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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the quarterly period ended: April 29, 2000
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- OR -
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transaction period from to
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COMMISSION FILE NUMBER 0-20664
BOOKS-A-MILLION, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 63-0798460
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
402 INDUSTRIAL LANE, BIRMINGHAM, ALABAMA 35211
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(Address of principal executive offices) (Zip Code)
(205) 942-3737
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(Registrant's phone number including area code)
NONE
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(Former name, former address and former fiscal year, if changed
since last period)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's common stock,
as of the latest practicable date: Shares of common stock, par value $.01 per
share, outstanding as of April 29, 2000 were 18,091,815 shares.
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PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BOOKS-A-MILLION, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
ASSETS April 29, 2000 January 29, 2000
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CURRENT ASSETS: $ $
Cash and temporary cash investments 5,121 4,920
Accounts receivable, net 12,074 12,942
Inventories 205,618 194,624
Prepayments and other 3,233 3,339
Deferred income taxes 5,292 5,084
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TOTAL CURRENT ASSETS 231,338 220,909
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PROPERTY AND EQUIPMENT:
Gross property and equipment 124,938 125,454
Less-accumulated depreciation and amortization 64,415 61,222
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NET PROPERTY AND EQUIPMENT 60,523 64,232
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OTHER ASSETS:
Goodwill, net 1,442 1,453
Other 190 191
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TOTAL OTHER ASSETS 1,632 1,644
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TOTAL ASSETS $ 293,493 $ 286,785
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LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Accounts payable $ 91,560 $ 103,505
Accrued expenses 17,385 20,970
Accrued income taxes 386 2,092
Current portion of long-term debt 23,760 470
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TOTAL CURRENT LIABILITIES 133,091 127,037
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LONG TERM DEBT 35,936 35,936
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DEFERRED INCOME TAXES 2,520 2,407
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STOCKHOLDERS' INVESTMENT:
Preferred stock, $.01 par value, 1,000,000 shares -- --
authorized, no shares outstanding
Common stock, $.01 par value, 30,000,000 shares authorized, 18,091,815 and
18,080,646 shares issued and outstanding at
April 29, 2000 and January 29, 2000, respectively 181 181
Additional paid-in capital 70,634 70,564
Less treasury stock at cost (81,600 shares at April 29, 2000 (252) (252)
and January 29, 2000)
Retained earnings 51,383 50,912
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TOTAL STOCKHOLDERS' INVESTMENT 121,946 121,405
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TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT $ 293,493 $ 286,785
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See accompanying notes
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BOOKS-A-MILLION, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Thirteen Weeks Ended
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April 29, 2000 May 1, 1999
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NET SALES $ 93,099 $ 85,127
Cost of products sold (including warehouse
distribution and store occupancy costs) (1) 68,399 62,770
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GROSS PROFIT 24,700 22,357
Operating, selling and administrative
expenses 19,257 17,498
Depreciation and amortization 3,650 3,342
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OPERATING INCOME 1,793 1,517
Interest expense, net 1,034 1,017
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INCOME BEFORE INCOME TAXES 759 500
Provision for income taxes 288 190
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NET INCOME $ 471 $ 310
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WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING - BASIC 18,005 17,946
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NET INCOME PER SHARE - BASIC $ 0.03 $ 0.02
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WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING - DILUTED 18,083 18,318
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NET INCOME PER SHARE - DILUTED $ 0.03 $ 0.02
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(1) Inventory purchases from related parties were $9,901 and $8,676,
respectively, for each of the periods presented above.
SEE ACCOMPANYING NOTES
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BOOKS-A-MILLION, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
THIRTEEN WEEKS ENDED
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APRIL 29, 2000 MAY 1, 1999
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 471 $ 310
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Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization 3,650 3,342
Loss on disposal of property and equipment 465 68
Deferred income taxes (95) (201)
Changes in current assets and liabilities:
Accounts receivable 868 2,986
Inventories (10,994) (14,172)
Prepayments and other 91 (432)
Accounts payable (11,945) (10,116)
Accrued income taxes (1,706) (476)
Accrued expenses (3,590) (2,882)
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Total adjustments (23,256) (21,883)
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Net cash used in operating activities (22,785) (21,573)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (387) (1,873)
Proceeds from sale of equipment 13 1,718
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Net cash used in investing activities (374) (155)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under credit facilities 56,533 50,191
Repayments under credit facilities (33,243) (27,220)
Proceeds from sale of common stock, net 70 174
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Net cash provided by financing activities 23,360 23,145
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Net increase in cash and temporary cash investments 201 1,417
Cash and temporary cash investments at beginning of period 4,920 4,322
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Cash and temporary cash investments at end of period $ 5,121 $ 5,739
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Supplemental Disclosures of Cash Flow Information:
Cash paid during the quarter for:
Interest $ 968 $ 958
Income taxes, net of refunds $ 2,090 $ 925
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SEE ACCOMPANYING NOTES
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BOOKS-A-MILLION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of
Books-A-Million, Inc. and its Subsidiaries (the "Company") for the thirteen week
periods ended April 29, 2000 and May 1, 1999, have been prepared in accordance
with U.S. generally accepted accounting principles for interim financial
information and are presented in accordance with the requirements of Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by U.S. generally accepted accounting
principles for complete financial statements. These financial statements should
be read in conjunction with the consolidated financial statements and notes
thereto for the fiscal year ended January 29, 2000, included in the Company's
2000 Annual Report on Form 10-K. In the opinion of management, the consolidated
financial statements included herein contain all adjustments (consisting only of
normal recurring adjustments) considered necessary for a fair presentation of
the Company's financial position as of April 29, 2000, and the results of its
operations and cash flows for the thirteen week period then ended. Certain prior
year amounts have been reclassified to conform to current year presentation.
The Company has experienced, and expects to continue to experience,
significant variability in sales and net income from quarter to quarter.
Therefore, the results of the interim periods presented herein are not
necessarily indicative of the results to be expected for any other interim
period or the full year.
2. NET INCOME PER SHARE
Basic net income per share ("EPS") excludes dilution and is computed by
dividing income available to common shareholders by the weighted average number
of common shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock
are exercised or converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the Company. Diluted EPS has
been computed based on the average number of shares outstanding including the
effect of outstanding stock options, if dilutive, in each respective thirteen
week period. A reconciliation of the weighted average shares for basic and
diluted EPS is as follows:
For the Thirteen Weeks Ended
(in thousands)
April 29, 2000 May 1, 1999
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Weighted average shares outstanding:
Basic 18,005 17,946
Dilutive effect of stock options outstanding 78 372
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Diluted 18,083 18,318
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Options outstanding of 1,056,000 and 117,000 for the thirteen weeks
ended April 29, 2000 and May 1, 1999, respectively, were not included in the
table above as they were anti-dilutive.
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BOOKS-A-MILLION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. PENDING ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for
Derivative Instruments and Hedging Activities, which establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. In June
1999, the FASB issued SFAS No. 137, Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133,
which amends FASB Statement No. 133 to be effective for all fiscal years
beginning after June 15, 2000 (February 4, 2001, for Books-A-Million, Inc.).
Management does not expect this statement to have a material effect on the
Company's consolidated financial statements.
4. CONTINGENCIES
The Company is a party to various legal proceedings incidental to its
business. In the opinion of management, after consultation with legal counsel,
the ultimate liability, if any, with respect to those proceedings is not
presently expected to materially affect the financial position or results of
operations of the Company.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This document contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 that involve a
number of risks and uncertainties. A number of factors could cause actual
results, performance, achievements of the Company, or industry results to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. These factors include,
but are not limited to, the competitive environment in the book retail industry
in general and in the Company's specific market areas; inflation; economic
conditions in general and in the Company's specific market areas; the number of
store openings and closings; the profitability of certain product lines, capital
expenditures and future liquidity; liability and other claims asserted against
the Company; uncertainties related to the Internet and the Company's Internet
initiatives; and other factors referenced herein. In addition, such
forward-looking statements are necessarily dependent upon the assumptions,
estimates and dates that may be incorrect or imprecise and involve known and
unknown risks, uncertainties and other factors. Accordingly, any forward-looking
statements included herein do not purport to be predictions of future events or
circumstances and may not be realized. Given these uncertainties, shareholders
and prospective investors are cautioned not to place undue reliance on such
forward-looking statements. The Company disclaims any obligations to update any
such factors or to publicly announce the results of any revisions to any of the
forward-looking statements contained herein to reflect future events or
developments.
RESULTS OF OPERATIONS
Net sales increased 9.4% to $93.1 million in the thirteen weeks ended
April 29, 2000, from $85.1 million in the thirteen weeks ended May 1, 1999. The
increase in net sales resulted from new store sales combined with comparable
store sales increase of 6.2% for the thirteen weeks ended April 29, 2000. During
the thirteen weeks ended April 29, 2000, one superstore was opened and one
superstore and one Bookland store were closed.
Gross profit increased $2.3 million or 10.5% to $24.7 million in the
thirteen weeks ended April 29, 2000 from $22.4 million in the thirteen weeks
ended May 1, 1999. Gross profit as a percentage of net sales for the thirteen
weeks ended April 29, 2000 was relatively constant at 26.5% versus 26.3% in the
same period last year. The increase was due to lower occupancy costs as a
percentage of sales compared to last year.
Operating, selling and administrative expenses increased $1.8 million
or 10.1% to $19.3 million in the thirteen weeks ended April 29, 2000, from $17.5
million in the thirteen weeks ended May 1, 1999. Operating, selling and
administrative expenses as a percentage of net sales for the thirteen weeks
ended April 29, 2000, increased slightly to 20.7% from 20.6% in the same period
last year.
Depreciation and amortization increased $0.4 million or 9.2% to $3.7
million in the thirteen weeks ended April 29, 2000, from $3.3 million in the
thirteen weeks ended May 1, 1999. The increase in depreciation and amortization
is primarily the result of the increased number of superstores operated by the
Company.
Interest expense was constant with last year at $1.0 million in the
thirteen weeks ended April 29, 2000 and May 1, 1999.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
During the first thirteen weeks of fiscal 2000, the Company's cash
requirements have been funded with net cash from operations and with borrowings
under the Company's credit facilities. Similar to many retailers, the Company's
business is seasonal, with its highest retail sales, gross profits and net
income traditionally occurring during the fourth fiscal quarter, reflecting the
increased demand for books and gifts during the year-end, holiday selling
season. Working capital requirements are generally highest during the third
fiscal quarter and the early part of the fourth fiscal quarter due to the
seasonality of the Company's business.
The Company has a revolving credit facility that allows borrowings up
to $90 million for which no principal repayments are due until the facility
expires on June 18, 2003, and an unsecured working capital line of credit for
$10 million, which is subject to annual renewal. As of April 29, 2000, $50.8
million was outstanding under these facilities combined. Both credit facilities
have certain financial and non-financial covenants with which the Company is in
compliance. Additionally, as of April 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 $0.4 million during the
first thirteen weeks of fiscal 2001. These expenditures were primarily used for
new store expenditures and warehouse distribution purposes. Management estimates
that capital expenditures for the remainder of fiscal 2001 will be approximately
$16.9 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 the remainder of fiscal 2001.
When necessary, the Company establishes certain reserves for the
closing of under-performing stores. Management feels that this year's activity
will not significantly vary from the number of closings in the prior year.
RELATED PARTY ACTIVITIES
Certain principal stockholders of the Company have controlling
ownership interests in other entities with which the Company conducts business.
Significant transactions between the Company and these various other entities
("related parties") are summarized in the following paragraph.
The Company purchases a portion of its inventories for resale from
related parties; such purchases were $9.9 million in the thirteen weeks ended
April 29, 2000, versus $8.7 million in the thirteen weeks ended May 1, 1999. The
increase in related party purchases is primarily due to increased purchases of
collectors merchandise. The Company sells a portion of its inventories to
related parties; such sales amounted to $1.2 million and $0.5 million in the
thirteen weeks ended April 29, 2000 and May 1, 1999, respectively. This increase
in related party sales is primarily due to increased sales of bargain books to
related parties. The Company also purchases logistics services from a related
party; such services amounted to $123,000 and $101,000 in the thirteen weeks
ended April 29, 2000 and May 1, 1999, respectively. Management believes the
terms of these related party transactions are substantially equivalent to those
available from unrelated parties and, therefore, have no significant impact on
gross profit.
FINANCIAL POSITION
During the thirteen weeks ended April 29, 2000, the Company opened one
superstore and closed one superstore and one Bookland store. Inventory and debt
balances at April 29, 2000 increased as compared to January 29, 2000 due to
seasonal fluctuations in inventory levels and the new superstore opened during
the first quarter of fiscal 2001.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
MARKET RISK
The Company is subject to interest rate fluctuations involving its
credit facilities. The average amount of debt outstanding under the Company's
credit facilities was $61.6 million during fiscal 2000. However, the Company
utilizes both fixed and variable debt to manage this exposure. On February 9,
1998, the Company entered into an interest rate swap agreement with a five year
term which carries a notional principal amount of $30.0 million. The swap
effectively fixes the interest rate on $30.0 million of variable rate debt at
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.
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II - OTHER INFORMATION
ITEM 1: Legal Proceedings
The Company is a party to various legal proceedings incidental
to its business. In the opinion of management, after
consultation with legal counsel, the ultimate liability, if
any, with respect to those proceedings is not presently
expected to materially affect the financial position or
results of operations of the Company.
ITEM 2: Changes in Securities
None
ITEM 3: Defaults Upon Senior Securities
None
ITEM 4: Submission of Matters of Vote of Security-Holders
- Date of Meeting - June 6, 2000
- Annual Meeting
- Name of each director elected at meeting:
Clyde B. Anderson
Ronald G. Bruno
- Name of each director whose term of office as director continued after
the meeting:
Charles C. Anderson
J. Barry Mason
Terry C. Anderson
- Other matters voted on at Annual Meeting
i.) Ratify the appointment by the Audit Committee of the Board
of Directors of Arthur Andersen LLP to serve as the
Company's independent auditor for fiscal 2001.
- Results of votes:
Number of Votes Cast Number of Votes Cast Number of Votes
For Against Abstaining
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Election of
Clyde B. Anderson 16,759,847 354,887 --
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Ronald G. Bruno 16,828,903 285,831 --
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Item i.) above 16,916,512 182,269 15,953
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ITEM 5: Other Information
None
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ITEM 6: Exhibits and Reports on Form 8-K
(A) Exhibits
Exhibit 3i Certificate of Incorporation of Books-A-Million,
Inc. (incorporated herein by reference to Exhibit 3.1 in the
Company's Registration Statement on Form S-1 (Capital
Registration No. 33-52256))
Exhibit 3ii By-Laws of Books-A-Million, Inc. (incorporated
herein by reference to Exhibit 3.2 in the Company's
Registration Statement on Form S-1 (Capital Registration No.
33-52256))
Exhibit 27 Financial Data Schedule (for SEC use only)
(B) Reports on Form 8-K
There were no reports filed on Form 8-K during the thirteen
week period ended April 29, 2000
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned duly authorized.
BOOKS-A-MILLION, INC.
Date: June 13, 2000 by:/s/ Clyde B. Anderson
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Clyde B. Anderson
Chief Executive Officer
Date: June 13, 2000 by:/s/ Richard S. Wallington
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Richard S. Wallington
Chief Financial Officer