOOKS-A-MILLION, INC.
STOCK OPTION PLAN
AS AMENDED AND RESTATED AS OF MARCH 18, 1998
SECTION 1
PURPOSE
The purpose of this Plan is to promote the interests of the Company
and its stockholders by granting Options to purchase stock to Employees and
Directors in order (1) to provide an additional incentive to each Employee or
Director to work to increase the value of the Company's stock, and (2) to
provide each Employee or Director with a stake in the future of the Company
which corresponds to the stake of each of the Company's stockholders.
SECTION 2
DEFINITIONS
Each term set forth in this Section 2 shall have the meaning set forth
opposite such term for purposes of this Plan and, for purposes of such
definitions, the singular shall include the plural and the plural shall include
the singular.
2.1 Board - means the Board of Directors of the Company.
2.2 Change in Control - means (a) the acquisition of the power to
direct, or cause the direction of, the management and policies of the Company
by a person (not previously possessing such power), acting alone or in
conjunction with others, whether through the ownership of Stock, by contract or
otherwise, or (b) the acquisition, directly or indirectly, of the power to vote
more than 50% of the outstanding Stock by any person or by two or more persons
acting together. For purposes of this definition, (1) the term "person" means a
natural person, corporation, partnership, joint venture, trust, government or
instrumentality of a government, and (2) customary agreements with or between
underwriters and selling group members with respect to a bona fide public
offering of Stock shall be disregarded.
2.3 Code - means the Internal Revenue Code of 1986, as amended.
2.4 Committee - means the committee appointed by the Board to
administer this Plan which at all times shall consist of two or more members of
the Board.
2.5 Company - means Books-A-Million, Inc., a Delaware corporation,
and any successor to such corporation.
2.6 Director - means any member of the Board who is not an
employee of the Company or a Subsidiary.
1
<PAGE> 2
2.7 Employee - means any full-time employee of the Company who the
Committee, acting in its absolute discretion, has determined to be eligible for
the grant of an Option under this Plan.
2.8 Exchange Act - means the Securities Exchange Act of 1934, as
amended.
2.9 Fair Market Value - means (a) the closing price on any date
for a share of Stock as reported by The Wall Street Journal under the New York
Stock Exchange Composite Transactions quotation system (or under any successor
quotation system), or (b) if the Stock is not traded on the New York Stock
Exchange, under the quotation system under which such closing price is
reported, or (c) if The Wall Street Journal does not report such closing price,
such closing price as reported by a newspaper or trade journal selected by the
Committee, or (d) if no such closing price is available on such date, such
closing price as so reported or so quoted in accordance with Section 2.9(a) for
the immediately preceding business day, or (e) if no newspaper or trade journal
reports such closing price or if no such price quotation is available, the
price which the Committee acting in good faith determines through any
reasonable valuation method that a share of Stock might change hands between a
willing buyer and a willing seller, neither being under any compulsion to buy
or to sell and both having reasonable knowledge of the relevant facts.
2.10 ISO - means an option granted under this Plan to purchase
Stock which is intended by the Company to satisfy the requirements of Code
Section 422.
2.11 Non-ISO - means an option granted under this Plan to purchase
Stock which is not intended by the Company to satisfy the requirements of Code
Section 422.
2.12 Option - means an ISO or a Non-ISO.
2.13 Option Certificate - means the written certificate or
instrument which sets forth the terms of an Option granted to an Employee or
Director under this Plan.
2.14 Option Price - means the price which shall be paid to purchase
one share of Stock upon the exercise of an Option granted under this Plan.
2.15 Parent Corporation - means any corporation which is a
parent of the Company within the meaning of Section 424(e) of the Code.
2.16 Plan - means this Books-A-Million, Inc. Stock Option Plan, as
amended from time to time.
2.17 Rule 16b-3 - means the exemption under Rule 16b-3 to Section
16(b) of the Exchange Act or any successor to such rule.
2.18 Stock - means the $.01 par value common stock of the Company.
2.19 Subsidiary - means a corporation which is a subsidiary
corporation (within the meaning of Section 424(f) of the Code) of the Company.
2
<PAGE> 3
2.20 Ten Percent Stockholder - means a person who owns (after
taking into account the attribution rules of code Section 424(d)) more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or of its Parent Corporation or its Subsidiary.
SECTION 3
SHARES RESERVED UNDER THE PLAN
There shall be 3,300,000 shares of Stock reserved for use under this
Plan, and such shares of Stock shall be reserved to the extent that the Company
deems appropriate from authorized but unissued shares of Stock and from shares
of Stock which have been reacquired by the Company. Furthermore, any shares of
Stock subject to an Option which remain unissued after the cancellation,
expiration or exchange of such Option thereafter shall again become available
for use under this Plan.
SECTION 4
EFFECTIVE DATE
The effective date of this Plan shall be the date it is adopted by the
Board, provided that the stockholders of the Company shall approve this Plan
after the date of its adoption and, to the extent this Plan provides for the
issuance of ISOs, the stockholders of the Company shall approve those portions
of this Plan related to the granting of ISOs within twelve (12) months after
the date of adoption. If any Options are granted under this Plan before the
date of such stockholder approval, such Options automatically shall be granted
subject to such approval.
SECTION 5
ADMINISTRATION
The Plan shall be administered by the Committee. The Board may from
time to time remove members from, or add members to, the Committee. Vacancies
on the Committee shall be filled by the Board. The Committee shall select one
of its members as Chairman and shall hold meetings at such times and places as
it may determine. The Committee acting in its absolute discretion shall
exercise such powers and take such action as expressly called for under this
Plan and, further, the Committee shall have the power to interpret this Plan
and (subject to Rule 16b-3) to take such other action (except to the extent the
right to take such action is expressly and exclusively reserved for the Board
or the Company's stockholders) in the administration and operation of this Plan
as the Committee deems equitable under the circumstances, which action shall be
binding on the Company, on each affected Employee or Director and on each other
person directly or indirectly affected by such action.
SECTION 6
ELIGIBILITY
Only Employees and Directors shall be eligible for the grant of
Options under this Plan.
3
<PAGE> 4
SECTION 7
GRANT OF OPTIONS
7.1 Committee Action. The Committee, acting in its absolute
discretion, shall have the right to grant Options to Employees under this Plan
from time to time to purchase shares of Stock and, further, shall have the
right to grant new Options in exchange for outstanding Options which have a
higher or lower Option Price. Each grant of an Option to an Employee shall be
evidenced by an Option Certificate, and each such Option Certificate shall (1)
specify whether the Option is an ISO or Non-ISO and (2) incorporate such other
terms and conditions as the Committee, acting in its absolute discretion, deems
consistent with the terms of this Plan, including (without limitation) a
restriction on the number of shares of Stock subject to the Option which first
become exercisable during any calendar year. If the Committee grants an ISO and
a Non-ISO to an Employee on the same date, the right of the Employee to
exercise one such Option shall not be conditioned on his or her failure to
exercise the other such Option.
7.2 $100,000 Limit. To the extent that the aggregate Fair Market
Value of Stock (determined as of the date the ISOs are granted) with respect to
which ISOs first become exercisable in any calendar year exceeds $100,000, such
Options in excess of the limitation shall be treated as Non-ISOs. The Fair
Market Value of the Stock subject to any other option (determined as of the
date such option was granted) which (1) satisfies the requirements of Section
422 of the Code and (2) is granted to an Employee under a plan maintained by
the Company, a Subsidiary or a Parent Corporation shall be treated (for
purposes of this $100,000 limitation) as if granted under this Plan. This
$100,000 limitation shall be administered in accordance with the rules under
Section 422(d) of the Code.
7.3 Grants to Directors. Each Director shall be granted (without
any further action on the part of the Committee) a Non-ISO under this Plan as
of the first day he serves as such to purchase 10,000 shares of Stock at the
Fair Market Value of such Stock on such date; provided, however, that for
Non-ISOs granted under this Section 7.3 prior to the completion by the Company
of an initial public offering of Stock (the "Initial Public Offering"), the
exercise price shall be the Price to the public to be set forth on the cover of
the final prospectus relating to the Initial Public Offering; and provided
further, however, that any such Non-ISOs granted under this Section 7.3 prior
to the completion by the Company of an Initial Public Offering shall be
forfeited if the Initial Public Offering is not completed on or before December
31, 1992. Thereafter, each Director who is serving as such on the last business
day of each calendar year and who has served as such for more than one year
shall be granted (without any further action on the part of the Committee) a
Non-ISO under this Plan as of the last business day of each calendar year to
purchase 6,000 shares of Stock from the Company at the Fair Market Value of
such Stock on such date. Each Non-ISO granted under this Plan to a Director
shall be evidenced by an Option Certificate, shall be fully vested upon grant
and shall expire 90 days after a Director ceases to serve as such or, if
earlier, on the sixth anniversary of the date of the grant of the Non-ISO. A
Non-ISO granted to a Director under this Plan shall conform in all other
respects to the terms and conditions of a Non-ISO under this Plan, and no
Director shall be eligible to receive an Option under this Plan except as
provided in this Section 7.3.
4
<PAGE> 5
SECTION 8
OPTION PRICE
The Option Price for each share of Stock subject to an ISO shall be no
less than the Fair Market Value of a share of Stock on the date the ISO is
granted; provided, however, if the Option is an ISO granted to a Ten Percent
Stockholder, the Option Price for each share of Stock subject to such ISO shall
be no less than 110% of the Fair Market Value of a share of Stock on the date
such ISO is granted. The Option Price for each share of Stock subject to a
Non-ISO which is granted to an Employee may (in the absolute discretion of the
Committee) be more or less than or equal to the Fair Market value of a share of
Stock on the date the Non-ISO is granted; provided, however, that in no event
shall the Option Price be less than adequate consideration as determined by the
Committee. The Option Price for each share of Stock subject to a Non-ISO which
is granted to a Director shall equal the fair market value of a share of Stock
on the date the Non-ISO is granted. The Option Price shall be payable in full
upon the exercise of any Option and, at the discretion of the Committee, an
Option Certificate can provide for the payment of the Option Price either in
cash, by check, or in Stock acceptable to the Committee. Any payment made in
Stock shall be treated as equal to the Fair Market Value of such Stock on the
date the properly endorsed certificate for such Stock is delivered to the
Committee or its delegate.
SECTION 9
EXERCISE PERIOD
Each Option granted under this Plan to an Employee shall be
exercisable in whole or in part at such time or times as set forth in the
related Option Certificate, but no Option Certificate shall make an Option
granted to an Employee exercisable (1) before the last day of the six-month
period which begins on the date such Option is granted or (2) after the earlier
of:
(a) the date such Option is exercised in full,
(b) the date which is the fifth anniversary of the date
the Option is granted, if the Option is an ISO and the Employee is a
Ten Percent Stockholder on the date the Option is granted, or
(c) the date which is the tenth anniversary of the date
the Option is granted, if the Option is (i) a Non-ISO or (ii) an ISO
which is granted to an Employee who is not a Ten Percent Stockholder
on the date the Option is granted.
An Option Certificate may provide for the exercise of an Option
granted to an Employee after the employment of such Employee has terminated for
any reason whatsoever, including death or disability.
SECTION 10
NONTRANSFERABILITY
No Option granted under this Plan shall be transferable by an Employee
or Director other than by will or by the laws of descent and distribution, and
such Option shall be exercisable during
5
<PAGE> 6
the lifetime of an Employee or Director only by such Employee or Director. The
person or persons to whom an Option is transferred by will or by the laws of
descent and distribution thereafter shall be treated for purposes of such
Option as the Employee or Director under this Plan.
SECTION 11
SECURITIES REGISTRATION
Each Option Certificate shall provide that, upon the receipt of shares
of Stock as a result of the exercise of an Option, the Employee or Director
shall, if so requested by the Company, hold such shares of Stock for investment
and not with a view to resale or distribution to the public and, if so
requested by the Company, shall deliver to the Company a written statement
satisfactory to the Company to that effect. Each Option Certificate also shall
provide that, if so requested by the Company, the Employee or Director shall
make a written representation to the Company that he or she will not sell or
offer to sell any of such Stock unless a registration statement shall be in
effect with respect to such Stock under the Securities Act of 1933, as amended
("1933 Act") and any applicable state securities law or unless he or she shall
have furnished to the Company an opinion, in form and substance satisfactory to
the Company, of legal counsel acceptable to the Company, that such registration
is not required. Certificates representing the Stock transferred upon the
exercise of an Option granted under this Plan may at the discretion of the
Company bear a legend to the effect that such Stock has not been registered
under the 1933 Act or any applicable state securities law and that such Stock
may not be sold or offered for sale in the absence of an effective registration
statement as to such Stock under the 1933 Act and any applicable state
securities law or an opinion, in form and substance satisfactory to the
Company, of legal counsel acceptable to the Company, that such registration is
not required.
SECTION 12
LIFE OF PLAN
No Option shall be granted under this Plan on or after the earlier of:
(1) the tenth anniversary of the effective date of this
Plan (as determined under Section 4 of this Plan), in which event this
Plan thereafter shall continue in effect until all outstanding Options
have been exercised in full or no longer are exercisable, or
(2) the date on which all of the Stock reserved under
Section 3 of this Plan has (as a result of the exercise of Options
granted under this Plan) been issued or no longer is available for use
under this Plan, in which event this Plan also shall terminate on such
date.
SECTION 13
ADJUSTMENT
The number of shares of Stock reserved under Section 3 of this Plan,
the number of shares of Stock subject to Options granted under this Plan and
the Option Price of such Options shall be adjusted by the Committee in an
equitable manner to reflect any change in the capitalization of the Company,
including, but not limited to, such changes as stock dividends or stock splits.
The Committee shall have the right to adjust (in a manner which satisfies the
requirements of Section
6
<PAGE> 7
424(a) of the Code) the number of shares of Stock reserved under Section 3 of
this Plan, the number of shares of Stock subject to Options granted under this
Plan, and the Option Price of such Options in the event of any corporate
transaction described in Section 424(a) of the Code which provides for the
substitution or assumption of Options. If any adjustment under this Section 13
would create a fractional share of Stock or a right to acquire a fractional
share of Stock, such fractional share shall be disregarded and the number of
shares of Stock reserved under this Plan and the number subject to any Options
granted under this Plan shall be the next lower number of shares of Stock,
rounding all fractions downward. An adjustment made under this Section 13 by
the Committee shall be conclusive and binding on all affected persons.
SECTION 14
SALE OR MERGER OR CHANGE IN CONTROL
14.1 Sale or Merger. If the Company agrees to sell all or
substantially all of its assets for cash or property or for a combination of
cash and property or agrees to any merger, consolidation, reorganization,
division or other corporate transaction in which Stock is converted into
another security or into the right to receive securities or property and such
agreement does not provide for the assumption or substitution of the Options
granted under this Plan, each Option granted (a) to an Employee may, at the
direction of the Committee, (1) be cancelled unilaterally by the Company
(subject to such conditions, if any, as the Committee deems appropriate under
the circumstances) in exchange for whole shares of Stock (and cash in lieu of a
fractional share) the number of which, if any, shall be determined by the
Committee on a date set by the Committee for this purpose by dividing (A) the
excess of the then Fair Market Value of the Stock then subject to exercise
under such Option (as determined without regard to any vesting schedule for
such Option) over the Option Price of such Stock by (B) the then Fair Market
Value of a share of such Stock, or (2) be cancelled unilaterally by the Company
if the Option Price equals or exceeds the Fair Market Value of a share of Stock
on such date, and (b) to a Director may be cancelled unilaterally by the
Company as of any date to the extent then unexercised after advance written
notice to each affected Director.
14.2 Change in Control. If there is a Change in Control of the
Company or a tender or exchange offer is made for Stock other than by the
Company, the Committee thereafter shall have the right (a) to take such action
with respect to any unexercised Options granted to Employees, or all such
Options, as the Committee deems appropriate under the circumstances to protect
the interest of the Company in maintaining the integrity of such grants under
this Plan, including following the procedures set forth in Section 14.1 for a
sale or merger of the Company, and (b) to follow the procedures for Directors
set forth in Section 14.1 with respect to any and all unexercised Options
granted to Directors. The Committee shall have the right to take different
action under this Section 14.2 with respect to different Employees or different
groups of Employees, as the Committee deems appropriate under the
circumstances.
7
<PAGE> 8
SECTION 15
AMENDMENT OR TERMINATION
This Plan may be amended by the Committee from time to time to the
extent that the Committee deems necessary or appropriate; provided, however (a)
no such amendment shall be made absent the approval of the stockholders of the
Company required under Section 422 of the Code (1) to increase the number of
shares of Stock reserved under Section 3, or (2) to change the class of
employees eligible for Options under Section 6 and (b) no provision of this
Plan shall be amended more than once every 6 months if amending such provision
would result the in loss of an exemption under Rule 16b-3. Subject to the other
limitations set forth in this Section 15, any amendment which specifically
applies to Non-ISOs shall not require stockholder approval unless such approval
is necessary to comply with Section 16 of the Exchange Act. The Committee also
may suspend the granting of Options under this Plan at any time and may
terminate this Plan at any time; provided, however, that the Committee shall
not have the right unilaterally to modify, amend or cancel any Option granted
before such suspension or termination unless (1) the Employee or Director
consents in writing to such modification, amendment or cancellation, or (2)
there is a dissolution or liquidation of the Company or a transaction described
in Section 13 or Section 14 of this Plan.
SECTION 16
MISCELLANEOUS
16.1 No Stockholder Rights. No Employee or Director shall have any
rights as a stockholder of the Company as a result of the grant of an Option to
him or to her under this Plan or his or her exercise of such Option pending the
actual delivery of Stock subject to such Option to such Employee.
16.2 No Contract of Employment. The grant of an Option to an
Employee or Director under this Plan shall not constitute a contract of
employment or a right to continue to serve on the Board and shall not confer on
any Employee or Director any rights upon his or her termination of employment
or service in addition to those rights, if any, expressly set forth in the
Option Certificate which evidences his or her Option.
16.3 Other Conditions. Each Option Certificate may require that an
Employee or Director (as a condition to the exercise of an Option) enter into
any agreement or make such representations prepared by the Company, including
any agreement which restricts the transfer of Stock acquired pursuant to the
exercise of such Option or provides for the repurchase of such Stock by the
Company under certain circumstances.
16.4 Withholding. The exercise of any Option granted under this
Plan shall constitute full and complete consent by an Employee to whatever
action the Committee deems necessary to satisfy the federal and state tax
withholding requirements, if any, which the Committee acting in its discretion
deems applicable to such exercise. The Committee also shall have the right to
provide in an Option Certificate that an Employee may elect to satisfy federal
and state withholding requirements through a reduction in the number of shares
of Stock actually transferred to him or her under this Plan, and if the
Employee is subject to the reporting requirements under Section 16 of the
8
<PAGE> 9
Exchange Act, any such election and any such reduction shall be effected so as
to satisfy the conditions to the exemption under Rule 16b-3 under the Exchange
Act.
16.5 Construction. This Plan shall be construed under the laws of
the State of Delaware.
9
<PAGE> 10
IN WITNESS WHEREOF, the Company has caused its duly authorized officer
to execute this Plan this 18th day of March, 1998 to evidence its adoption of
this Plan.
BOOKS-A-MILLION, INC.
BY: /s/ Sandra B. Cochran
--------------------------------
10
<PAGE> 1
EXHIBIT 10.14
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT dated June 19, 1998 ("this
Amendment") is entered into by BOOKS-A-MILLION, INC., a Delaware corporation
("BAM"), AMERICAN WHOLESALE BOOK COMPANY, INC., an Alabama corporation ("AWBC";
BAM and AWBC are sometimes together referred to as the "Borrowers"), AMSOUTH
BANK, an Alabama banking corporation formerly known as AmSouth Bank of Alabama
("AmSouth"), SUNTRUST BANK, ATLANTA, a Georgia banking corporation,
NATIONSBANK, N.A., a national banking association, successor by merger to
NationsBank, N.A. (South), a national banking association formerly known as
NationsBank of Georgia, N.A., and SOUTHTRUST BANK, NATIONAL ASSOCIATION, a
national banking association (collectively, the "Lenders"), and AMSOUTH BANK,
an Alabama banking corporation formerly known as AmSouth Bank of Alabama, as
agent for the Lenders (the "Agent").
RECITALS
A. The Borrowers, the Agent and the Lenders are parties to that
certain Credit Agreement dated October 27, 1995 as amended by a First Amendment
to Credit Agreement dated June 4, 1997 (collectively, the "Agreement") pursuant
to which the Lenders have made available to the Borrowers a revolving credit
facility in an aggregate principal amount outstanding not to exceed $90,000,000
(the "Revolving Facility"), the proceeds of which are to be used by the
Borrowers for general corporate purposes.
A. The Borrowers have applied to the Lenders for an extension of
the Termination Date of the Revolving Facility until June 18, 2003, and for a
provision permitting additional extensions of the Termination Date under agreed
terms and conditions.
B. The Lenders are willing to extend the Termination Date as
requested only if, among other things, the Borrowers enter into this Amendment.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing Recitals, and to
induce the Lenders to increase the amount of the Revolving Facility, the
Borrowers, the Lenders and the Agent hereby agree as follows:
1. Capitalized terms used in this Amendment and not otherwise
defined herein have the respective meanings attributed thereto in the
Agreement.
2. The defined term "Termination Date" set forth in Article I of
the Agreement is hereby deleted and replaced in its entirety by the following:
"Termination Date shall mean June 18, 2003, as the same may be
extended from
<PAGE> 2
time to time in accordance with Section 2.12 hereof."
3. Section 2.12 of the Agreement is hereby deleted in its
entirety and replaced by the following:
"SECTION 2.12 EXTENSION OF TERMINATION DATE 2.12 EXTENSION OF
TERMINATION DATE. If the Borrowers have furnished to the Agent and the
Lenders the financial statements referred to in Section 7.3 within the
time set forth therein, the Borrowers may request, not earlier than
thirty (30) days prior to June 19, 1999 and June 19, 2000,
respectively, that the Termination Date be extended for an additional
period of one year. The Agent shall notify the Borrowers in writing,
within sixty (60) days of receipt of such request, of the decision of
the Lenders as to whether to extend the Termination Date. Failure by
the Agent to give such notice shall constitute refusal by the Lenders
to extend the Termination Date. The Termination Date shall be extended
only upon written consent of all Lenders."
4. Pursuant to Section 10.2(b) of the Agreement, NationsBank,
N.A. hereby designates the address and facsimile number set forth below its
signature on the attached signature page as its notice address for all purposes
under the Agreement.
5. Notwithstanding the execution of this Amendment, all of the
indebtedness evidenced by each of the Notes shall remain in full force and
effect, as modified hereby, and nothing contained in this Amendment shall be
construed to constitute a novation of the indebtedness evidenced by any of the
Notes or to release, satisfy, discharge, terminate or otherwise affect or
impair in any manner whatsoever (a) the validity or enforceability of the
indebtedness evidenced by any of the Notes; (b) the liens, security interests,
assignments and conveyances effected by the Agreement or the Loan Documents, or
the priority thereof; (c) the liability of any maker, endorser, surety,
guarantor or other person that may now or hereafter be liable under or on
account of any of the Notes or the Agreement or the Loan Documents; or (d) any
other security or instrument now or hereafter held by the Lender as security
for or as evidence of any of the above-described indebtedness.
6. All references in the Loan Documents to "Credit Agreement"
shall refer to the Agreement as amended by this Amendment, and as the Agreement
may be further amended from time to time.
7. The Borrowers hereby certify that the organizational
documents of the Borrowers have not been amended since October 27, 1995.
8. The Borrowers hereby represent and warrant to the Lender that
all representations and warranties contained in the Agreement are true and
correct as of the date hereof; and the Borrowers hereby certify that no Event
of Default nor any event that, upon notice or lapse of time or both, would
constitute an Event of Default, has occurred and is continuing.
9. Except as hereby amended, the Agreement shall remain in full
force and effect as written. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which when
taken together shall constitute one and the same instrument. The covenants and
agreements contained in this Amendment shall apply to and inure
2
<PAGE> 3
to the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns.
10. Nothing contained herein shall be construed as a waiver,
acknowledgment or consent to any breach of or Event of Default under the
Agreement and the Loan Documents not specifically mentioned herein.
11. This Amendment shall be governed by the laws of the State of
Alabama.
[Remainder of this page intentionally blank.]
3
<PAGE> 4
IN WITNESS WHEREOF, each of the Borrowers, the Lenders and the Agent
has caused this Amendment to be executed and delivered by its duly authorized
corporate officer as of the day and year first above written.
BOOKS-A-MILLION, INC.
By: /s/ Sandra B. Cochran
--------------------------------------
Its Executive Vice President
-----------------------------------
AMERICAN WHOLESALE BOOK COMPANY, INC.
By: /s/ Sandra B. Cochran
--------------------------------------
Its Executive Vice President
-----------------------------------
Hand Delivery Address:
402 Industrial Lane
Birmingham, Alabama 35211
FAX: (205) 945-1772
Attention: Chief Financial Officer
Mailing Address:
Post Office Box 19768
Birmingham, Alabama 35219
FAX: (205) 945-1772
Attention: Chief Financial Officer
<PAGE> 5
AMSOUTH BANK
By: /s/ David A. Simmons
--------------------------------------
Its Senior Vice President
Commitment Amount: $27,000,000
Applicable Commitment Percentage: 30.000%
Lending Office and Hand Delivery Address:
7th Floor, AmSouth-Sonat Tower
1900 Fifth Avenue North
Birmingham, Alabama 35203
FAX: (205) 801-0157
Attention: David A. Simmons
Mailing Address:
P. O. Box 11007
Birmingham, Alabama 35288
FAX: (205) 801-0157
Attention: David A. Simmons
<PAGE> 6
SUNTRUST BANK, ATLANTA
By: /s/ David J. Edge
---------------------------------------
Its Vice President
------------------------------------
By: /s/ John R. Frazer
---------------------------------------
Its Vice President
------------------------------------
Commitment Amount: $24,000,000
Applicable Commitment Percentage: 26.667%
Lending Office and Hand Delivery Address:
25 Park Place N.E.
Mail Code 120 - 24th Floor
Atlanta, Georgia 30303
FAX: (404) 827-6270
Attention: F. McClellan Deaver, III
Mailing Address:
Post Office Box 4418
Mail Code 120
Atlanta, Georgia 30302
FAX: (404) 827-6270
Attention: F. McClellan Deaver, III
<PAGE> 7
NATIONSBANK, N.A.
By: /s/ Nancy S. Goldman
---------------------------------------
Its: Vice President
-----------------------------------
Commitment Amount: $24,000,000
Applicable Commitment Percentage: 26.667%
Lending Office, Hand Delivery and Mailing
Address:
600 Peachtree Street, N.E.
9th Floor
Atlanta, Georgia 30308-2213
FAX: (404) 607-6467
Attention: Nancy S. Goldman
<PAGE> 8
SOUTHTRUST BANK, NATIONAL
ASSOCIATION
By: /s/ J. Burton McDonald
---------------------------------------
Its: Group Vice President
-----------------------------------
Commitment Amount: $15,000,000
Applicable Commitment Percentage: 16.666%
Lending Office and Hand Delivery Address:
6th Floor, SouthTrust Tower
420 North 20th Street
Birmingham, Alabama 35203
FAX: (205) 254-5911
Attention: J. Burton McDonald, Jr.
Mailing Address:
Post Office Box 2554
Birmingham, Alabama 35290
Attention: J. Burton McDonald, Jr.
<PAGE> 9
AMSOUTH BANK, as Agent
By: /s/ David A. Simmons
---------------------------------------
Its Senior Vice President
<PAGE> 1
EXHIBIT 10.15
[EXECUTION COPY]
THIRD AMENDMENT
TO SHORT-TERM CREDIT AGREEMENT
THIS THIRD AMENDMENT TO SHORT-TERM CREDIT AGREEMENT dated effective
June 3, 1998 ("this Amendment") is entered into by BOOKS-A-MILLION, INC., a
Delaware corporation ("BAM"), AMERICAN WHOLESALE BOOK COMPANY, INC., an Alabama
corporation ("AWBC"; BAM and AWBC are sometimes together referred to as the
"Borrowers") and AMSOUTH BANK, an Alabama banking corporation formerly known as
AmSouth Bank of Alabama (the "Lender").
RECITALS
A. The Borrowers and the Lender have heretofore entered into a
Short-Term Credit Agreement dated as of October 27, 1995, as amended by a First
Amendment thereto dated as of November 1, 1996, and as further amended by a
Second Amendment thereto dated June 4, 1997 (as so amended, the "Credit
Agreement") whereby the Lender has made available to the Borrowers a revolving
credit facility in an aggregate principal amount outstanding not to exceed
$10,000,000 (the "Revolving Facility"), the proceeds of which are to be used by
the Borrowers for general corporate purposes.
B. The Borrowers have applied to the Lender for an extension of
the Termination Date of the Revolving Facility until June 2, 1999.
C. The Borrowers and the Lender wish to amend the Agreement as
requested by the Borrowers and as further set forth in this Amendment.
AGREEMENT
NOW, THEREFORE, in consideration of the recitals and the mutual
obligations and covenants contained herein, the Borrowers and the Lender hereby
agree as follows:
1. Capitalized terms used in this Amendment and not otherwise
defined herein have the respective meanings attributed thereto in the
Agreement.
2. The defined term "Termination Date" set forth in Article I of
the Agreement is hereby amended to read, in its entirety, as follows:
"Termination Date" means June 2, 1999, as the same may be
extended from time to time in accordance with Section 2.7 hereof."
3. Section 2.7 of the Agreement is hereby deleted in its
entirety and replaced by the following:
"SECTION 2.7 EXTENSION OF TERMINATION DATE.
Upon written notice to the Lender in the form attached as
Schedule 2.7(a) at least thirty (30) days (but not more than
sixty (60) days) prior to the Termination Date then in effect,
the Borrowers may request that such Termination Date be
extended for an additional 364 days.
<PAGE> 2
The Lender shall notify the Borrowers in writing in the form
attached as Schedule 2.7(b) at least fourteen (14) days prior
to such Termination Date of the decision of the Lender as to
whether to extend the Termination Date. Failure by the Lender
to give such notice shall constitute refusal by the Lender to
extend the Termination Date."
4. Notwithstanding the execution of this Amendment, all of the
indebtedness evidenced by the Note shall remain in full force and effect, as
modified hereby, nothing contained in this Amendment shall be construed to
constitute a novation of the indebtedness evidenced by the Note or to release,
satisfy, discharge, terminate or otherwise affect or impair in any manner
whatsoever (a) the validity or enforceability of the indebtedness evidenced by
the Note; (b) the liens, security interests, assignments and conveyances
effected by the Agreement or the Loan Documents, or the priority thereof; (c)
the liability of any maker, endorser, surety, guarantor or other person that
may now or hereafter be liable under or on account of the Note or the Agreement
or the Loan Documents; or (d) any other security or instrument now or hereafter
held by the Lender as security for or as evidence of any of the above-described
indebtedness.
5. All references in the Loan Documents to "Credit Agreement"
shall refer to the Agreement as amended by this Amendment, and as the Agreement
may be further amended from time to time.
6. The Borrowers hereby certify that the organizational
documents of the Borrowers have not been amended since October 27, 1995.
7. The Borrowers hereby represent and warrant to the Lender that
all representations and warranties contained in the Agreement are true and
correct as of the date hereof; and the Borrowers hereby certify that no Event
of Default nor any event that, upon notice or lapse of time or both, would
constitute an Event of Default, has occurred and is continuing.
8. Except as hereby amended, the Agreement shall remain in full
force and effect as written. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which when
taken together shall constitute one and the same instrument. The covenants and
agreements contained in this Amendment shall apply to and inure to the benefit
of and be binding upon the parties hereto and their respective successors and
permitted assigns.
9. Nothing contained herein shall be construed as a waiver,
acknowledgment or consent to any breach of or Event of Default under the
Agreement and the Loan Documents not expressly waived, acknowledged or
consented to previously by the Lender in writing.
10. This Amendment shall be governed by the laws of the State of
Alabama.
2
<PAGE> 3
IN WITNESS WHEREOF, each of the Borrowers and the Lender has caused
this Amendment to be executed and delivered by its duly authorized corporate
officer to be effective as of the day and year first above written.
BOOKS-A-MILLION, INC.
By: /s/ Sandra B. Cochran
--------------------------------------
Its Executive Vice President
-----------------------------------
AMERICAN WHOLESALE BOOK COMPANY, INC.
By: /s/ Sandra B. Cochran
--------------------------------------
Its Executive Vice President
-----------------------------------
Hand Delivery Address:
402 Industrial Lane
Birmingham, Alabama 35211
FAX: (205) 945-1772
Attention: Chief Financial Officer
Mailing Address:
Post Office Box 19768
Birmingham, Alabama 35219
FAX: (205) 945-1772
Attention: Chief Financial Officer
<PAGE> 4
AMSOUTH BANK
By: /s/ David A. Simmons
--------------------------------------
Its Senior Vice President
Hand Delivery Address:
AmSouth-Sonat Tower
1900 Fifth Avenue North
Birmingham, Alabama 35203
FAX: (205) 326-5601
Attention: David A. Simmons
Mailing Address:
P. O. Box 11007
Birmingham, Alabama 35288
FAX: (205) 326-5601
Attention: David A. Simmons
<PAGE> 5
SCHEDULE 2.7(A)
(Request for Extension
of Termination Date)
<PAGE> 6
Date:________________
BY FACSIMILE - 801-0157
ORIGINAL BY CERTIFIED U.S. MAIL
Mr. David A. Simmons
Senior Vice President
Regional Banking
AmSouth Bank
P.O. Box 11007
Birmingham, Alabama 35203
Re: $10,000,000 Revolving Line of Credit by AmSouth Bank,
as Lender, to Books-A-Million, Inc. and American
Wholesale Book Company, Inc., as Borrowers
Dear Mr. Simmons:
This letter is to request that you extend the Termination
Date for the above revolving loan to _______________________ pursuant to
Section 2.7 of the Short-Term Credit Agreement dated as of October 27, 1995 (as
amended from time to time, the "Credit Agreement"). No Event of Default exists
under the Credit Agreement and no event has occurred that with notice or the
passage of time, or both, could become an Event of Default. The Borrowers have
delivered to the Lender all financial information required to be submitted to
date under the terms of the Credit Agreement.
Thank you for your assistance. We look forward to your reply.
BOOKS-A-MILLION, INC.
By:
-------------------------------------
Its:
-------------------------------------
AMERICAN WHOLESALE BOOK COMPANY, INC.
By:
-------------------------------------
Its:
-------------------------------------
<PAGE> 7
SCHEDULE 2.7(B)
(Notice of Extension
of Termination Date)
<PAGE> 8
Date:________________
BY FACSIMILE - 945-1772
ORIGINAL BY CERTIFIED U.S. MAIL
Chief Financial Officer
Books-A-Million, Inc.
American Wholesale Book Company, Inc.
402 Industrial Lane
Birmingham, Alabama 35211
Re: $10,000,000 Revolving Line of Credit by AmSouth
Bank, as Lender, to Books-A-Million, Inc. and
American Wholesale Book Company, Inc., as Borrowers
Dear Sir or Madam:
Please be advised that AmSouth Bank is pleased to extend the
Termination Date of the above revolving loan to the following date:
_______________________. All references in the Credit Agreement and other
Credit Documents to the capitalized term "Termination Date" shall hereafter
refer to this date.
AMSOUTH BANK
By:
-------------------------------------
Its:
-------------------------------------
<PAGE> 1
EXHIBIT 21
Subsidiaries of the Registrant
The Company's subsidiaries are the following:
American Wholesale Book Company, Inc., an Alabama corporation.
American Internet Services, Inc., an Alabama corporation
NetCentral, Inc., a Tennessee corporation
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our reports included or incorporated by reference in this Form 10-K, into the
Company's previously filed Registration Statements File Nos. 33-72812 and
33-86980.
ARTHUR ANDERSEN LLP
Birmingham, Alabama
April 26, 1999
<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-K FOR THE PERIOD ENDED JANUARY 30, 1999.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-30-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-30-1999
<EXCHANGE-RATE> 1
<CASH> 4,322
<SECURITIES> 0
<RECEIVABLES> 17,219
<ALLOWANCES> 939
<INVENTORY> 175,211
<CURRENT-ASSETS> 202,466<F1>
<PP&E> 117,006
<DEPRECIATION> 49,629
<TOTAL-ASSETS> 271,551<F2>
<CURRENT-LIABILITIES> 118,444
<BONDS> 0<F3>
0<F4>
0
<COMMON> 180
<OTHER-SE> 114,842
<TOTAL-LIABILITY-AND-EQUITY> 271,551
<SALES> 347,877
<TOTAL-REVENUES> 347,877
<CGS> 256,793
<TOTAL-COSTS> 323,187
<OTHER-EXPENSES> 12,974
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,435
<INCOME-PRETAX> 7,281
<INCOME-TAX> 2,767
<INCOME-CONTINUING> 4,514
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,514
<EPS-PRIMARY> 0.26<F5>
<EPS-DILUTED> 0.26<F5>
<FN>
<F1>(OTHER CURRENT ASSETS) 6,653 OTHER CURRENT ASSETS.
<F2>(OTHER ASSETS) 1,708 OTHER ASSETS.
<F3>(LONG-TERM DEBT) 36,944 LONG TERM DEBT.
<F4>(DEFERRED INCOME TAXES) 1,141 DEFERRED INCOME TAXES.
<F5>THE EARNINGS PER SHARE CALCULATIONS HAVE BEEN PREPARED IN ACCORDANCE WITH
SFAS NO. 128 AND BASIC AND DILUTED EARNINGS PER SHARE HAVE BEEN ENTERED IN PLACE
OF PRIMARY AND FULLY DILUTED, RESPECTIVELY.
</FN>
</TABLE>
