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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 29, 2000
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
17, 2000 (based on the closing sale price as reported on the NASDAQ National
Market on such date), was $50,797,958.
The number of shares outstanding of the Registrant's Common Stock as of
April 17, 2000 was 18,091,815.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Stockholders for the fiscal year ended
January 29, 2000 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 6, 2000 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 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
initiative ; 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 offers its products over the Internet at
Booksamillion.com and Joemuggs.com. The Company is also a wholesaler of books
to, among others, bookstores, wholesale clubs, supermarkets, department stores
and mass merchandisers. Additionally, the Company has a subsidiary which
provides website development and maintenance services.
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.
("NetCentral").
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 135 Books-A-Million superstores as
of January 29, 2000.
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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 24 combination stores as of January 29, 2000.
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 21 traditional bookstores as of January 29, 2000.
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. The
Company is assisted in its Internet development efforts through its wholly owned
subsidiary, NetCentral, Inc.
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 music inventory from one supplier and
substantially all of its magazines from another supplier, each of which is a
related party and the majority of its collectors' supplies from one supplier. No
one vendor accounted for more than 8.7% of the Company's overall merchandise
purchases in the fiscal year ended January 29, 2000. 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,"
"Bambeanos," "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 2,800
full-time associates and 2,100 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 the
tractors that pull the company owned 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
page 24 of the Annual Report to Stockholders for the year ended January 29, 2000
is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information under the heading "Selected Consolidated Financial
Data" for the years ended February 3, 1996, through January 29, 2000 on page 4
of the Annual Report to Stockholders for the year ended January 29, 2000, 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 5 through 7 of the
Annual Report to Stockholders for the year ended January 29, 2000 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 $62.0 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 6.78%. The swap agreement expires on February 9, 2003. The counter party to
the interest rate swap 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.
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 29, 2000 are incorporated herein by reference:
Consolidated Balance Sheets as of January 29, 2000 and January 30,
1999.
Consolidated Statements of Operations for the Fiscal Years Ended
January 29, 2000, January 30, 1999 and January 31, 1998.
Consolidated Statements of Stockholders' Investment for the Fiscal
Years Ended January 29, 2000, January 30, 1999 and January 31, 1998.
Consolidated Statements of Cash Flows for the Fiscal Years Ended
January 29, 2000, January 30, 1999 and January 31, 1998.
Notes to Consolidated Financial Statements.
Report of Independent Public Accountants.
The information under the heading "Summary of Quarterly Results
(Unaudited)" on page 22 of the Annual Report to Stockholders for the
Fiscal Years Ended January 29, 2000 and January 30, 1999 are
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 2003", "Incumbent Directors -
Term Expiring 2001" and "Incumbent Directors - Term Expiring 2002" on pages 3
and 4 of the Proxy Statement for the Annual Meeting of Stockholders to be held
June 6, 2000, 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:
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<CAPTION>
NAME AGE POSITION WITH THE COMPANY
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Clyde B. Anderson 39 Chairman of the Board and Chief Executive Officer
Sandra B. Cochran 41 President and Secretary
Terrance G. Finley 46 President, Booksamillion.com
Richard S. Wallington 41 Chief Financial Officer
</TABLE>
Clyde B. Anderson has served as a director of the Company since August
1987. Mr. Anderson has served as the Chairman of the Board of the Company since
January 2000 and the Chief Executive Officer of the Company since July 1992. Mr.
Anderson served as the President of the Company from November 1987 to August
1999. From November 1987 to March 1994, Mr. Anderson also served as the
Company's Chief Operating Officer. Mr. Anderson 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 and the brother of
Terry C. Anderson, both members of the Company's Board of Directors.
Sandra B. Cochran has served as President of the Company since August
1999 and Secretary since June 1998. Ms. Cochran served as the Executive Vice
President from February 1996 to August 1999 and as Chief Financial Officer from
September 1993 to August 1999. Ms. Cochran previously served as Vice President
and Assistant Secretary of the Company from August 1992 to September 1993. 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.
Richard S. Wallington has served as the Chief Financial Officer of the
Company since August 1999. Mr. Wallington served as Vice President and
Controller from September 1993 to August 1999. Prior to joining the Company, Mr.
Wallington served as the Director of Financial Reporting for Woodward & Lothrop,
a retail department store.
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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
2000.
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 6, 2000 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 6, 2000 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 6, 2000 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 29, 2000 are incorporated by
reference in Part II, Item 8:
Consolidated Balance Sheets as of January 29, 2000 and January 30,
1999.
Consolidated Statements of Operations for the Fiscal Years Ended
January 29, 2000, January 30, 1999 and January 31, 1998.
Consolidated Statements of Stockholders' Investment for the Fiscal
Years Ended January 29, 2000, January 30, 1999 and January 31, 1998.
Consolidated Statements of Cash Flows for the Fiscal Years Ended
January 29, 2000, January 30, 1999 and January 31, 1998.
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
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<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 (incorporated
by reference to Exhibit 10.2 to Annual Report on Form
10-K for the fiscal year ended January 30, 1999, File
No. 0-20664, filed on April 30, 1999).
*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.
*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).
</TABLE>
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<TABLE>
<S> <C>
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, NationsBank, N.A.
and SouthTrust Bank, National Association 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 10.14 to
Annual Report on Form 10-K for the fiscal year ended
January 30, 1999, File No. 0-20664, filed on April
30, 1999).
10.15 -- Third amendment to Short-Term Credit Agreement, dated
June 3, 1998 between the Company and AmSouth Bank of
Alabama (incorporated by reference to Exhibit 10.15
to Annual Report on Form 10-K for the fiscal year
ended January 30, 1999, File No. 0-20664, filed on
April 30, 1999).
10.16 -- Third amendment to Revolving Loan Agreement dated
June 18, 1999 between the Company and AmSouth Bank of
Alabama, SunTrust Bank, Atlanta, NationsBank, N.A.
and SouthTrust Bank, National Association and Master
Assignment and Acceptance Agreement dated November 7,
1997 between AmSouth Bank, NationsBank, N.A.,
SunTrust Bank, Atlanta and SouthTrust Bank, N.A.
13 -- Portions of the Annual Report to Stockholders for the
year ended January 29, 2000 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 29, 2000, 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 29, 2000, 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.
9
<PAGE> 12
(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).
10
<PAGE> 13
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
Chairman of the Board and Chief Executive Officer
Date: April 28, 2000
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
Chairman of the Board and Chief Executive Officer
Date: April 28, 2000
PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER:
/s/ Richard S. Wallington
- ----------------------------------------------------
Richard S. Wallington
Chief Financial Officer
Date: April 28, 2000
DIRECTORS:
/s/ Clyde B. Anderson
- ----------------------------------------------------
Clyde B. Anderson
Date: April 28, 2000
/s/ Charles C. Anderson
- ----------------------------------------------------
Charles C. Anderson
Date: April 28, 2000
<PAGE> 14
DIRECTORS:
/s/ Ronald G. Bruno
- ----------------------------------------------------
Ronald G. Bruno
Date: April 28, 2000
/s/ J. Barry Mason
- ----------------------------------------------------
J. Barry Mason
Date: April 28, 2000
/s/ Terry C. Anderson
- ----------------------------------------------------
Terry C. Anderson
Date: April 28, 2000
<PAGE> 15
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Books-A-Million, Inc.:
We have audited in accordance with auditing standards generally accepted in the
United States, 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 14, 2000. 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 14, 2000
S-1
<PAGE> 16
SCHEDULE 2.
BOOKS-A-MILLION, INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JANUARY 31, 1998, JANUARY 30, 1999 AND JANUARY 29, 2000
<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 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
FOR THE YEAR ENDED JANUARY 29, 2000:
Allowance for doubtful accounts $ 938,623 $ 898,830 $ (348,556) $1,488,897
</TABLE>
S-2
<PAGE> 17
INDEX TO 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.
*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, NationsBank, N.A.
and SouthTrust Bank, National Association 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 10.2 to
Annual Report on Form 10-K for the fiscal year ended
January 30, 1999, File No. 0-20664, filed on April
30, 1999).
10.15 -- Third amendment to Short-Term Credit Agreement, dated
June 3, 1998 between the Company and AmSouth Bank of
Alabama (incorporated by reference to Exhibit 10.2 to
Annual Report on Form 10-K for the fiscal year ended
January 30, 1999, File No. 0-20664, filed on April
30, 1999).
10.16 -- Third amendment to Revolving Loan Agreement dated
June 18, 1999 between the Company and AmSouth Bank of
Alabama, SunTrust Bank, Atlanta, NationsBank, N.A.
and SouthTrust Bank, National Association and Master
Assignment and Acceptance Agreement dated November 7,
1997 between AmSouth Bank, NationsBank, N.A.,
SunTrust Bank, Atlanta and SouthTrust Bank, N.A.
</TABLE>
<PAGE> 18
<TABLE>
<S> <C>
13 -- Portions of the Annual Report to Stockholders for the
year ended January 29, 2000 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 29, 2000, 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 29, 2000, 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.
<PAGE> 1
EXHIBIT 10.5
<PAGE> 2
EXHIBIT 10.5
BOOKS-A-MILLION, INC.
1999 AMENDED AND RESTATED
EMPLOYEE STOCK PURCHASE PLAN
SECTION 1
PURPOSE
The primary purpose of this Plan is to encourage Stock ownership by
each Eligible Employee of Books-A-Million and each Subsidiary in the belief that
such ownership will increase his or her interest in the success of
Books-A-Million and will provide an additional incentive for him or her to
remain in the employ of Books-A-Million or such subsidiary. Books-A-Million
intends that this Plan constitutes an "employee stock purchase plan" within the
meaning of Section 423 of the Code and, further, intends that any ambiguity in
this Plan or any related offering be resolved to effect such intent.
SECTION 2
DEFINITIONS
2.1. The term Account shall mean the separate bookkeeping account
which shall be established and maintained by the Plan Administrator for each
Participant for each Purchase Period to record the payroll deductions made on
his or her behalf to purchase Stock under this Plan.
2.2. The term Authorization shall mean the participation election
and payroll deduction authorization form which an Eligible Employee shall be
required to properly complete in writing and timely file with the Plan
Administrator before the end of an Offering Period in order to participate in
this Plan for the related Purchase Period.
2.3. The term Beneficiary shall mean the person described in
Section 14.
2.4. The term Books-A-Million shall mean Books-A-Million, Inc., a
corporation incorporated under the laws of the State of Delaware, and any
successor to Books-A-Million.
2.5. The term Board shall mean the board of directors of
Books-A-Million.
2.6. The term Code shall mean the Internal Revenue Code of 1986, as
amended.
2.7. The term Disability shall mean a condition which the Plan
Administrator in his or her discretion determines would be treated as a total
and permanent disability under Section 22(e)(3) of the Code.
2.8. The term Eligible Employee shall mean each employee of
Books-A-Million or a Subsidiary except:
(a) an employee who has completed less than one full and
continuous year of employment as an employee of Books-A-Million or such
Subsidiary,
<PAGE> 3
(b) an employee who customarily is employed 20 hours or less per
week by Books-A-Million or such Subsidiary,
(c) an employee who (after completing at least one full and
continuous year of employment as an employee of Books-A-Million or such
Subsidiary) customarily is employed for not more than 5 months in any calendar
year by Books-A-Million or such Subsidiary, and
(d) an employee who would own (immediately after the grant of an
option under this Plan) stock possessing 5% or more of the total combined voting
power or value of all classes of stock of Books-A-Million based on the rules set
forth in Section 423(b)(3) and Section 424 of the Code.
An employee's continuous employment by Books-A-Million or by a
Subsidiary shall not be treated as interrupted by a transfer directly between
Books-A-Million and any Subsidiary or between one Subsidiary and another
Subsidiary.
2.9. The term Exercise Date shall mean for each Purchase Period the
last day of such Purchase Period.
2.10. The term Offering Period shall mean a period which (a) shall
be set by Books-A-Million, (b) shall come before the related Purchase Period and
(c) shall continue for no more than 30 days.
2.11. The term Option Price shall mean for each Purchase Period the
lesser of 85% of the closing price for a share of Stock on the first day of such
Purchase Period or 85% or the closing price for a share of Stock on the last day
of such Purchase Period, as such closing price is accurately reported in The
Wall Street Journal or in any successor to The Wall Street Journal or, if there
is no such successor, any similar trade publication selected by the Plan
Administrator; For purposes of this Section 2.11 "closing price" for a share of
Stock as of a given date shall mean (a) the closing price per share of Stock on
the principal exchange on which shares of Stock are then trading (or if shares
of Stock are not traded on such date, then on the next preceding date on which a
trade occurred), or (b) if the Stock is not traded on an exchange but is quoted
on NASDAQ or a successor quotation system, the mean between the closing
representative bid and asked prices for the stock, or (c) if Stock is not
publicly traded on an exchange and not quoted on NASDAQ or a successor quotation
system, the fair market value per share of the Stock as established by the Plan
Administrator acting in good faith.
2.12. The term Participant shall mean for each Purchase Period an
Eligible Employee who has satisfied the requirements set forth in Section 7 of
the Plan for such Purchase Period.
2.13. The term Participating Employer shall for each Participant, as
of any date, mean Books-A-Million or a Subsidiary, whichever employs such
Participant as of such date.
2.14. The term Plan shall mean this Books-A-Million, Inc. 1999
Amended and Restated Employee Stock Purchase Plan (which prior to April 19, 1999
was known as the Books-A-Million, Inc. Employee Stock Purchase Plan) as
effective as of the date set forth in Section 3 and as thereafter amended from
time to time.
2.15. The term Plan Administrator shall mean the person or persons
appointed by the Board to administer this Plan.
2.16. The term Purchase Period shall mean a 12 consecutive month
period which shall begin on a date (within the 15 day period which immediately
follows the end of the related Offering Period) set by Books-A-Million.
2.17. The term Retirement shall mean a termination of employment
after reaching at least age 55 and completing at least 10 years of continuous
employment with Books-A-Million or
-2-
<PAGE> 4
a Subsidiary (where such continuous employment shall be determined using the
same rules used to determine whether an employee is an Eligible Employee).
2.18. The term Stock shall mean the $ .01 par value common stock of
Books-A-Million.
2.19. The term Subsidiary shall mean each corporation (a) which is
in an unbroken chain of corporations beginning with Books-A-Million in which
each corporation in such chain (except for the last corporation in such chain)
owns stock possessing 80% or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain and (b) which
the Plan Administrator has designated as eligible to participate in this Plan.
SECTION 3
EFFECTIVE DATE
This Plan was originally known as the Books-A-Million, Inc. Employee
Stock Purchase Plan and was first effective as of September 17, 1992. Effective
as of April 19, 1999, the Plan is amended and restated in its entirety and the
Plan is renamed the Books-A-Million, Inc. 1999 Amended and Restated Employee
Stock Purchase Plan. The Books-A-Million, Inc. 1999 Amended and Restated
Employee Stock Purchase Plan will be submitted for the approval of the
Books-A-Million Shareholders within 12 months after the Board's initial adoption
of the Plan. Options to purchase shares of Stock in excess of the 100,000 shares
of Stock available for purchase under the Plan prior to this amendment and
restatement of the Plan may be granted prior to such shareholder approval;
provided, however, that such options shall not be exercisable prior to the time
the Books-A-Million, Inc. 1999 Amended and Restated Employee Stock Purchase Plan
is approved by the shareholders; provided, further, that if such shareholder
approval has not been obtained by the end of said 12-month period, all options
to purchase shares of Stock in excess of the 100,000 shares of Stock available
for purchase under the Plan prior to this amendment and restatement of the Plan
shall thereupon be canceled and become null and void.
SECTION 4
OFFERINGS
Options to purchase shares of Stock shall be offered to Participants in
accordance with this Plan from time to time at the discretion of the Board;
provided, however, that there shall be no more than one Offering Period in
effect at any time and that there shall be no more than one Purchase Period in
effect at any time.
SECTION 5
STOCK AVAILABLE FOR OPTIONS
There shall be an aggregate of 200,000 shares of Stock available for
purchase from Books-A-Million upon the exercise of options granted under Section
9 of this Plan (including the 100,000 shares of Stock available for purchase
under the Plan prior to this amendment and restatement of the Plan). Any shares
of Stock which are subject to options granted as of the first day of a Purchase
Period but which are not purchased on the related Exercise Date shall again
become available under this Plan.
-3-
<PAGE> 5
SECTION 6
ADMINISTRATION
The Plan Administrator shall be responsible for the administration of
this Plan and shall have the power in connection with such administration to
interpret this Plan and to take such other action in connection with such
administration as the Plan Administrator deems necessary or equitable under the
circumstances. The Plan Administrator also shall have the power to delegate the
duty to perform such administrative functions as the Plan Administrator deems
appropriate under the circumstances. Any person to whom the duty to perform an
administrative function is delegated shall act on behalf of and shall be
responsible to the Plan Administrator for such function. Any action or inaction
by or on behalf of the Plan Administrator under this Plan shall be final and
binding on each Eligible Employee, each Participant and on each other person who
makes a claim under this Plan based on the rights, if any, of any such Eligible
Employee or Participant under this Plan.
SECTION 7
PARTICIPATION
Each person who is an Eligible Employee on the first day of an Offering
Period shall satisfy the requirements to be a Participant in this Plan for the
related Purchase Period if:
(a) he or she properly completes in writing and files an
authorization with the Plan Administrator on or before the last day of such
Offering Period to purchase shares of Stock pursuant to the option granted under
Section 9, and
(b) he or she remains an Eligible Employee throughout the period
which begins on the first day of such Offering Period and ends on the first day
of the related Purchase Period. An Authorization shall require an Eligible
Employee to provide such information and to take such action as the Plan
Administrator in his or her discretion deems necessary or helpful to the orderly
administration of this Plan, including specifying (in accordance with Section 9)
his or her payroll deductions to purchase shares of Stock pursuant to the option
granted under Section 9 and designating a Beneficiary. A Participant's status as
such shall terminate for a Purchase Period (for which he or she has an effective
Authorization) at such time as his or her Account has been withdrawn under
Section 12 or Section 13 or the purchases and distributions contemplated under
Section 10 or Section 13 with respect to his or her Account have been completed,
whichever comes first.
SECTION 8
PAYROLL DEDUCTIONS
(a) Initial Authorization. Each Participant's Authorization made
under Section 7 shall specify the specific dollar amount which he or she
authorizes his or her Participating Employer to deduct from his or her
compensation each pay day during the Purchase Period for which such
Authorization is in effect to purchase shares of Stock pursuant to the option
granted under Section 9, provided:
-4-
<PAGE> 6
(1) the total of such dollar amount shall (based on the
assumption that there shall be 26 pay days in such Purchase Period) not
be less than $100.00, and
(2) the total of such dollar amount shall (based on the
assumption that there shall be 26 pay days in such Purchase Period) not
be more than $5,000.00.
(b) Subsequent Authorization. A Participant shall have the right
to make one amendment to an Authorization after the end of an Offering Period to
reduce or to stop the payroll deductions which he or she previously had
authorized for the related Purchase Period, and such reduction shall be
effective as soon as practicable after the Plan Administrator actually receives
such amended Authorization.
(c) Account Credits, General Assets and Taxes. All payroll
deductions made for a Participant shall be credited to his or her Account as of
the pay day as of which the deduction is made. All payroll deductions shall be
held by Books-A-Million, by Books-A-Million's agent or by one, or more than one,
Subsidiary (as determined by the Plan Administrator) as part of the general
assets of Books-A-Million or any such Subsidiary, and each Participant's right
to the payroll deductions credited to his or her Account shall be those of a
general and unsecured creditor. Books-A-Million, Books-A-Million's agent or such
Subsidiary shall have the right to withhold on payroll deductions to the extent
such person deems necessary or appropriate to satisfy applicable tax laws.
(d) No Cash Payments. A Participant may not make any contribution
to his or her Account except through payroll deductions made in accordance with
this Section 8.
SECTION 9
GRANTING OF OPTION
(a) General Rule. Subject to Section 9(b) and Section 9(c), each
person who is a Participant for a Purchase Period automatically shall be granted
by operation of this Plan an option as of the first day of such Purchase Period
to purchase the number of shares of Stock determined by the Plan Administrator
by dividing the total payroll deductions which he or she has elected to make for
such Purchase Period under Section 7 (based on the assumption that there will be
26 pay days in such Purchase Period) by the Option Price for a share of Stock as
determined as of the first day of such Purchase Period, and rounding down to the
nearest whole number. Each such option shall be exercisable only in accordance
with the terms of this Plan.
(b) Statutory Limitation. No option granted by operation of this
Plan to any Eligible Employee under Section 9(a) shall permit his or her rights
to purchase shares of Stock under this Plan or under any other employee stock
purchase plan (within the meaning of Section 423 of the Code) or any other
shares of Stock under any other employee stock purchase plans (within the
meaning of Section 423 of the Code) of Books-A-Million and any of its
subsidiaries (within the meaning of Section 424(f) of the Code) to accrue
(within the meaning of Section 423(b)(8) of the Code) at a rate which exceeds
$25,000 of the fair market value of such Stock for any calendar year. Such fair
market value shall be determined as of the first day of the Purchase Period for
which the option is granted.
(c) Available Shares of Stock. If the number of shares of Stock
available for purchase for any Purchase Period is insufficient to cover the
shares which Participants have elected to purchase through effective
Authorizations, then each Participant's option to purchase shares of Stock for
such Purchase Period shall be reduced to equal the number of shares of Stock
-5-
<PAGE> 7
(rounded down to nearest whole number ) which the Plan Administrator shall
determine by multiplying the number of shares of Stock available for options for
such Purchase Period by a fraction, the numerator of which shall be the number
of shares of Stock for which such Participant would have been granted an option
under Section 9(a) if sufficient shares were available and the denominator of
which shall be the total number of shares of Stock for which options would have
been granted to all Participants under Section 9(a) if sufficient shares were
available.
SECTION 10
EXERCISE OF OPTION
(a) General Rule. Unless a Participant files an amended
Authorization under Section 10(b) or Section 12 on or before the Exercise Date
for a Purchase Period for which he or she has an effective Authorization, his or
her option shall be exercised automatically on such Exercise Date for the
purchase of as many whole shares of Stock subject to such option as the balance
credited to his or her Account as of that date will purchase at the Option Price
for such shares of Stock if he or she also is an Eligible Employee on such
Exercise Date.
(b) Partial Exercise. A Participant may file an amended
Authorization under this Section 10 with the Plan Administrator on or before an
Exercise Date to elect, effective as of such Exercise Date, to exercise his or
her option for a specific number of whole shares of stock (which shall be less
than the whole number which the entire balance credited to his or her Account
would purchase) and to withdraw in cash the remaining balance credited to his or
her Account (without interest) as of such date after giving effect to such
partial exercise, and any such amended Authorization shall be effective only if
such Participant is an Eligible Employee on such Exercise Date.
(c) Automatic Refund; Balance Carry Forward. If a Participant's
Account has a remaining cash balance after his or her option has been exercised
as of an Exercise Date under Section 10 (a), such balance automatically shall be
refunded to the Participant in cash (without interest) as soon as practicable
following such Exercise Date; provided, however, that the Plan Administer may in
its discretion provide that such balance shall be carried forward to the next
Purchase Period unless the Participant has elected to withdraw from the Plan
pursuant to Section 12 hereof.
SECTION 11
DELIVERY
A stock certificate representing any shares of Stock purchased upon the
exercise of an option under this Plan shall be delivered to the Participant
registered in (a) his or her name or, if the Participant so directs on his or
her Authorization filed with the Plan Administrator on or before the Exercise
Date for such option and if permissible under applicable law, (b) the names of
the Participant and one such other person as may be designated by the
Participant, as joint tenants with rights of survivorship. No Participant (or
any person who makes a claim through a Participant) shall have any interest in
any shares of Stock subject to an option until such option has been exercised
and the related shares of Stock actually have been delivered to such person.
-6-
<PAGE> 8
SECTION 12
VOLUNTARY ACCOUNT WITHDRAWAL
A Participant may elect to withdraw the entire balance credited to his
or her Account for a Purchase Period by completing in writing and filing an
amended Authorization with the Plan Administrator on or before the Exercise Date
for such period. If a Participant makes such a withdrawal election, such balance
shall be paid to him or her in cash (without interest) as soon as practicable
after such amended Authorization is filed, and no further payroll deductions
shall be made on his or her behalf for the remainder of such Purchase Period.
SECTION 13
TERMINATION OF EMPLOYMENT
(a) Death, Disability or Retirement. If a Participant's employment
by a Participating Employer terminates as a result of his or her Death,
Disability or Retirement on of before the Exercise Date for a Purchase Period
and if such Participant or, in the event he or she dies, his or her Beneficiary
timely makes an irrevocable election in writing under this Section 13(a), such
person shall have the right:
(1) to withdraw the Participant's entire Account in cash
(without interest), or
(2) to apply the Participant's entire Account to purchase
whole shares of Stock at the
Option Price for such Purchase Period as of the related Exercise Date.
Any election made under this Section 13(a) shall be irrevocable and shall be
timely only if actually delivered to the Plan Administrator on or before the
earlier of (i) the Exercise Date for such Purchase Period or (ii) the last day
of the 3 consecutive months period which begins on the last day the Participant
was an Eligible Employee. If no timely election is made under this Section
13(a), a Participant shall be deemed to have elected the cash alternative set
forth in Section 13(a)(1). If the purchase alternative set forth in Section
13(a)(2) is elected, the certificate representing the shares of Stock purchased
shall be delivered as soon as administratively practicable to the Participant
or, in the event he or she dies, to his or her Beneficiary. Finally, if a
Participant's Account has a remaining balance after his or her option has been
exercised under this Section 13(a), such balance automatically shall be refunded
to the Participant or, in the event he or she dies, to his or her Beneficiary in
cash (without interest) as soon as practicable after such exercise.
(b) Other Terminations. If a Participant's employment as an
Eligible Employee terminates on or before the Exercise Date for a Purchase
Period for any reason whatsoever other than his or her Death, Disability or
Retirement, his or her Account automatically shall be distributed as if he or
she has elected to withdraw his or her Account in cash under Section 12
immediately before the date his or her employment had so terminated.
(c) Transfers. If a Participant is transferred directly between
Books-A-Million and a Subsidiary or between one Subsidiary and another
Subsidiary while he or she has an Authorization in effect, such Authorization
shall (subject to all the terms and conditions of this Plan) remain in effect.
-7-
<PAGE> 9
SECTION 14
DESIGNATION OF BENEFICIARY
A Participant shall designate on his or her Authorization a Beneficiary
(a) who shall act on his or her behalf if the Participant dies before the end of
a Purchase Period and (b) who shall receive the Stock, if any, and cash, if any,
to the Participant's credit under this Plan if the Participant dies after the
end of a Purchase Period but before the delivery of the certificate representing
such shares of Stock, if any, and the cash, if any, to his or her credit in such
Account. Such designation may be revised in writing at any time by the
Participant by filing an amended Authorization, and his or her revised
designation shall be effective at such time as the Plan Administrator receives
such amended Authorization. If a deceased Participant fails to designate a
Beneficiary or, if no person so designated survives the Participant or, if after
checking his or her last known mailing address, the whereabouts of the person so
designated are unknown, then the Participant's Beneficiary shall be determined
by the Plan Administrator in accordance with the Participant's will or the
applicable laws of descent and distribution.
SECTION 15
TRANSFERABILITY
Neither the balance credited to a Participant's Account nor any rights
to the exercise of an option or to receive shares of Stock under this Plan may
be assigned, encumbered, alienated, transferred, pledged, or otherwise disposed
of in any way by a Participant during his or her lifetime or by his or her
Beneficiary or by any other person during his or her lifetime, and any attempt
to do so shall be without effect; provided, however, that the Plan Administrator
in its absolute discretion may treat any such action as an election by a
Participant to withdraw the balance credited to his or her Account in accordance
with Section 12. A Participant's right, if any, to transfer any interest in this
Plan at his or her death shall be determined exclusively under Section 13 and
Section 14.
SECTION 16
ADJUSTMENT
The number of shares of Stock covered by outstanding options granted
pursuant to this Plan and the related Option Price and the number of shares of
Stock available under this Plan shall be adjusted by the Board in an equitable
manner to reflect any change in the capitalization of Books-A-Million,
including, but not limited to such changes as dividends paid in the form of
Stock or Stock splits. Furthermore, the Board shall adjust (in a manner which
satisfies the requirements of Section 424(a) of the Code) the number of shares
of Stock available under this Plan and the number of shares of Stock covered by
options granted under this Plan and the related Option Prices in the event of
any corporate transaction described in Section 424(a) of the Code. If any
adjustment under this Section 16 would create a fractional share of Stock or a
right to acquire a fractional share, such fractional share shall be disregarded
and the number of shares of Stock subject to options granted pursuant to this
Plan shall be the next lower number of whole shares of Stock, rounding all
fractions downward. An adjustment made under this Section 16 by the Board shall
be conclusive and binding on all affected persons.
-8-
<PAGE> 10
SECTION 17
SECURITIES REGISTRATION
If Books-A-Million shall deem it necessary to register under the
Securities Act of 1933, as amended, or any other applicable statutes, any shares
of Stock with respect to which an option shall have been exercised under this
Plan or to qualify any such shares of Stock for an exemption from any such
statutes, Books-A-Million shall take such action at its own expense before
delivery of the certificate representing such shares of Stock. If shares of
Stock are listed on any national stock exchange at the time an option to
purchase shares of Stock is exercised under this Plan, Books-A-Million whenever
required shall register shares of Stock for which such option is exercised under
the Securities Act of 1933, as amended, and shall make prompt application for
the listing on such national stock exchange of such shares, all at the expense
of Books-A-Million.
SECTION 18
AMENDMENT OR TERMINATION
This Plan may be amended by the Board from time to time to the extent
that the Board deems necessary or appropriate in light of, and consistent with,
Section 423 of the Code and the laws of the State of Delaware. The Board also
may terminate this Plan or any offering made under this Plan at any time;
provided, however, the Board shall not have the right to modify, cancel, or
amend any option outstanding after the beginning of a Purchase Period unless (a)
each Participant consents in writing to such modification, amendment or
cancellation, (b) such modification only accelerates the Exercise Date for the
related Purchase Period or (c) the Board acting in good faith deems that such
action is required under applicable law.
SECTION 19
NOTICES
All Authorizations and other communications from a Participant to the
Plan Administrator under, or in connection with, this Plan shall be deemed to
have been filed with the Plan Administrator when actually received in the form
specified by the Plan Administrator at the location, or by the person,
designated by the Plan Administrator for the receipt of such Authorizations and
communications.
SECTION 20
EMPLOYMENT
No offer under this Plan shall constitute an offer of employment, and
no acceptance of an offer under this Plan shall constitute an employment
agreement. Any such offer or acceptance shall have no bearing whatsoever on the
employment relationship between any Eligible Employee and Books-A-Million or any
subsidiary of Books-A-Million, including a Subsidiary. Finally, no Eligible
Employee shall be induced to participate in this Plan by the expectation of
employment or continued employment.
-9-
<PAGE> 11
SECTION 21
HEADINGS, REFERENCES AND CONSTRUCTION
The headings to sections in this Plan have been included for
convenience of reference only. Except as otherwise expressly indicated, all
references to sections in this Plan shall be to sections in this plan. This Plan
shall be interpreted and construed in accordance with the laws of the State of
Delaware.
-10-
<PAGE> 1
EXHIBIT 10.16
<PAGE> 2
EXHIBIT 10.16
THIRD AMENDMENT TO CREDIT AGREEMENT
THIS THIRD AMENDMENT TO CREDIT AGREEMENT dated as of June 18, 1999
("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
thereto dated June 4, 1997 and a Second Amendment thereto dated June 19, 1998
(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 proceeds of which are to be
used by the Borrowers for general corporate purposes.
B. The Borrowers have applied to the Lenders for a modification
to the definition of "Net Income Available for Debt Service" and the financial
covenant set forth in Section 7.8(1) of the Agreement.
C. The Lenders are willing to make such modification as requested
only if, among other things, the Borrowers enter into this Amendment.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing Recitals, the
Borrowers, the Lenders and the Agent hereby agree as follows:
Capitalized terms used in this Amendment and not otherwise defined
herein have the respective meanings attributed thereto in the Agreement.
The definition of "Net Income Available for Debt Service" set forth in
Section 1.1 of the Agreement is hereby amended to read, in its entirety, as
follows:
Net Income Available for Debt Service for any period shall
mean Consolidated Net Income (or the net deficit, if expenses and
charges exceed revenues and other proper income credits) for such
period, plus amounts that have been deducted for (i) Interest Expense,
(ii) Operating Lease Payments, (iii) depreciation, (iv) amortization
and (v) income and profit taxes in determining Consolidated Net Income
for such period.
Section 7.8(1) of the Agreement is hereby amended to read, in its
entirety, as follows:
(1) Coverage Ratio. The ratio of Net Income Available for
Debt Service for the preceding four quarters to Interest Expense and
Operating Lease Payments of BAM and the Consolidated Entities on a
consolidated basis for such period shall not be less than 1.50 to 1.0
at any time.
As consideration for the Lenders' agreement to make the modification
set forth in this Amendment, the Borrowers shall pay a fee in the amount of
$45,000 to the Agent for the account of each of the Lenders. This fee shall be
due and payable upon the execution of this Amendment and shall be fully earned
and non-refundable.
<PAGE> 3
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 Agent or the Lenders as security for or
as evidence of any of the above-described indebtedness.
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.
The Borrowers hereby certify that the organizational documents of the
Borrowers have not been amended since October 27, 1995.
The Borrowers hereby represent and warrant to the Agent and the Lenders
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.
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.
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.
This Amendment shall be governed by the laws of the State of Alabama.
[Remainder of this page intentionally blank]
2
<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 & Chief Financial Officer
AMERICAN WHOLESALE BOOK COMPANY, INC.
By: /s/ Sandra B. Cochran
---------------------
Its Executive Vice President & Chief Financial Officer
<PAGE> 5
AMSOUTH BANK
By: /s/ David A. Simmons
--------------------
Its Senior Vice President
<PAGE> 6
SUNTRUST BANK, ATLANTA
By: /s/ David J. Edge
-----------------
Its Vice President
By: /s/ Carolyn S. McMeekin
-----------------------
Its Corporate Banking Officer
<PAGE> 7
NATIONSBANK, N.A.
By: /s/ David Jackson
------------------
Its Senior Vice President
<PAGE> 8
SOUTHTRUST BANK, NATIONAL ASSOCIATION
By: /s/ Chris Peck
---------------
Its Commercial Loan Officer
<PAGE> 9
AMSOUTH BANK, as Agent
By: /s/ David A. Simmons
Its Senior Vice President
<PAGE> 1
EXHIBIT 13
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
Fiscal Year Ended
----------------------------------------------------------------
(In thousands, except per share data) 1/29/00 1/30/99 1/31/98 2/1/97 2/3/96
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales $404,057 $347,877 $324,762 $278,613 $229,801
Cost of products sold 296,316 256,793 238,342 206,269 164,124
----------------------------------------------------------------
Gross profit 107,741 91,084 86,420 72,344 65,677
Operating, selling and administrative expenses 80,117 66,394 59,260 50,636 43,559
Depreciation and amortization 13,830 12,974 11,588 9,540 6,833
Store closing charge 2,945
Operating profit ---------------------------------------------------------------
13,794 11,716 15,572 12,168 12,340
Interest expense, net 4,211 4,435 4,331 2,826 474
Income before income taxes ----------------------------------------------------------------
9,583 7,281 11,241 9,342 11,866
Provision for income taxes 3,641 2,767 4,272 3,550 4,390
----------------------------------------------------------------
Net income $ 5,942 $ 4,514 $ 6,969 $ 5,792 $ 7,476
================================================================
Weighted average number of shares outstanding - basic 17,981 17,497 17,425 17,405 17,371
Net income per share - basic $ 0.33 $ 0.26 $ 0.40 $ 0.33 $ 0.43
================================================================
Weighted average number of shares outstanding - diluted 18,250 17,554 17,428 17,580 17,641
Net income per share - diluted $ 0.33 $ 0.26 $ 0.40 $ 0.33 $ 0.42
================================================================
<CAPTION>
As of
----------------------------------------------------------------
1/29/00 1/30/99 1/31/98 2/1/97 2/3/96
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital $ 93,872 $ 84,022 $ 82,771 $ 70,629 $ 54,693
Property and equipment, net 64,232 67,377 65,814 63,147 49,253
Total assets 286,785 271,551 245,816 233,539 190,933
Long-term debt 35,936 36,944 45,240 37,645 14,087
Stockholders' investment 121,405 115,022 103,485 96,420 90,455
</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 the Internet and the Company's Internet initiative; 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, stockholders and prospective investors are
cautioned not to place undue reliance on such forward-looking statements. The
Company disclaims any obligation to update any such factors or to publicly
announce the results of any of the forward-looking statements contained herein
to reflect future events or developments.
4
<PAGE> 2
Management's Discussion & Analysis of Financial Condition & Results of
Operations
GENERAL
The Company was founded in 1917 and currently operates 180 retail bookstores,
including 135 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 operations data expressed as a
percentage of net sales for the periods presented.
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------
1/29/00 1/30/99 1/31/98
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Gross profit 26.6% 26.2% 26.6%
Operating, selling and administrative expenses 19.8% 19.1% 18.2%
Depreciation and amortization 3.4% 3.7% 3.6%
Operating profit 3.4% 3.4% 4.8%
Interest expense, net 1.0% 1.3% 1.3%
Income before income taxes 2.4% 2.1% 3.5%
Provision for income taxes 0.9% 0.8% 1.3%
Net income 1.5% 1.3% 2.2%
</TABLE>
FISCAL 2000 COMPARED TO FISCAL 1999
Net sales increased $56.2 million, or 16.1%, to $404.1 million in fiscal 2000
from $347.9 million in fiscal 1999. Comparable store sales increased 8.2% for
fiscal year 2000. The increase in net sales resulted from net sales generated by
12 new stores opened during fiscal 2000, and 11 new stores opened in the second
half of fiscal 1999. In addition, the Company closed five underperforming stores
in fiscal 2000.
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 $16.6 million, or 18.3%, to $107.7 million in fiscal 2000
from $91.1 million in fiscal 1999. Gross profit as a percentage of net sales
increased to 26.6% in fiscal 2000 from 26.2% in fiscal 1999, primarily due to
decreased occupancy costs and lower warehouse distribution costs as a percentage
of net sales.
Operating, selling and administrative expenses increased $13.7 million, or
20.7%, to $80.1 million in fiscal 2000, from $66.4 million in fiscal 1999.
Operating, selling and administrative expenses as a percentage of net sales
increased to 19.8% in fiscal 2000 from 19.1% in fiscal 1999, primarily due to
costs incurred related to the development of new business opportunities.
Depreciation and amortization increased $0.8 million, or 6.6%, to $13.8 million
in fiscal 2000 from $13.0 million in fiscal 1999. Depreciation and amortization
as a percentage of net sales decreased to 3.4% in fiscal 2000 from 3.7% in
fiscal 1999, primarily the result of lower capital expenditures due to fewer
stores opened in fiscal 2000 than in the previous year.
5
<PAGE> 3
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF
OPERATIONS
Net interest expense was relatively constant with last year at $4.2 million in
fiscal 2000 versus net interest expense of $4.4 million in fiscal 1999.
FISCAL 1999 COMPARED TO 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 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
programs, 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
opened 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.
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.
6
<PAGE> 4
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF
OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company has a revolving credit facility that allows borrowings up to $90.0
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 $10.0
million, which is subject to annual renewal. As of January 29, 2000, $27.5
million was outstanding under these facilities combined. Additionally, as of
January 29, 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 $13.5 million in fiscal 2000. These
expenditures were primarily used to open new stores, perform renovations and
make improvements to existing stores, and investments in management information
systems. Management estimates that capital expenditures for fiscal 2001 will be
approximately $19.3 million and that such amounts will be used primarily for new
stores, renovation and improvements to existing stores, expansion of existing
warehouse facilities, 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 2001.
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. Related party inventory purchases
decreased in fiscal 2000 due to lower related party magazine purchases. Related
party sales transactions also decreased in fiscal 2000 due to lower related
party bargain book sales. 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 2000, the Company opened 12 new superstores. The store openings
resulted in increased inventory and property and equipment balances at January
29, 2000, as compared to January 30, 1999.
YEAR 2000 COMPLIANCE
During fiscal 2000, the Company evaluated, remediated and tested its systems
in order to become Year 2000 compliant. The total costs incurred in fiscal 2000,
to meet this objective, totaled $496,000. To date, the Company is unaware of any
Year 2000 compliance issues for the Company, its key suppliers and its key
business services partners.
7
<PAGE> 5
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
As of
-----------------------
(Dollars in thousands) 1/29/00 1/30/99
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and temporary cash investments $ 4,920 $ 4,322
Accounts receivable, net of allowance for doubtful accounts of $1,489 and $939, respectively 8,781 12,282
Related party receivables 4,161 3,998
Inventories 194,624 175,211
Prepayments and other 3,339 2,938
Deferred income taxes 5,084 3,715
-----------------------
Total Current Assets 220,909 202,466
-----------------------
PROPERTY AND EQUIPMENT:
Land 628 628
Buildings 5,442 7,142
Equipment 40,646 33,087
Furniture and fixtures 35,904 34,416
Leasehold improvements 42,235 41,434
Construction in process 599 299
-----------------------
125,454 117,006
Less accumulated depreciation and amortization 61,222 49,629
-----------------------
Net Property and Equipment 64,232 67,377
-----------------------
OTHER ASSETS:
Goodwill, net 1,453 1,495
Other 191 213
-----------------------
Total Other Assets 1,644 1,708
-----------------------
TOTAL ASSETS $ 286,785 $ 271,551
=======================
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Accounts payable:
Trade $ 94,090 $ 92,176
Related party 9,415 9,014
Accrued income taxes 2,092 476
Accrued expenses 20,970 16,778
Current portion of long-term debt 470 0
-----------------------
TOTAL CURRENT LIABILITIES 127,037 118,444
-----------------------
LONG-TERM DEBT 35,936 36,944
-----------------------
DEFERRED INCOME TAXES 2,407 1,141
-----------------------
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, 18,080,646 and 18,016,525 shares issued -- --
and outstanding at January 29, 2000 and January 30, 1999, respectively 181 180
Additional paid-in capital 70,564 70,124
Treasury stock at cost (81,600 shares at January 29, 2000 and January 30, 1999) (252) (252)
Retained earnings 50,912 44,970
-----------------------
TOTAL STOCKHOLDERS' INVESTMENT 121,405 115,022
-----------------------
TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT $ 286,785 $ 271,551
=======================
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
8
<PAGE> 6
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Fiscal Year Ended
----------------------------------------
(In thousands, except per share data) 1/29/00 1/30/99 1/31/98
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 404,057 $ 347,877 $ 324,762
Cost of products sold, including warehouse distribution and store occupancy costs(1) 296,316 256,793 238,342
----------------------------------------
GROSS PROFIT 107,741 91,084 86,420
Operating, selling and administrative expenses 80,117 66,394 59,260
Depreciation and amortization 13,830 12,974 11,588
----------------------------------------
OPERATING PROFIT 13,794 11,716 15,572
Interest expense, net 4,211 4,435 4,331
----------------------------------------
INCOME BEFORE INCOME TAXES 9,583 7,281 11,241
Provision for income taxes 3,641 2,767 4,272
----------------------------------------
NET INCOME $ 5,942 $ 4,514 $ 6,969
========================================
Weighted average number of shares outstanding - basic 17,981 17,497 17,425
----------------------------------------
NET INCOME PER SHARE - BASIC $ 0.33 $ 0.26 $ 0.40
========================================
Weighted average number of shares outstanding - diluted 18,250 17,554 17,428
----------------------------------------
NET INCOME PER SHARE - DILUTED $ 0.33 $ 0.26 $ 0.40
========================================
</TABLE>
(1) Inventory purchases from related parties were $34,548, $36,836 and $32,303,
respectively, for the periods presented above.
The accompanying notes are an integral part of these consolidated statements.
9
<PAGE> 7
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
<TABLE>
<CAPTION>
Common Stock Additional Treasury Stock
---------------- Paid-In --------------- Retained
(In thousands) Shares Amount Capital Shares Amount Earnings
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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 461 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 18,017 180 70,124 82 (252 44,970
Net income -- -- -- -- -- 5,942
Issuance of stock for employee stock purchase plan 16 -- 77 -- -- --
Exercise of stock options 48 1 306 -- -- --
Tax benefit from exercise of stock options -- -- 57 -- -- --
------------------------------------------------------
BALANCE, JANUARY 29, 2000 18,081 $ 181 $ 70,564 82 $ (252 $ 50,912
======================================================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
10
<PAGE> 8
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Fiscal Year Ended
------------------------------------------
(Dollars in thousands) 1/29/00 1/30/99 1/31/98
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,942 $ 4,514 $ 6,969
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 13,830 12,974 11,588
(Gain) loss on sale of property 1,156 (472) 44
Deferred income tax provision, net (103) (912) (97)
(Increase) decrease in assets:
Accounts receivable, net 3,501 (550) 1,466
Related party receivables (163) 3,561 (1,705)
Inventories (19,413) (23,899) (9,882)
Prepayments and other (444) (2,223) (214)
Increase (decrease) in liabilities:
Accounts payable 2,315 22,258 (2,465)
Accrued income taxes 1,673 (321) 769
Accrued expenses 4,178 2,817 (718)
------------------------------------------
Total adjustments 6,530 13,233 (1,214)
------------------------------------------
Net cash provided by operating activities 12,472 17,747 5,755
------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment 1,742 1,627 42
Capital expenditures (13,462) (15,682) (14,355)
------------------------------------------
Net cash used in investing activities (11,720) (14,055) (14,313)
------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options and purchase of shares
under employee stock purchase plan 384 4,215 96
Contributions from certain stockholders -- 1,054 --
Purchase of treasury stock -- (252) --
Issuance of notes payable 1,409 -- --
Borrowings under credit facilities 169,103 153,475 152,296
Repayments under credit facilities (171,050) (161,771) (144,701)
------------------------------------------
Net cash provided by (used in) financing activities (154) (3,279) 7,691
------------------------------------------
NET INCREASE (DECREASE) IN CASH AND TEMPORARY CASH INVESTMENTS 598 413 (867)
CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING OF YEAR 4,322 3,909 4,776
------------------------------------------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF YEAR $ 4,920 $ 4,322 $ 3,909
========================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 4,318 $ 4,625 $ 4,276
Income taxes, net of refunds $ 1,882 $ 4,026 $ 4,023
========================================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE> 9
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 180 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 and operates an internet business. 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 2000, 1999 and 1998 were 52-week
periods.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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 29, 2000 and January 30, 1999, accumulated amortization of goodwill was
$252,000 and $210,000, respectively. The Company continually evaluates whether
events or
12
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 as incurred.
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, both reported and unreported.
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 stockholders 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, 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) 1/29/00 1/30/99 1/31/98
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Weighted average shares outstanding:
Basic 17,981 17,497 17,425
Dilutive effect of stock options outstanding 269 57 3
------------------------
Diluted 18,250 17,554 17,428
========================
</TABLE>
13
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Options outstanding of 464,000, 619,000 and 1,557,000 for the years ended
January 29, 2000, January 30, 1999 and January 31, 1998, respectively, were not
included in the table above as they were anti-dilutive.
Disclosure of Fair Value of Financial Instruments
Statement of Financial Accounting Standards ("SFAS") No. 107, Disclosure About
Fair Value of Financial Instruments, requires all businesses to disclose the
fair value of financial instruments, both assets and liabilities recognized and
not recognized on the balance sheet, for which it is practicable to estimate
fair value. Based upon their remaining term to maturity and the current interest
environment, the estimated fair values of the Company's financial instruments
recognized on the balance sheet at January 29, 2000 and January 30, 1999
approximate their carrying values at those dates. The Company maintains an
interest rate swap agreement which fixes the interest rate for a portion of its
variable rate debt. If this swap agreement had been terminated as of January 29,
2000 the Company would have recognized a $1,100,000 benefit.
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.
New Accounting Standards
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. This statement was
adopted in fiscal 2000 and did not have a significant impact on the Company's
financial statements.
In June 1998, the Financial Accounting Standards Board ("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. 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 (January 1, 2001 for
companies with calendar-year fiscal years). This statement is not expected to
have a material effect on the Company's consolidated 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 were adopted in fiscal 2000 and did not have a significant impact on
the Company's financial statements.
14
<PAGE> 12
NOTES TO CONSOLIDATED 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 Stockholders
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.
2. INCOME TAXES
A summary of the components of the income tax provision is as follows (dollars
in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------
1/29/00 1/30/99 1/31/98
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $3,448 $3,337 $3,831
State 296 342 538
---------------------------------
3,744 3,679 4,369
---------------------------------
Deferred taxes arising from:
Depreciation 1,270 (321) 61
Accruals (522) (443) 4
Inventory (113) 25 (181)
Other (738) (173) 19
---------------------------------
(103) (912) (97)
---------------------------------
Provision for income taxes $3,641 $2,767 $4,272
=================================
</TABLE>
15
<PAGE> 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A reconciliation of the federal statutory income tax rate to the effective
income tax rate is as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------
1/29/00 1/30/99 1/31/98
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory income tax rate 34.0% 34.0% 34.0%
State income tax provision 2.8% 3.1% 3.2%
Other 1.2% 0.9% 0.8%
-------------------------------
Effective income tax rate 38.0% 38.0% 38.0%
===============================
</TABLE>
Temporary differences which created deferred tax assets and liabilities at
January 29, 2000 and January 30, 1999, are detailed below (dollars in
thousands):
<TABLE>
<CAPTION>
As of 1/29/00 As of 1/30/99
-----------------------------------------------------
Current Noncurrent Current Noncurrent
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Depreciation $ -- $(2,275) $ -- $(1,005)
Accruals 3,136 -- 2,614 --
Inventory 878 -- 765 --
Other 1,070 (132) 336 (136)
---------------------------------------------------
Deferred tax asset (liability) $5,084 $(2,407) $3,715 $(1,141)
===================================================
</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 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 non-financial covenants with which the Company is in compliance.
As of January 29, 2000 and January 30, 1999, $27.5 million and $29.4 million,
respectively, were outstanding under these credit facilities. The maximum and
average outstanding balances during fiscal 2000 were $74.6 million and $61.6
million, respectively. The outstanding borrowings as of January 29, 2000, had
interest rates ranging from 6.31% to 6.82%.
The Company is subject to interest rate fluctuations involving its credit
facilities. However, the Company uses 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 6.78%. The swap agreement expires on February
9, 2003. The counter party to the interest rate swap 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.
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
16
<PAGE> 14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
these facilities. As of January 29, 2000 and January 30, 1999, there were $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 May 11, 2004, 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.
4. LEASES
The Company leases the premises for its retail bookstores under operating
leases, which expire in various years through the year 2012. 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 best available information.
The Company also leases certain office, warehouse and retail store space from
related parties. Rental expense under these leases was approximately $674,000,
$624,000 and $411,000 in fiscal 2000, 1999 and 1998, respectively. Total minimum
future rental payments under these leases are $689,000.
Minimum future rental payments under non-cancelable operating leases having
remaining terms in excess of one year as of January 29, 2000, are as follows (in
thousands):
<TABLE>
<CAPTION>
Fiscal Year
- -----------------------------------
<S> <C>
2001 $ 23,278
2002 21,366
2003 19,502
2004 16,559
2005 16,853
Subsequent years 46,732
--------
Total $144,290
========
</TABLE>
Rental expense for all operating leases consisted of the following (in
thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------------
1/29/00 1/30/99 1/31/98
- ---------------------------------------------------------------
<S> <C> <C> <C>
Minimum rentals $23,458 $21,151 $18,171
Contingent rentals 596 425 690
-------------------------------------
Total $24,054 $21,576 $18,861
=====================================
</TABLE>
17
<PAGE> 15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 expense under this plan was $554,000, $333,000 and $238,000 in
fiscal 2000, 1999 and 1998, 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. 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 29, 2000 January 30, 1999 January 31, 1998
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year 1,335,400 $ 8.25 1,571,130 $ 7.57 1,164,060 $ 8.32
Granted 636,550 8.21 431,850 10.83 458,250 5.80
Exercised (49,160) 6.31 (460,550) 8.98 -- --
Forfeited (355,940) 8.44 (207,030) 7.25 (51,180) 9.20
---------------------------------------------------------------------------------------------
Outstanding at end of year 1,566,850 $ 8.20 1,335,400 $ 8.25 1,571,130 $ 7.57
---------------------------------------------------------------------------------------------
Exercisable at end of year 363,400 $ 8.62 315,280 $ 8.58 573,448 $ 8.86
---------------------------------------------------------------------------------------------
Weighted average fair value
of options granted $ 7.33 $ 9.30 $ 2.89
=============================================================================================
</TABLE>
During fiscal years 2000, 1999 and 1998, the Company recognized tax benefits
related to the exercise of stock options in the amount of $57,000, $2,333,000
and $0, respectively. The tax benefits were credited to paid-in capital in the
respective years.
18
<PAGE> 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes information about stock options outstanding at
January 29, 2000:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------- ----------------------------------------------
Weighted
Number Average Number
Outstanding at Remaining Weighted Exercisable at Weighted
Range of January 29, Contractual Average January 29, Average
Exercise Price 2000 Life (Years) Exercise Price 2000 Exercise Price
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 4.44 - $ 10.00 1,202,500 4.49 $ 7.17 228,650 $ 6.19
$ 10.00 - $ 16.88 364,350 3.99 $ 11.73 134,750 $ 12.75
</TABLE>
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 non-employees.
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:
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------
(In thousands except per share data) 1/29/00 1/30/99 1/31/98
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income-as reported $ 5,942 $ 4,514 $ 6,969
Net income-pro forma 5,307 4,257 6,788
Net income per share-diluted, as reported 0.33 0.26 0.40
Net income per share-diluted, pro forma 0.29 0.24 0.39
</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 1.37 with risk-free interest rates ranging from 5.10%
to 6.65%.
19
<PAGE> 17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Employee Stock Purchase Plan
The Company maintains an employee stock purchase plan under which 200,000 shares
of the Company's common stock are reserved for purchase by employees at 85% of
the fair market value of the common stock. The reserve was increased to 200,000
shares at the fiscal 1999 annual meeting of the stockholders from 100,000
shares. Of the total reserved shares, 79,059 shares have been purchased as of
January 29, 2000.
6. RELATED PARTY TRANSACTIONS
Certain 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 $34,548,000, $36,836,000 and $32,303,000 in
fiscal 2000, 1999 and 1998, respectively. The Company sells a portion of its
inventories to related parties; such sales amounted to $2,841,000, $5,301,000
and $10,273,000 in fiscal 2000, 1999 and 1998, respectively. The Company also
purchases logistics services from a related party that amounted to $445,000,
$128,000 and $0 in fiscal 2000, 1999 and 1998, respectively.
20
<PAGE> 18
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 29, 2000, and January 30, 1999, and the related consolidated statements
of operations, stockholders' investment, and cash flows for each of the three
fiscal years in the period ended January 29, 2000. 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 auditing standards generally
accepted in the United States. 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 29, 2000, and January 30, 1999, and the
results of their operations and their cash flows for each of the three fiscal
years in the period ended January 29, 2000, in conformity with accounting
principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Birmingham, Alabama
March 14, 2000
21
<PAGE> 19
SUMMARY OF QUARTERLY RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
Fiscal Year Ended January 29, 2000
------------------------------------------
First Second Third Fourth
(In thousands, except per share data) Quarter Quarter Quarter Quarter Total
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 85,127 $ 89,878 $ 91,162 $ 137,890 $ 404,057
Gross profit 22,357 23,364 22,081 39,939 107,741
Operating profit 1,517 1,196 (319) 11,400 13,794
Net income (loss) 310 19 (924) 6,537 5,942
Net income (loss) per share - basic 0.02 0.00 (0.05) 0.36 0.33
Net income (loss) per share - diluted 0.02 0.00 (0.05) 0.36 0.33
<CAPTION>
Fiscal Year Ended January 30, 1999
------------------------------------------
First Second Third Fourth
(In thousands, except per share data) 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
</TABLE>
(1) The sum of 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.
22
<PAGE> 20
CORPORATE DATA
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 29, 2000,
and January 30, 1999.
<TABLE>
<CAPTION>
Quarter Ended High Low
- -------------------------------------------------
<S> <C> <C>
January, 2000 $ 12 $ 7 5/8
October, 1999 12 3/16 7 1/2
July, 1999 16 5/8 7
April, 1999 17 8
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
</TABLE>
The closing price on April 17, 2000, was $4.50. No cash dividends have
been declared since completion of the Company's initial public offering. As of
April 17, 2000, Books-A-Million, Inc., had approximately 19,200 stockholders
based on the number of individual participants represented by security position
listings.
24
<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 on File Nos. 33-72812 and
33-86980.
ARTHUR ANDERSEN LLP
Birmingham, Alabama
April 24, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
BOOKS-A-MILLION, INC.'S CONSOLIDATED BALANCE SHEETS, CONSOLIDATED STATEMENTS OF
OPERATIONS AND CONSOLIDATED STATEMENTS OF CASH FLOWS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FOR 10-K FOR THE FIFTY-TWO WEEKS ENDED JANUARY 29,
2000.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-START> JAN-30-1999
<PERIOD-END> JAN-29-2000
<EXCHANGE-RATE> 1
<CASH> 4,920
<SECURITIES> 0
<RECEIVABLES> 14,431
<ALLOWANCES> 1,489
<INVENTORY> 194,624
<CURRENT-ASSETS> 220,909<F1>
<PP&E> 125,454
<DEPRECIATION> 61,222
<TOTAL-ASSETS> 286,785<F2>
<CURRENT-LIABILITIES> 127,037
<BONDS> 0<F3>
0<F4>
0
<COMMON> 181
<OTHER-SE> 121,224
<TOTAL-LIABILITY-AND-EQUITY> 286,785
<SALES> 404,057
<TOTAL-REVENUES> 404,057
<CGS> 296,316
<TOTAL-COSTS> 376,433
<OTHER-EXPENSES> 13,830
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,211
<INCOME-PRETAX> 9,583
<INCOME-TAX> 3,641
<INCOME-CONTINUING> 5,942
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,942
<EPS-BASIC> 0.33<F5>
<EPS-DILUTED> 0.33<F5>
<FN>
<F1>8,423-OTHER CURRENT ASSETS
<F2>1,644-OTHER ASSETS
<F3>35,936-LONG TERM DEBT
<F4>2,407-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>
