<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended: October 28, 2000
-----------------
- OR -
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transaction period from to
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COMMISSION FILE NUMBER 0-20664
BOOKS-A-MILLION, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 63-0798460
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
402 INDUSTRIAL LANE, BIRMINGHAM, ALABAMA 35211
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(Address of principal executive offices) (Zip Code)
(205) 942-3737
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(Registrant's phone number including area code)
NONE
----
(Former name, former address and former fiscal year,
if changed since last period)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's common stock,
as of the latest practicable date: Shares of common stock, par value $.01 per
share, outstanding as of December 11, 2000 were 17,776,215 shares.
<PAGE> 2
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BOOKS-A-MILLION, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
October 28, 2000 January 29, 2000
---------------- ----------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and temporary cash investments $ 6,710 $ 4,920
Accounts receivable, net 8,787 12,942
Inventories 235,734 194,624
Prepayments and other 3,653 3,339
Deferred income taxes 6,507 5,084
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TOTAL CURRENT ASSETS 261,391 220,909
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PROPERTY AND EQUIPMENT:
Gross property and equipment 132,836 125,454
Less accumulated depreciation and amortization 71,108 61,222
---------- ----------
NET PROPERTY AND EQUIPMENT 61,728 64,232
---------- ----------
OTHER ASSETS:
Goodwill, net 1,432 1,453
Other 121 191
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TOTAL OTHER ASSETS 1,553 1,644
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TOTAL ASSETS $ 324,672 $ 286,785
========== ==========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Accounts payable $ 114,172 $ 103,505
Accrued expenses 18,680 20,970
Accrued income taxes -- 2,092
Current portion of long-term debt 33,338 470
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TOTAL CURRENT LIABILITIES 166,190 127,037
---------- ----------
LONG TERM DEBT 35,993 35,936
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DEFERRED INCOME TAXES 2,747 2,407
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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, 18,091,815 and 18,080,646
shares issued and outstanding at October 28, 2000 and January 29, 2000,
respectively 181 181
Additional paid-in capital 70,635 70,564
Treasury stock at cost (81,600 shares at October 28, 2000 and January 29, 2000) (252) (252)
Retained earnings 49,178 50,912
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TOTAL STOCKHOLDERS' INVESTMENT 119,742 121,405
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TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT $ 324,672 $ 286,785
========== ==========
</TABLE>
See accompanying notes
2
<PAGE> 3
BOOKS-A-MILLION, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-Nine Weeks Ended
---------------------------------- ----------------------------------
October 28, 2000 October 30, 1999 October 28, 2000 October 30, 1999
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
NET SALES $ 90,133 $ 91,162 $ 276,861 $ 266,167
Cost of products sold (including warehouse
distribution and store occupancy costs) (1) 67,898 69,081 205,582 198,365
---------- ---------- ---------- ----------
GROSS PROFIT 22,235 22,081 71,279 67,802
Operating, selling and administrative expenses 19,758 18,983 59,365 55,274
Depreciation and amortization 3,772 3,417 11,074 10,134
---------- ---------- ---------- ----------
OPERATING INCOME (LOSS) (1,295) (319) 840 2,394
Interest expense, net 1,345 1,172 3,637 3,354
---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES (2,640) (1,491) (2,797) (960)
Provision (Benefit) for income taxes (1,003) (567) (1,063) (365)
---------- ---------- ---------- ----------
NET INCOME (LOSS) $ (1,637) $ (924) $ (1,734) $ (595)
========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING - BASIC 18,010 17,995 18,008 17,957
========== ========== ========== ==========
NET INCOME (LOSS) PER SHARE - BASIC $ (0.09) $ (0.05) $ (0.10) $ (0.03)
========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING - DILUTED 18,010 17,995 18,008 17,957
========== ========== ========== ==========
NET INCOME (LOSS) PER SHARE - DILUTED $ (0.09) $ (0.05) $ (0.10) $ (0.03)
========== ========== ========== ==========
</TABLE>
(1) Inventory purchases from related parties were $10,594, $9,094, $28,100 and
$23,935, respectively for each of the periods presented.
See accompanying notes
3
<PAGE> 4
BOOKS-A-MILLION, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
------------------------------------
OCTOBER 28, 2000 OCTOBER 30, 1999
---------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (1,734) $ (595)
---------- ----------
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
Depreciation and amortization 11,074 10,134
Loss on disposal of property and equipment 943 78
Change in deferred income taxes (1,083) (433)
Changes in current assets and liabilities:
Accounts receivable 4,155 4,967
Inventories (41,110) (46,983)
Prepayments and other (295) (1,636)
Accounts payable 10,668 15,282
Accrued income taxes (2,092) (476)
Accrued expenses (2,301) 1,753
---------- ----------
Total adjustments (20,041) (17,314)
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Net cash used in operating activities (21,775) (17,909)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (9,496) (7,069)
Proceeds from sales of equipment 65 1,721
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Net cash used in investing activities (9,431) (5,348)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under credit facilities 32,925 24,495
Proceeds from sale of common stock, net 71 279
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Net cash provided by financing activities 32,996 24,774
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Net increase in cash and temporary cash investments 1,790 1,517
Cash and temporary cash investments at beginning of period 4,920 4,322
---------- ----------
Cash and temporary cash investments at end of period $ 6,710 $ 5,839
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 3,337 $ 2,981
Income Taxes, net of refunds $ 2,913 $ 1,436
========== ==========
</TABLE>
See accompanying notes
4
<PAGE> 5
BOOKS-A-MILLION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of
Books-A-Million, Inc. and its Subsidiaries (the "Company") for the thirteen and
thirty-nine week periods ended October 28, 2000 and October 30, 1999, have been
prepared in accordance with U.S. generally accepted accounting principles for
interim financial information and are presented in accordance with the
requirements of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by U.S. generally
accepted accounting principles for complete financial statements. These
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto for the fiscal year ended January 29,
2000, included in the Company's 2000 Annual Report on Form 10-K. In the opinion
of management, the consolidated financial statements included herein contain all
adjustments (consisting only of normal recurring adjustments) considered
necessary for a fair presentation of the Company's financial position as of
October 28, 2000, and the results of its operations and cash flows for the
thirteen and thirty-nine week periods then ended. Certain prior year amounts
have been reclassified to conform to current year presentation.
The Company has experienced, and expects to continue to experience,
significant variability in sales and net income from quarter to quarter.
Therefore, the results of the interim periods presented herein are not
necessarily indicative of the results to be expected for any other interim
period or the full year.
2. NET INCOME PER SHARE
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 thirteen
and thirty-nine week period. A reconciliation of the weighted average shares for
basic and diluted EPS is as follows:
<TABLE>
<CAPTION>
For the Thirteen Weeks Ended
(in thousands)
Oct 28, 2000 Oct 30, 1999
-------------------------------
<S> <C> <C>
Weighted average shares outstanding:
Basic 18,010 17,995
Dilutive effect of stock options outstanding 0 0
-------------------------------
Diluted 18,010 17,995
-------------------------------
</TABLE>
<TABLE>
<CAPTION>
For the Thirty-Nine Weeks Ended
(in thousands)
Oct 28, 2000 Oct 30, 1999
-------------------------------
<S> <C> <C>
Weighted average shares outstanding:
Basic 18,008 17,957
Dilutive effect of stock options outstanding 0 0
-------------------------------
Diluted 18,008 17,957
-------------------------------
</TABLE>
Options outstanding of 1,515,717 and 1,529,489 for the thirteen weeks
and thirty-nine weeks ended October 28, 2000, respectively, and outstanding
options of 1,231,058 and 1,210,349 for the thirteen and thirty-nine weeks ended
October 30, 1999, respectively, were not included in the table above as they
were anti-dilutive.
5
<PAGE> 6
BOOKS-A-MILLION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. PENDING ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("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. In June
1999, the FASB issued SFAS No. 137, Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133,
which amends FASB Statement No. 133 to be effective for all fiscal years
beginning after June 15, 2000 (February 4, 2001, for Books-A-Million, Inc.). In
June 2000, FASB Statement No. 138, Accounting for Derivative Instruments and
Hedging Activities, was issued. SFAS No. 138 amends the accounting and reporting
standards of SFAS No. 133 for certain derivative instruments and certain hedging
activities. Management is in the process of evaluating the impact of these
statements on the consolidated financial statements; however, the adoption of
these statements could increase the volatility in earnings.
4. CONTINGENCIES
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.
6
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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 areas; 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 the Internet and the Company's Internet
initiatives; and other factors referenced herein. In addition, such
forward-looking statements are necessarily dependent upon the 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.
RESULTS OF OPERATIONS
Net sales decreased 1.1% to $90.1 million in the thirteen weeks ended
October 28, 2000, from $91.2 million in the thirteen weeks ended October 30,
1999. This decrease was due to lower comparable store sales during the quarter.
Net sales increased 4.0% to $276.9 million in the thirty-nine weeks ended
October 28, 2000, from $266.2 million in the thirty-nine weeks ended October 30,
1999. For the thirty-nine week period the increase in net sales resulted
primarily from new stores opened during the year. During the thirteen weeks
ended October 28, 2000, three superstores were opened, one newsstand was opened,
and three superstores were relocated.
Gross profit increased $0.1 million or 0.7% to $22.2 million in the
thirteen weeks ended October 28, 2000, from $22.1 million in the thirteen weeks
ended October 30, 1999, and in the thirty-nine weeks ended October 28, 2000,
gross profit increased 5.1% to $71.3 million from $67.8 million in the same
period last year. Gross profit as a percentage of net sales for the thirteen
weeks ended October 28, 2000, was 24.7% versus 24.2% in the same period last
year. Gross profit as a percentage of net sales for the thirty-nine weeks ended
October 28, 2000, was 25.7% versus 25.5% in the same period last year. The
increase as a percentage of net sales for the thirteen and thirty-nine week
periods was due to improved merchandise control versus the same period last
year.
Operating, selling and administrative expenses increased $0.8 million
or 4.1% to $19.8 million in the thirteen weeks ended October 28, 2000, from
$19.0 million in the thirteen weeks ended October 30, 1999, and in the
thirty-nine weeks ended October 28, 2000, operating, selling and administrative
expenses increased 7.4% to $59.4 million from $55.3 million in the same period
last year. Operating, selling and administrative expenses as a percentage of net
sales for the thirteen weeks ended October 28, 2000, increased to 21.9% from
20.8% in the same period last year. For the thirty-nine week period operating,
selling and administrative expenses as a percentage of net sales increased to
21.4% from 20.8% in the same period last year. The increase in this percentage
for the thirteen and thirty-nine week periods was primarily due to increased
corporate expense and investment in information systems.
Depreciation and amortization increased $0.4 million or 10.4% to $3.8
million in the thirteen weeks ended October 28, 2000, from $3.4 million in the
thirteen weeks ended October 30, 1999, and in the thirty-nine week period
depreciation and amortization increased $1.0 million or 9.3% to $11.1 million
from $10.1 million in the same period last year. The increase in depreciation
and amortization for the thirteen and thirty-nine week periods was primarily the
result of the increased number of superstores operated by the Company.
Interest expense was relatively constant at $1.3 million for the
thirteen weeks ended October 28, 2000 versus $1.2 million in the prior year.
Interest expense was relatively constant at $3.6 million for the thirty-nine
week period ended October 28, 2000 versus $3.4 million in the year earlier
period.
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
During the first thirty-nine weeks of fiscal 2001, the Company's cash
requirements have been funded with net cash from operations and with borrowings
under the Company's credit facilities. Similar to many retailers, the Company's
business is seasonal, with its highest retail sales, gross profits and net
income traditionally occurring during the fourth fiscal quarter, reflecting the
increased demand for books and gifts during the year-end, holiday selling
season. Working capital requirements are generally highest during the third
fiscal quarter and the early part of the fourth fiscal quarter due to the
seasonality of the Company's business.
The Company has a revolving credit facility that allows borrowings up
to $90 million for which no principal repayments are due until the facility
expires on June 18, 2003. On September 25, 2000 the company amended its $10
million unsecured working capital line to provide for an additional $5 million
of credit bringing the total to $15 million which is subject to annual
renewal. As of October 28, 2000, an aggregate of $60.5 million was outstanding
under these facilities. Both credit facilities have certain financial and
non-financial covenants with which the Company is in compliance. Additionally,
as of October 28, 2000, the Company has outstanding borrowings associated with
the issuance of an industrial revenue bond totaling $7.5 million.
The Company's capital expenditures totaled $9.5 million during the
first thirty-nine weeks of fiscal 2001. These expenditures were primarily used
for new stores expenditures, warehouse distribution purposes and investment in
management information systems. Management estimates that capital expenditures
for the remainder of fiscal 2001 will be approximately $5.8 million, and that
such amounts will be used primarily for new stores, renovations 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 meet the Company's
working capital requirements for the remainder of fiscal 2001.
When necessary, the Company establishes certain reserves for the
closing of under-performing stores. Management feels that this year's activity
will not significantly vary from the number of closings in the prior year.
RELATED PARTY ACTIVITIES
Certain principal stockholders of the Company have controlling
ownership interests in other entities with which the Company conducts business.
Significant transactions between the Company and these various other entities
(described as "related parties") are summarized in the following paragraph.
The Company purchases a portion of its inventories for resale from
related parties; such purchases were $28.1 million in the thirty-nine weeks
ended October 28, 2000, versus $23.9 million in the thirty-nine weeks ended
October 30, 1999. The increase in related party purchases is primarily the
result of the opening of eight superstores and one newsstand during the period.
The Company sells a portion of its inventories to related parties; such sales
amounted to $2.3 million and $2.1 million in the thirty-nine weeks ended October
28, 2000 and October 30, 1999, respectively. This increase in related party
sales is primarily due to increased sales of bargain books to related parties.
The Company also purchases logistics services from a related party; such
services amounted to $235,000 and $348,000 in the thirty-nine weeks ended
October 28, 2000 and October 30, 1999, respectively. 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 the thirty-nine weeks ended October 28, 2000, the Company opened
eight superstores and one newsstand. Inventory and debt balances at October 28,
2000 increased as compared to January 29, 2000 due to seasonal fluctuations in
inventory levels and the eight new superstores opened during the first
thirty-nine weeks of fiscal 2001.
8
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
MARKET RISK
The Company is subject to interest rate fluctuations involving its
credit facilities. The average amount of debt outstanding under the Company's
credit facilities was $61.6 million during fiscal 2000. 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 with a five year
term 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
5.78%. The swap agreement expires on February 9, 2003. Also, on May 14, 1996,
the Company entered into an interest rate swap agreement with a ten year term
which carries a notional principal amount of $7.5 million. The swap effectively
fixes the interest rate on $7.5 million of variable rate debt at 6.98%. The swap
agreement expires on June 7, 2006. The counter party to the interest rate swaps
is one of the Company's primary banks. The Company believes the credit and
liquidity risk of the counter party failing to meet its obligation is remote as
the company settles its interest position with the bank on a quarterly basis.
9
<PAGE> 10
II - OTHER INFORMATION
ITEM 1: 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 2: Changes in Securities
None
ITEM 3: Defaults Upon Senior Securities
None
ITEM 4: Submission of Matters of Vote of Security-Holders
None
ITEM 5: Other Information
None
ITEM 6: Exhibits and Reports on Form 8-K
(A) Exhibits
Exhibit 3i Certificate of Incorporation of Books-A-Million,
Inc. (incorporated herein by reference to Exhibit 3.1 in the
Company's Registration Statement on Form S-1 (Capital
Registration No. 33-52256))
Exhibit 3ii By-Laws of Books-A-Million, Inc. (incorporated
herein by reference to Exhibit 3.2 in the Company's
Registration Statement on Form S-1 (Capital Registration No.
33-52256))
Exhibit 27 Financial Data Schedule (for SEC use only)
(B) Reports on Form 8-K
There were no reports filed on Form 8-K during the thirteen
week period ended October 28, 2000
10
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned duly authorized.
BOOKS-A-MILLION, INC.
Date: December 12, 2000
by: /s/ Clyde B. Anderson
----------------------------
Clyde B. Anderson
Chief Executive Officer
Date: December 12, 2000
by: /s/ Richard S. Wallington
----------------------------
Richard S. Wallington
Chief Financial Officer
