1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended: August 4, 2001
--------------
- OR -
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transaction period from__________to__________
COMMISSION FILE NUMBER 0-20664
BOOKS-A-MILLION, INC.
---------------------
(Exact name of registrant as specified in its charter)
DELAWARE 63-0798460
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
402 INDUSTRIAL LANE, BIRMINGHAM, ALABAMA 35211
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(Address of principal executive offices) (Zip Code)
(205) 942-3737
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(Registrant's phone number including area code)
NONE
----
(Former name, former address and former fiscal year,
if changed since last period)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No[ ]
Indicate the number of shares outstanding of each of the issuer's common stock,
as of the latest practicable date: Shares of common stock, par value $.01 per
share, outstanding as of September 14, 2001 were 18,138,122 shares.
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BOOKS-A-MILLION, INC. AND SUBSIDIARIES
INDEX
PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Condensed Consolidated Balance Sheets 3
Unaudited Condensed Consolidated Statements of Operations 4
Unaudited Condensed Consolidated Statement of Stockholders' Investment 5
Unaudited Condensed Consolidated Statements of Cash Flows 6
Notes to Unaudited Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters of Vote of Security-Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
2
3
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BOOKS-A-MILLION, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
AUGUST 4, 2001 FEBRUARY 3, 2001
-------------- ----------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,124 $ 5,282
Accounts receivable, net 10,566 10,775
Inventories 213,976 205,986
Prepayments and other 4,766 4,521
Deferred income taxes 4,898 3,791
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TOTAL CURRENT ASSETS 238,330 230,355
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PROPERTY AND EQUIPMENT:
Gross property and equipment 138,075 134,901
Less accumulated depreciation and amortization 81,464 74,242
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NET PROPERTY AND EQUIPMENT 56,611 60,659
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OTHER ASSETS:
Goodwill, net 1,389 1,410
Other 628 117
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TOTAL OTHER ASSETS 2,017 1,527
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TOTAL ASSETS $ 296,958 $ 292,541
========== ==========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Accounts payable $ 96,501 $ 102,510
Accrued expenses 19,479 22,611
Accrued income taxes -- 650
Current portion of long-term debt 17,409 460
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TOTAL CURRENT LIABILITIES 133,389 126,231
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LONG TERM DEBT 43,171 41,526
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DEFERRED INCOME TAXES 1,340 1,554
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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,
18,138,122 and 18,092,001 shares issued and outstanding at
August 4, 2001 and February 3, 2001, respectively 181 181
Additional paid-in capital 70,717 70,634
Less treasury stock at cost (1,541,250 shares at August 4, 2001
and 597,600 shares at February 3, 2001) (3,821) (1,563)
Accumulated other comprehensive income (loss) (906) 0
Retained earnings 52,887 53,978
---------- ----------
TOTAL STOCKHOLDERS' INVESTMENT 119,058 123,230
========== ==========
TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT $ 296,958 $ 292,541
========== ==========
SEE ACCOMPANYING NOTES
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4
BOOKS-A-MILLION, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
------------------------------- -------------------------------
AUGUST 4, 2001 JULY 29, 2000 AUGUST 4, 2001 JULY 29, 2000
-------------- ------------- -------------- -------------
NET SALES $ 104,011 $ 93,629 $ 201,501 $ 186,728
Cost of products sold (including warehouse
distribution and store occupancy costs)(1) 77,169 69,285 149,173 137,684
--------- --------- --------- ---------
GROSS PROFIT 26,842 24,344 52,328 49,044
Operating, selling and administrative expenses 22,894 20,350 43,905 39,607
Depreciation and amortization 3,896 3,652 7,773 7,302
--------- --------- --------- ---------
OPERATING INCOME 52 342 650 2,135
Interest expense, net 1,142 1,258 2,409 2,292
--------- --------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES (1,090) (916) (1,759) (157)
Income taxes provision (benefit) (414) (348) (668) (60)
--------- --------- --------- ---------
NET INCOME (LOSS) $ (676) $ (568) $ (1,091) $ (97)
========= ========= ========= =========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING - BASIC 16,773 18,010 17,047 18,008
========= ========= ========= =========
NET INCOME (LOSS) PER SHARE - BASIC $ (0.04) $ (0.03) $ (0.06) $ (0.01)
========= ========= ========= =========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING - DILUTED 16,773 18,010 17,047 18,008
========= ========= ========= =========
NET INCOME (LOSS) PER SHARE - DILUTED $ (0.04) $ (0.03) $ (0.06) $ (0.01)
========= ========= ========= =========
(1) Inventory purchases from related parties were $4,801, $7,605, $17,197 and
$17,506, respectively, for each of the periods presented above.
SEE ACCOMPANYING NOTES
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BOOKS-A-MILLION, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' INVESTMENT
(IN THOUSANDS)
(UNAUDITED)
ACCUMULATED
COMMON STOCK ADDITIONAL TREASURY STOCK OTHER TOTAL
----------------- PAID-IN ------------------- RETAINED COMPREHENSIVE STOCKHOLDERS'
SHARES AMOUNT CAPITAL SHARES AMOUNT EARNINGS INCOME (LOSS) INVESTMENT
------ ------ ---------- ------ -------- -------- ------------- -------------
BALANCE, FEBRUARY 3, 2001 18,092 $ 181 $ 70,634 598 $ (1,563) $ 53,978 $ 0 $ 123,230
Issuance of stock for
employee stock purchase plan 46 -- 83 -- -- -- -- $ 83
Purchase of treasury stock -- -- -- 943 (2,258) -- -- $ (2,258)
Net income (loss) -- -- -- -- -- (1,091) -- $ (1,091)
Cumulative effect of
accounting change (Note 3) -- -- -- -- -- -- (465) $ (465)
Unrealized loss on
derivative instruments -- -- -- -- -- -- (441) $ (441)
------ ------ -------- ------ -------- -------- ------ ---------
BALANCE, AUGUST 4, 2001 18,138 $ 181 $ 70,717 1,541 $ (3,821) $ 52,887 $ (906) $ 119,058
====== ====== ======== ====== ======== ======== ====== =========
SEE ACCOMPANYING NOTES
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BOOKS-A-MILLION, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
TWENTY-SIX WEEKS ENDED
------------------------------
AUGUST 4, 2001 JULY 29, 2000
-------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (1,091) $ (97)
-------- --------
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization 7,773 7,302
Loss on disposal of property and equipment 41 704
Change in deferred income taxes (733) (95)
Changes in assets and liabilities:
Accounts receivable 209 3,210
Inventories (2,076) (15,236)
Prepayments and other (278) (741)
Accounts payable (6,009) (11,968)
Accrued income taxes (650) (2,092)
Accrued expenses (4,626) (2,483)
-------- --------
Total adjustments (6,349) (21,399)
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Net cash used in operating activities (7,440) (21,496)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (3,617) (4,622)
Acquisition of certain assets (Note 4) (6,532) 0
Proceeds from sale of equipment 12 42
-------- --------
Net cash used in investing activities (10,137) (4,580)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under credit facilities 96,706 90,970
Repayments under credit facilities (78,112) (64,783)
Proceeds from sale of common stock, net 83 70
Purchase of treasury stock (2,258) --
-------- --------
Net cash provided by financing activities 16,419 26,257
-------- --------
Net increase (decrease) in cash and temporary cash investments (1,158) 181
Cash and temporary cash investments at beginning of period 5,282 4,920
-------- --------
Cash and temporary cash investments at end of period $ 4,124 $ 5,101
-------- --------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 1,909 $ 2,197
-------- --------
Income taxes, net of refunds $ 1,069 $ 3,068
-------- --------
Non-cash transactions:
Cumulative effect of hedging activities, net of tax
benefit of $588 $ 906 $ 0
-------- --------
SEE ACCOMPANYING NOTES
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BOOKS-A-MILLION, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
of Books-A-Million, Inc. and its Subsidiaries (the "Company") for the thirteen
and twenty-six week periods ended August 4, 2001 and July 29, 2000, 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 February 3,
2001, included in the Company's 2001 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
August 4, 2001, and the results of its operations and cash flows for the
thirteen and twenty-six week periods then ended. Certain prior year amounts have
been reclassified to conform to current year presentation.
The Company has experienced, and expects to continue to experience,
significant variability in sales and net income from quarter to quarter.
Therefore, the results of the interim periods presented herein are not
necessarily indicative of the results to be expected for any other interim
period or the full year.
2. NET INCOME PER SHARE
Basic net income per share ("EPS") excludes dilution and is computed by
dividing income available to common shareholders by the weighted average number
of common shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock
are exercised or converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the Company. Diluted EPS has
been computed based on the average number of shares outstanding including the
effect of outstanding stock options, if dilutive, in each respective thirteen
and twenty-six week period. A reconciliation of the weighted average shares for
basic and diluted EPS is as follows:
For the Thirteen Weeks Ended
(in thousands)
August 4, 2001 July 29, 2000
-------------- -------------
Weighted average shares outstanding:
Basic 16,773 18,010
Dilutive effect of stock options outstanding 0 0
------ ------
Diluted 16,773 18,010
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For the Twenty-Six Weeks Ended
(in thousands)
August 4, 2001 July 29, 2000
-------------- -------------
Weighted average shares outstanding:
Basic 17,047 18,008
Dilutive effect of stock options outstanding 0 0
------ ------
Diluted 17,047 18,008
------ ------
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Options outstanding of 1,445,000 and 1,460,000 for the thirteen weeks and
twenty-six weeks ended August 4, 2001 and outstanding options of 1,522,435 and
1,537,152 for the thirteen and twenty-six weeks ended July 29, 2000 were not
included in the table above as they were anti-dilutive.
3. ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities,
amended by SFAS No. 137, Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133, and SFAS
No. 138, Accounting for Certain Derivatives and Certain Hedging Activities. SFAS
No. 133 establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value. SFAS No. 133 requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the hedged
item in the income statement, and requires that a company must formally
document, designate and assess the effectiveness of transactions that receive
hedge accounting.
The Company adopted these statements effective February 4, 2001. The
adoption of these statements resulted in a cumulative after-tax increase to
other comprehensive loss of $465,000 and a reduction to income of $40,000 for
the thirteen weeks ended May 5, 2001. The $1.5 million liability related to the
derivatives is reflected in Accrued Expenses, and the relative tax benefit of
$588,000 is reflected in Current Deferred Tax Assets in the accompanying
condensed consolidated balance sheet at August 4, 2001. The adoption of these
statements may increase volatility in earnings.
4. ACQUISITION OF ASSETS
During March 2001, the Company acquired inventory and lease-rights of
eighteen retail stores from Crown Books Corporation for $6.5 million. The stores
are located in the Chicago and Washington, D.C. metropolitan areas. The results
of operations for these stores are reflected in the consolidated financial
statements beginning in the first quarter of fiscal 2002.
5. 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 11.1% to $104.0 million in the thirteen weeks ended
August 4, 2001, from $93.6 million in the thirteen weeks ended July 29, 2000.
Net sales increased 7.9% to $201.5 million in the twenty-six weeks ended August
4, 2001, from $186.7 million in the twenty-six weeks ended July 29, 2000. The
increase in net sales resulted from 18 new stores acquired this year. Comparable
store sales in the second quarter decreased 1.5% versus last year. Excluding
collector sales, comparable store sales increased 1.6% over the same period last
year. During the thirteen weeks ended August 4, 2001, two newsstands were opened
and one Bookland store was closed.
Gross profit increased $2.5 million or 10.3% to $26.8 million in the
thirteen weeks ended August 4, 2001 from $24.3 million in the thirteen weeks
ended July 29, 2000, and in the twenty-six weeks ended August 4, 2001, gross
profit increased 6.7% to $52.3 million from $49.0 million in the same period
last year. Gross profit as a percentage of net sales for the thirteen weeks
ended August 4, 2001 was 25.8% versus 26.0% in the same period last year. Gross
profit as a percentage of net sales for the twenty-six weeks ended August 4,
2001 was 26.0% versus 26.3% in the same period last year. The decrease as a
percentage of net sales for the thirteen and twenty-six week periods was
primarily due to higher occupancy costs as a percentage of sales.
Operating, selling and administrative expenses increased $2.5 million
or 12.5% to $22.9 million in the thirteen weeks ended August 4, 2001, from $20.4
million in the thirteen weeks ended July 29, 2000, and in the twenty-six weeks
ended August 4, 2001, operating, selling and administrative expenses increased
10.9% to $43.9 million from $39.6 million in the same period last year.
Operating, selling and administrative expenses as a percentage of net sales for
the thirteen weeks ended August 4, 2001, increased to 22.0% from 21.7% in the
same period last year. For the twenty-six week period operating, selling and
administrative expenses as a percentage of net sales increased to 21.8% from
21.2% in the same period last year. The increase in this percentage for the
thirteen and twenty-six week periods was due to lower comparable store sales and
higher store selling costs as a percent to sales.
Depreciation and amortization increased $0.2 million or 6.7% to $3.9
million in the thirteen weeks ended August 4, 2001, from $3.7 million in the
thirteen weeks ended July 29, 2000, and in the twenty-six week period
depreciation and amortization increased $0.5 million or 6.5% to $7.8 million
from $7.3 million in the same period last year. The increase in depreciation and
amortization for the thirteen and twenty-six week periods was primarily the
result of the increased number of superstores operated by the Company.
Interest expense was $1.1 million in the thirteen weeks ended August 4,
2001 versus $1.3 million in the thirteen weeks ended July 29, 2000, and $2.4
million in the twenty-six weeks ended August 4, 2001 versus $2.3 million in the
same period last year. The decrease in interest expense for the second quarter
is due to lower interest rates versus last year. Year to date, the increase in
interest expense is due to higher average (net) debt balances at the beginning
of the period that continued throughout the first quarter and most of the second
quarter.
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LIQUIDITY AND CAPITAL RESOURCES
During the first twenty-six weeks of fiscal 2002, 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
$15 million, which is subject to annual renewal. As of August 4, 2001, $52.2
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 August 4, 2001, the Company has outstanding
borrowings associated with the issuance of an industrial development revenue
bond totaling $7.5 million.
The Company's capital expenditures totaled $3.6 million during the
first twenty-six weeks of fiscal 2002. These expenditures were primarily used
for new store expenditures and warehouse distribution purposes. Management
estimates that capital expenditures for the remainder of fiscal 2002 will be
approximately $8.0 million, and that such amounts will be used primarily for new
stores, renovation and improvements to existing stores and investments in
management information systems. Management believes that existing cash balances
and net cash from operating activities, together with borrowings under the
Company's credit facilities, will be adequate to finance the Company's planned
capital expenditures and to meet the Company's working capital requirements for
the remainder of fiscal 2002.
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 $17.2 million in the twenty-six weeks ended
August 4, 2001, versus $17.5 million in the twenty-six weeks ended July 29,
2000. The decrease in related party purchases is primarily due to decreased
purchases of music merchandise. The Company sells a portion of its inventories
to related parties; such sales amounted to $1.6 million and $1.7 million in the
twenty-six weeks ended August 4, 2001 and July 29, 2000, respectively. This
decrease in related party sales is primarily due to lower sales of bargain
books. Management believes the terms of these related
10
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party transactions are substantially equivalent to those available from
unrelated parties and, therefore, have no significant impact on gross profit.
FINANCIAL POSITION
During the twenty-six weeks ended August 4, 2001, the Company acquired
18 stores from Crown Books Corporation, located in the Chicago and Washington
D.C. metropolitan areas. In addition, the Company opened two newsstands, closed
one superstore and closed two Bookland stores. Inventory and debt balances at
August 4, 2001 increased as compared to February 3, 2001 due to seasonal
fluctuations in inventory levels and the acquisition of inventory and
lease-rights from Crown Books Corporation.
NEW AND PENDING ACCOUNTING PRONOUNCEMENTS
On July 20, 2001, the Financial Accounting Standards Board ("FASB")
issued Statements of Financial Accounting Standards No. 141, "Business
Combinations" ("FAS 141") and No. 142, "Goodwill and Other Intangible Assets"
("FAS 142"). Business combinations initiated after June 30, 2001, must be
accounted for under the provisions of these two statements. The Company must
also apply these provisions to previously recorded business combinations as of
January 1, 2002. The principal provisions of FAS 141 and FAS 142 are as follows:
All business combinations initiated after June 30, 2001 will be
accounted for using the "purchase" method, under which the identifiable
assets and liabilities of the acquired business are recorded at their
respective fair market values with the residual amount being recorded
as goodwill. The "pooling-of-interests" method, under which the
financial statements of the acquirer and the acquiree were combined as
if the two businesses had always been one, will no longer be used.
Goodwill and identifiable intangible assets will no longer be amortized
over a maximum period of forty years. Goodwill will not be amortized
but will instead be tested for impairment annually or upon the
occurrence of certain "triggering events". Identifiable intangible
assets will be amortized over their expected useful lives; those with
indefinite expected useful lives will not be amortized. Identifiable
intangible assets will continue to be tested for impairment under
previously existing accounting standards.
The Company will adopt FAS 141 and FAS 142 on February 3, 2002, and
expects the adoption of these standards to have no material impact on its
financial condition, results of operations or cash flows.
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 $64.1 million during fiscal 2001. 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 11, 2003. Also, on May 14, 1996,
the Company entered into an interest rate swap agreement, with a ten-year term,
which carries a notional principal amount of $7.5 million. The swap effectively
fixes the interest rate on $7.5 million of variable rate debt at 7.98%. The swap
agreement expires on June 7, 2006. The counter party to the interest rate swaps
is one of the Company's primary banks. The Company believes the credit and
liquidity risk of the counter party failing to meet its obligation is remote as
the Company settles its interest position with the bank on a quarterly basis.
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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
None
ITEM 5: Other Information
None
ITEM 6: Exhibits and Reports on Form 8-K
(A) Exhibits
Exhibit 3i Certificate of Incorporation of Books-A-Million,
Inc. (incorporated herein by reference to Exhibit 3.1 in the
Company's Registration Statement on Form S-1 (Capital
Registration No. 33-52256))
Exhibit 3ii By-Laws of Books-A-Million, Inc. (incorporated
herein by reference to Exhibit 3.2 in the Company's
Registration Statement on Form S-1 (Capital Registration No.
33-52256))
(B) Reports on Form 8-K
There were no reports filed on Form 8-K during the thirteen
week period ended August 4, 2001
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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: September 17, 2001 by:/s/ Clyde B. Anderson
---------------------
Clyde B. Anderson
Chief Executive Officer
Date: September 17, 2001 by:/s/ Richard S. Wallington
-------------------------
Richard S. Wallington
Chief Financial Officer