UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the quarterly period ended: October 30, 2004
- 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
-------- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
402 INDUSTRIAL LANE, BIRMINGHAM, ALABAMA 35211
---------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(205) 942-3737
----------------------------------------------
(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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
Indicate the number of shares outstanding of each of the issuer's common stock,
as of the latest practicable date: Shares of common stock, par value $.01 per
share, outstanding as of December 8, 2004 were 16,357,845 shares.
EXPLANATORY NOTE:
As previously disclosed in a Form 8-K filed on March 22, 2005, following a
detailed review of its lease-related accounting policies, Books-A-Million, Inc.
(the "Company") determined to restate its prior financial statements (the
"Restatement") to correct errors in those financial statements relating to the
computation of depreciation, rent holiday, straight-line rent expense and the
related deferred liability.
Historically, the Company depreciated leasehold improvements over a
period of ten years, regardless of the term of the lease for the store. The
Company has corrected its depreciable life for leasehold improvements to the
lesser of the economic useful life of the asset or the term of the lease. When
calculating the straight-line rent expense per store, the Company previously
used the store opening date as the starting date for the rent expense
calculation. The Company has corrected this calculation to start straight-line
rent expense on the date when the Company takes possession and has the right to
control use of the leased premises. Also, the Company has corrected its method
of classification of landlord allowances. For certain new stores, the Company
receives funding from landlords for the construction of leasehold improvements.
Historically, landlord allowances were classified as a reduction of leasehold
improvements on the Company's balance sheet and as a reduction in capital
expenditures in the Company's statement of cash flows. However, the Company has
restated the balance sheet by increasing other long-term liabilities and
increasing leasehold improvements (asset). In addition, in the statement of cash
flows, the Company has classified landlord allowances as an operating activity
and not as a reduction in capital expenditures.
As a result, the accompanying consolidated financial statements have
been restated from the amounts previously reported to incorporate the effects of
these corrections. See Note 13 to the condensed consolidated financial
statements.
This amendment No. 1 on Form 10-Q/A to the Company's quarterly
report on Form 10-Q for the fiscal quarter ended October 30, 2004, initially
filed with the Securities and Exchange Commission ("SEC") on December 14, 2004
("Original Filing"), is being filed to reflect restatements of the Company's
consolidated balance sheets at October 30, 2004 and the Company's consolidated
statements of operations, and consolidated cash flows for the thirteen weeks
ended October 30, 2004 and November 1, 2003 and the thirty nine weeks ended
October 30, 2004 and November 1, 2003 and the notes related thereto. For a more
detailed description of these restatements, see Note 13, "Restatement of
Financial Statements" to the accompanying condensed consolidated financial
statements.
For the convenience of the reader, this Form 10-Q/A includes the Original
Filing in its entirety. However, this Form 10-Q/A only amends and restates Items
1, 2, and 4 of Part I of the Original Filing and no other material information
in the Original Filing is amended hereby. The foregoing items have not been
updated to reflect other events occurring after the Original Filing or to modify
or update those disclosures affected by subsequent events. In addition, pursuant
to the rules of the SEC, Item 6 of Part II of the Original Filing has been
amended to contain currently-dated certifications from our Chief Executive
Officer and Chief Financial Officer , as required by Sections 302 and 906 of the
Sarbanes-Oxley Act of 2002. The certifications of our Executive Chairman of the
Board, Chief Executive Officer and Chief Financial Officer are attached to this
Form 10-Q/A as Exhibits 31.1, 31.2, 31.3, 32.1, 32.2 and 32.3, respectively.
Except for the foregoing amended information, this Form 10-Q/A continues
to describe conditions as of the date of the Original Filing, and does not
update disclosures contained herein to reflect events that occurred at a later
date.
Concurrently with the filing of this Form 10-Q/A, we are filing an
amendment on Form 10-K/A to our Annual Report on Form 10-K for the fiscal year
ended January 31, 2004 ("2004 10-K") to provide restatements of the financial
statements or financial data as of and for the periods included in the 2004 10-K
and amended quarterly reports on Form 10-Q/A for the quarters ended May 1, 2004
and July 31, 2004. We have not amended and do not intend to amend our previously
filed Annual Reports on Form 10-K other than the 2004 10-K or our Quarterly
Reports on Form 10-Q for the periods affected by the Restatement that ended
prior to January 30, 2004. For this reason, the consolidated financial
statements, auditors' reports and related financial information for all affected
periods contained in any prior reports should no longer be relied upon.
2
BOOKS-A-MILLION, INC. AND SUBSIDIARIES
INDEX
PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (UNAUDITED AND AS RESTATED):
Condensed Consolidated Balance Sheets 4
Condensed Consolidated Statements of Operations 5
Condensed Consolidated Statements of Cash Flows 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 16
Item 3. Quantitative and Qualitative Disclosures about Market Risk 22
Item 4. Controls and Procedures 23
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 25
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 25
Item 3. Defaults Upon Senior Securities 25
Item 4. Submission of Matters to a Vote of Security-Holders 25
Item 5. Other Information 25
Item 6. Exhibits and Reports on Form 8-K 25
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BOOKS-A-MILLION, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
AS OF OCTOBER 30, 2004 AS OF JANUARY 31, 2004
---------------------- ----------------------
(as restated) (as restated)
(see Note 13) (see Note 13)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,662 $ 5,348
Accounts receivable, net 10,161 7,271
Related party accounts receivable, net 130 351
Inventories 228,495 211,591
Prepayments and other 6,824 5,890
Deferred income taxes 4,846 4,450
-------------- ----------------
TOTAL CURRENT ASSETS 255,118 234,901
-------------- ----------------
PROPERTY AND EQUIPMENT:
Gross property and equipment 189,106 189,961
Less accumulated depreciation and amortization 136,439 130,069
-------------- ----------------
NET PROPERTY AND EQUIPMENT 52,667 59,892
-------------- ----------------
OTHER ASSETS 2,408 1,605
-------------- ----------------
TOTAL ASSETS $ 310,193 $ 296,398
============== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 97,953 $ 87,984
Related party accounts payable 11,661 8,777
Accrued expenses 31,501 30,191
Accrued income taxes - 3,226
Current portion of long-term debt 9,220 -
-------------- ----------------
TOTAL CURRENT LIABILITIES 150,335 130,178
-------------- ----------------
LONG-TERM DEBT 18,700 20,640
DEFERRED INCOME TAXES 2,097 1,957
OTHER LONG-TERM LIABILITIES 11,250 12,622
-------------- ----------------
TOTAL NON-CURRENT LIABILITIES 32,047 35,219
-------------- ----------------
COMMITMENTS AND CONTINGENCIES (NOTE 6)
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 1,000,000 shares - -
authorized, no shares outstanding
Common stock, $.01 par value, 30,000,000 shares
authorized, 18,950,006 and 18,465,387 shares issued at
October 30, 2004 and January 31, 2004, respectively 190 185
Additional paid-in capital 73,833 71,799
Less treasury stock, at cost (2,568,789 and 2,010,050
shares at October 30, 2004 and January 31, 2004,
respectively) (9,181) (5,271)
Deferred compensation (421) (284)
Accumulated other comprehensive loss, net of tax (414) (707)
Retained earnings 63,804 65,279
-------------- ----------------
TOTAL STOCKHOLDERS' EQUITY 127,811 131,001
-------------- ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 310,193 $ 296,398
============== ================
SEE ACCOMPANYING NOTES
4
BOOKS-A-MILLION, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
------------------------------------ ----------------------------------
OCTOBER 30, 2004 NOVEMBER 1, 2003 OCTOBER 30, 2004 NOVEMBER 1, 2003
---------------- ---------------- ---------------- ----------------
(AS RESTATED) (AS RESTATED) (AS RESTATED) (AS RESTATED)
(SEE NOTE 13) (SEE NOTE 13) (SEE NOTE 13) (SEE NOTE 13)
NET SALES $ 104,286 $ 102,418 $ 326,091 $ 313,308
Cost of products sold (including warehouse,
distribution and store occupancy costs) (1) 76,414 75,480 236,990 229,605
----------- ------------- ----------- ------------
GROSS PROFIT 27,872 26,938 89,101 83,703
Operating, selling and administrative expenses 24,792 22,748 72,566 67,831
Depreciation and amortization 4,396 4,421 13,334 13,515
------------ ------------- ----------- ------------
OPERATING INCOME (LOSS) (1,316) (231) 3,201 2,357
Interest expense, net 503 747 1,508 2,464
----------- ------------- ----------- ------------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME
TAXES (1,819) (978) 1,693 (107)
Income tax provision (benefit) (673) (375) 627 (47)
------------ ------------- ----------- ------------
INCOME (LOSS) FROM CONTINUING OPERATIONS (1,146) (603) 1,066 (60)
DISCONTINUED OPERATIONS (NOTE 10):
Loss from discontinued operations before income
taxes (42) (275) (34) (669)
Income tax benefit 16 102 13 248
------------ ------------- ----------- ------------
LOSS FROM DISCONTINUED OPERATIONS (26) (173) (21) (421)
------------ ------------- ----------- ------------
NET INCOME (LOSS) $ (1,172) $ (776) $ 1,045 $ (481)
=========== ============= =========== ============
NET INCOME (LOSS) PER COMMON SHARE:
BASIC:
INCOME (LOSS) FROM CONTINUING OPERATIONS $ (0.07) $ (0.04) $ 0.06 $ -
LOSS FROM DISCONTINUED OPERATIONS - (0.01) - (0.03)
----------- ------------- ----------- ------------
NET INCOME (LOSS) $ (0.07) $ (0.05) $ 0.06 $ (0.03)
=========== ============= =========== ============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC 16,578 16,278 16,507 16,249
=========== ============= =========== ============
DILUTED:
INCOME (LOSS) FROM CONTINUING OPERATIONS $ (0.07) $ (0.04) $ 0.06 $ -
LOSS FROM DISCONTINUED OPERATIONS - (0.01) - (0.03)
----------- ------------- ----------- -------------
NET INCOME (LOSS) $ (0.07) $ (0.05) $ 0.06 $ (0.03)
=========== ============= =========== ============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING -
DILUTED 16,578 16,278 17,227 16,249
=========== ============= =========== ============
(1) Inventory purchases from related parties were $9,741, $9,436, $26,519 and
$27,763, respectively, for each of the periods presented above.
SEE ACCOMPANYING NOTES
5
BOOKS-A-MILLION, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
THIRTY-NINE WEEKS ENDED
-------------------------------------
OCTOBER 30, 2004 NOVEMBER 1, 2003
---------------- ----------------
(AS RESTATED) (AS RESTATED)
(SEE NOTE 13) (SEE NOTE 13)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 1,045 $ (481)
------------- -------------
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 13,381 13,730
Deferred compensation amortization 103 -
Loss on impairment of assets 181 608
(Gain)/Loss on disposal of property (15) 36
Change in deferred income taxes 128 (330)
Tax benefit of exercise of stock options 754 -
(Increase)/Decrease in inventories (16,904) (19,219)
Increase/(Decrease) in accounts payable 12,853 (1,713)
Changes in certain other assets and liabilities (7,112) 1,655
------------- -------------
Total adjustments 3,369 (5,233)
------------- -------------
Net cash provided by (used in) operating activities 4,414 (5,714)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (7,026) (7,995)
Proceeds from sale of equipment 31 34
------------- -------------
Net cash used in investing activities (6,995) (7,961)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under credit facilities 143,420 154,070
Repayments under credit facilities (136,140) (140,695)
Purchase of treasury stock (3,910) -
Proceeds from exercise of stock options and issuance of
common stock under the employee stock option plan
1,045 176
Payment of dividends (2,520) -
------------- -------------
Net cash provided by financing activities 1,895 13,551
------------- --------------
Net decrease in cash and cash equivalents (686) (124)
Cash and cash equivalents at beginning of period 5,348 4,977
------------- -------------
Cash and cash equivalents at end of period $ 4,662 $ 4,853
============= =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 1,569 $ 2,457
Income taxes, net of refunds $ 4,408 $ 1,713
SEE ACCOMPANYING NOTES
6
BOOKS-A-MILLION, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The unaudited condensed consolidated financial statements of
Books-A-Million, Inc. and its subsidiaries (the "Company") for the
thirteen and thirty-nine week periods ended October 30, 2004 and November
1, 2003 have been prepared in accordance with accounting principles
generally accepted in the United States ("GAAP") 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 GAAP 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 31, 2004 included in our Fiscal 2004
Annual Report on Form 10-K/A. In the opinion of management, the financial
statements included herein contain all adjustments considered necessary
for a fair presentation of our financial position as of October 30, 2004,
and the results of our operations and cash flows for the thirteen and
thirty-nine week periods ended October 30, 2004 and November 1, 2003. The
Company's fiscal year 2005 begins February 1, 2004 and ends January 29,
2005, and the Company's fiscal year 2004 begins February 3, 2003 and ends
January 31, 2004.
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the
reporting period. Actual amounts could differ from those estimates and
assumptions.
We have also experienced, and expect 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.
Stock-Based Compensation
At October 30, 2004 and January 31, 2004, we had one stock option
plan. We account for the plan under the recognition and measurement
principles of Accounting Pronouncements Bulletin (APB) Opinion No. 25,
"Accounting for Stock Issued to Employees," and related Interpretations.
No stock-based employee compensation cost for this stock option plan is
reflected in net income, as all options granted under the plan had an
exercise price equal to the market value of the underlying common stock on
the date of grant. For the thirty-nine weeks ended October 30, 2004, the
Company has recorded $103,000 of compensation expense related to
restricted stock issued under the executive compensation plan and
$1,023,000 for the entire compensation expense related to the stock-based
employee compensation plan. The following table illustrates the effect on
net income (loss) and net income (loss) per common share if the Company
had applied the fair value recognition provisions of Statement of
Financial Accounting Standards No. 148, "Accounting for Stock-Based
Compensation -- Transition and Disclosure -- an Amendment of FASB
Statement No. 123," to stock-based employee compensation (in thousands
except per share amounts):
For the Thirteen Weeks Ended For the Thirty-Nine Weeks Ended
----------------------------------- ------------------------------------
In thousands October 30, 2004 November 1, 2003 October 30, 2004 November 1, 2003
------------ ---------------- ---------------- ---------------- ----------------
Net income (loss), as reported $ (1,172) $ (776) $ 1,045 $ (481)
Deduct: Total stock-based employee
compensation expense determined
under fair value based method
for all awards, net of tax effects 341 328 1,023 984
----------- --------- ----------- ----------
Pro forma net income (loss) $ (1,513) $ (1,104) $ 22 $ (1,465)
Net income (loss) per common share:
Basic--as reported $ (0.07) $ (0.05) $ 0.06 $ (0.03)
Basic--pro forma (0.09) (0.07) 0.00 (0.09)
Diluted--as reported (0.07) (0.05) 0.06 (0.03)
Diluted--pro forma $ (0.09) $ (0.07) $ 0.00 $ (0.09)
The fair value of the options granted under our stock option plan
was estimated on the date of grant using the Black-Scholes option-pricing
model with the following weighted average assumptions for the thirty-nine
week periods ended October 30, 2004 and November 1, 2003: no dividend
yield; expected stock price volatility rate of 1.06 and 1.01 respectively;
risk-free interest rates of 3.87% to 4.90% and 3.63% to 5.10%,
respectively; and expected lives of six or ten years.
7
BOOKS-A-MILLION, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2. NET INCOME PER SHARE
Basic net income per share ("EPS") is computed by dividing net
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 weighted
average number of shares outstanding including the effect of outstanding
stock options and restricted stock, if dilutive, in each respective
thirteen and thirty-nine week period. A reconciliation of the weighted
average shares for basic and diluted EPS is as follows:
For the Thirteen Weeks Ended
(in thousands)
October 30, 2004 November 1, 2003
---------------- ----------------
Weighted average shares outstanding:
Basic 16,578 16,278
Dilutive effect of stock options and - -
restricted stock outstanding
------ ------
Diluted 16,578 16,278
------ ------
For the Thirty-Nine Weeks Ended
(in thousands)
October 30, 2004 November 1, 2003
---------------- ----------------
Weighted average shares outstanding:
Basic 16,507 16,249
Dilutive effect of stock options and 720 -
restricted stock outstanding
------ ------
Diluted 17,227 16,249
------ ------
Options outstanding to purchase 796,000 and 2,129,000 shares of
common stock as of October 30, 2004 and November 1, 2003, respectively,
were not included in the tables above as they were anti-dilutive under the
treasury stock method. Options are excluded from the diluted earning per
share calculation in periods with a net loss because options would be
anti-dilutive by definition.
3. RELATED PARTY TRANSACTIONS
Charles C. Anderson, a major stockholder of the company, Terry C.
Anderson, a director of the Company during the quarter, and Clyde B. Anderson, a
director and officer of the Company, each have controlling ownership interests
in other entities with which we conduct business. Significant transactions
between us and these various other entities ("related parties") are summarized
in the following paragraphs.
We purchase a substantial portion of our magazines as well as
certain of our seasonal music and newspapers from Anderson Media Corporation
("Anderson Media"), an affiliate through common ownership. During the
thirty-nine weeks ended October 30, 2004 and November 1, 2003, purchases of
these items from Anderson Media totaled $24,645,000 and $26,061,000,
respectively. We purchase certain of our collectibles and books from Anderson
Press, Inc. ("Anderson Press"), an affiliate through common ownership. During
the thirty-nine weeks ended October 30, 2004 and November 1, 2003, such
purchases from Anderson Press totaled $580,000 and $660,000, respectively. We
purchase certain of our greeting cards and gift products from C.R. Gibson, Inc.,
an affiliate through common ownership. The purchases of these products during
the thirty-nine weeks ended October 30, 2004 and November 1, 2003 were $278,000
and $207,000, respectively. We purchase certain magazine subscriptions from
Magazines.com, an affiliate through common ownership. During the thirty-nine
weeks ended October 30, 2004 and November 1, 2003, purchases of these items were
$53,000 and $59,000, respectively. We purchase content for publication from
Publication Marketing Corporation, an affiliate through common ownership. During
the thirty-nine weeks ended October 30, 2004 and November 1, 2003, purchases of
these items were $51,000 and $54,000, respectively. We utilize import sourcing
and consolidation services from Anco Far East Importers, LTD ("Anco Far East"),
an affiliate through common ownership. The total paid to Anco Far East was
$905,000 and $723,000 during the thirty-nine weeks ended October 30, 2004 and
November 1, 2003, respectively.
8
BOOKS-A-MILLION, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
These amounts paid to Anco Far East primarily included the actual cost of the
product, as well as duty, freight and fees for sourcing and consolidation
services. All costs other than the sourcing and consolidation service fees were
passed through from other vendors. Anco Far East fees, net of the passed-through
costs, were $63,000 and $51,000, respectively.
We sold books to (received returns from) Anderson Media in the amounts of
($78,000) and $501,000 during the thirty-nine weeks ended October 30, 2004 and
November 1, 2003, respectively. During the thirty-nine weeks ended October 30,
2004 and November 1, 2003, we provided $253,000 and $204,000, respectively, of
internet services to Magazines.com. During the thirty-nine weeks ended October
30, 2004 and November 1, 2003, we provided $62,000 and $54,000, respectively, of
internet services to American Promotional Events, an affiliate through common
ownership.
We lease our principal executive offices from a trust, which was
established for the benefit of the grandchildren of Mr. Charles C. Anderson, a
former member of the Board of Directors. The lease extends to January 31, 2006.
During the thirty-nine weeks ended October 30, 2004 and November 1, 2003, we
paid rent of $103,000 in each period to the trust under this lease. Anderson &
Anderson LLC ("A&A"), which is an affiliate through common ownership, also
leases three buildings to us. During the thirty-nine weeks ended October 30,
2004 and November 1, 2003, we paid A&A a total of $331,000 and $339,000,
respectively, in connection with such leases. Total minimum future rental
payments under all of these leases are $172,000 at October 30, 2004. We sublease
certain property to Hibbett Sporting Goods, Inc. ("Hibbett"), a sporting goods
retailer in the southeastern United States. Our Executive Chairman, Clyde B.
Anderson, is a member of Hibbett's board of directors. During the thirty-nine
weeks ended October 30, 2004 and November 1, 2003, we received $143,000 and
$141,000, respectively, in rent payments from Hibbett.
The Company shares ownership of a plane, which the Company uses in the
operations of its business, with an affiliated company. The Company rents the
plane to affiliated companies at rates that cover all the variable cost and a
portion of the fixed cost. The total amounts received from affiliated companies
for use of the plane during the thirty-nine weeks ended October 30, 2004 and
November 1, 2003, was $144,000 and $428,000, respectively.
4. DERIVATIVE AND HEDGING ACTIVITIES
We are subject to interest rate fluctuations involving our credit
facilities and debt related to an Industrial Development Revenue Bond (the
"Bond"). However, we use fixed interest rate hedges to manage this
exposure. We entered into two separate $10 million swaps on July 24, 2002.
Both expire in August 2005 and effectively fix the interest rate on an
aggregate of $20 million of variable credit facility debt at 5.00% per
year. In addition, we entered into a $7.5 million interest rate swap in
May 1996 that expires in June 2006 and effectively fixes the interest rate
on the Bond at 8.48% per year. The counter parties to the interest rate
swaps are two primary banks in our credit facility. We believe the credit
and liquidity risks of the counter parties failing to meet their
obligation are remote as we settle our interest position with the banks on
a quarterly basis.
Our hedges are generally designated as cash flow hedges because they
are interest rate swaps that convert variable payments to fixed payments.
Cash flow hedges protect against the variability in future cash outflows
of current or forecasted debt and related interest expense. The changes in
the fair value of these hedges are reported on the balance sheet with a
corresponding adjustment to accumulated other comprehensive income or in
earnings, depending on the type of hedging relationship. Over time,
amounts held in accumulated other comprehensive income will be
reclassified to earnings if the hedge transaction becomes ineffective.
Our interest rate swaps described above are reported as a liability
classified in other long-term liabilities in the accompanying condensed
consolidated balance sheets at their fair value of $821,000 and $1.5
million as of October 30, 2004 and January 31, 2004, respectively. For the
thirteen weeks ended October 30, 2004 and November 1, 2003, adjustment
gains (losses) of $72,000 (net of tax provision of $42,000) and ($53,000)
(net of tax benefit of $33,000), respectively, and in the thirty-nine
weeks ended October 30, 2004 and November 1, 2003, adjustment gains of
$298,000 (net of tax provision of $175,000) and $234,000 (net of tax
provision of $144,000), respectively, were recorded in accumulated other
comprehensive income and are detailed in Note 5. During the fourth quarter
of fiscal 2004, one interest rate swap no longer qualified for hedge
accounting under SFAS No. 133; as a result, we de-designated the hedge. A
pre-tax gain of $213,000 was recorded in operating, selling and
administrative expenses during the first thirty-nine weeks of fiscal 2005
related to the de-designated hedge.
9
BOOKS-A-MILLION, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5. COMPREHENSIVE INCOME
Comprehensive income is net income or loss, plus certain other items
that are recorded directly to stockholders' equity. The only such items
currently applicable to us are the unrealized gains (losses) on the hedges
explained in Note 4, as follows:
Thirteen Weeks Ended Thirty-Nine Weeks Ended
COMPREHENSIVE INCOME
(in thousands) (in thousands)
October 30, November 1, October 30, November 1,
2004 2003 2004 2003
----------- ----------- ----------- -----------
Net income (loss) $(1,172) $(776) $1,045 $(481)
Unrealized gains (losses) on hedges,
net of deferred tax provision
(benefit) for the thirteen-week
periods of $42 and ($33),
respectively, and the thirty-nine
week periods of $175 and $144,
respectively. 72 (53) 298 234
------- ----- ------ -----
Total comprehensive income $(1,100) $(829) $1,343 $(247)
(loss) ======= ===== ====== =====
6. COMMITMENTS AND CONTINGENCIES
We are a party to various legal proceedings incidental to our
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 our financial position,
results of operations or cash flows.
From time to time, we enter into certain types of agreements that
require us to indemnify parties against third party claims under certain
circumstances. Generally these agreements relate to: (a) agreements with
vendors and suppliers under which we may provide customary indemnification
to our vendors and suppliers in respect of actions they take at our
request or otherwise on our behalf, (b) agreements with vendors who
publish books or manufacture merchandise specifically for us to indemnify
the vendors against trademark and copyright infringement claims concerning
the books published or merchandise manufactured on behalf of us, (c) real
estate leases, under which we may agree to indemnify the lessors from
claims arising from our use of the property, and (d) agreements with our
directors, officers and employees, under which we may agree to indemnify
such persons for liabilities arising out of their relationship with us. We
have Directors and Officers Liability Insurance, which, subject to the
policy's conditions, provides coverage for indemnification amounts payable
by us with respect to our directors and officers up to specified limits
and subject to certain deductibles. The nature and terms of these types of
indemnities vary. The events or circumstances that would require us to
perform under these indemnities are transaction and circumstance specific.
Generally, our maximum liability under such indemnities is not explicitly
stated, and therefore the overall maximum amount of our obligations cannot
be reasonably estimated. Historically, we have not incurred significant
costs related to performance under these types of indemnities. No
liabilities have been recorded for these obligations on our balance sheet
at October 30, 2004 and January 31, 2004 as such liabilities are
considered de minimis.
7. INVENTORIES
Inventories were:
(In thousands) October 30, 2004 January 31, 2004
-------------- ---------------- ----------------
Inventories (at FIFO) $ 229,598 $ 212,251
LIFO reserve (1,103) (660)
-------------- -------------
Net inventories $ 228,495 $ 211,591
============== =============
10
BOOKS-A-MILLION, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
8. BUSINESS SEGMENTS
We have two reportable segments: retail trade and electronic
commerce trade. The retail trade segment is a strategic business segment
that is engaged in the retail trade of mostly book merchandise and
includes our distribution center operations, which predominately supplies
merchandise to our retail stores. The electronic commerce trade segment is
a strategic business segment that transacts business over the internet and
is managed separately due to divergent technology and marketing
requirements.
The accounting policies of the segments are substantially the same
as those described in our Fiscal 2004 Annual Report on Form 10-K/A. We
evaluate performance of the segments based on profit and loss from
operations before interest and income taxes. Certain intersegment cost
allocations have been made based upon consolidated and segment revenues.
Thirteen Weeks Ended Thirty-Nine Weeks Ended
------------------------------------ -----------------------------------
October 30, 2004 November 1, 2003 October 30, 2004 November 1, 2003
---------------- ---------------- ---------------- ----------------
NET SALES
Retail Trade $ 102,178 $ 100,668 $ 320,080 $ 308,727
Electronic Commerce Trade 6,571 6,789 19,246 18,285
Intersegment Sales Elimination (4,463) (5,039) (13,235) (13,704)
----------- ----------- ------------ ----------
Net Sales $ 104,286 $ 102,418 $ 326,091 $ 313,308
=========== =========== ============ ==========
OPERATING INCOME (LOSS)
Retail Trade $ (1,773) $ (675) $ 2,184 $ 1,764
Electronic Commerce Trade 408 403 660 402
Intersegment Elimination 49 41 357 191
----------- ----------- ------------ ----------
Total Operating Income (Loss) $ (1,316) $ (231) $ 3,201 $ 2,357
=========== =========== ============ ==========
As of As of
October 30, 2004 January 31, 2004
---------------- ----------------
ASSETS
Retail Trade $ 309,331 $ 295,437
Electronic Commerce Trade 1,189 1,527
Intersegment Elimination (327) (566)
-------------- -------------
Total Assets $ 310,193 $ 296,398
============== =============
11
BOOKS-A-MILLION, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
9. RECENT ACCOUNTING PRONOUNCEMENTS
In December 2002, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure - an Amendment of FASB No.
123" ("SFAS 148"). SFAS 148 amends SFAS 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), to provide alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, SFAS 148 amends the disclosure requirements
of SFAS 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. The
disclosure provisions of this statement are effective for financial statements
for fiscal years ending after December 15, 2002 and are included herein. We have
not adopted the fair value method of recording stock options under SFAS No. 123.
The FASB has now determined that stock-based compensation should be recognized
as a cost in the financial statements and that such cost be measured according
to the fair value of the stock options. The FASB has not as yet determined the
methodology for calculating fair value and plans to issue an accounting
standard. We will continue to monitor communications on this subject from the
FASB in order to determine the impact on our financial position, results of
operations or cash flows.
FASB Interpretation No. 46, "Consolidation of Variable Interest
Entities" ("FIN 46"), was issued in January 2003. This interpretation requires
consolidation of variable interest entities ("VIE"), also formerly referred to
as "special purpose entities," if certain conditions are met. The interpretation
applies immediately to VIE's created after January 31, 2003 and to interests
obtained in VIE's after January 31, 2003. Beginning after June 15, 2003, the
interpretation also applies to VIE's created or interests obtained in VIE's
before January 31, 2003. In December 2003, the FASB issued FASB Interpretation
No. 46R, "Consolidation of Variable Interest Entities--An Interpretation of ARB
51" (revised December 2003) ("FIN 46R"), which includes significant amendments
to previously issued FIN No. 46. Among other provisions, FIN 46R includes
revised transition dates for public entities. We adopted the provisions of FIN
46R effective in the first quarter of fiscal 2005. The adoption of this
interpretation did not have an effect on our financial position, results of
operations or cash flows.
10. DISCONTINUED OPERATIONS
Discontinued operations represent the closure in fiscal 2005 of two
retail stores in Alabama and Florida and in fiscal 2004 of four retail stores in
markets located in Georgia (two stores), Louisiana and North Carolina where we
do not expect another of our existing stores to absorb the closed store's
customers and cash flows. The Florida retail store closed in fiscal 2005 was
substantially destroyed by a hurricane in September 2004 and not reopened.
Expenses relating to store closings when the store is not classified as a
discontinued operation are reported in Other Administrative Expenses. If the
store is closed and another store is in the same market and the cash flows are
expected to be materially recovered, the store is not considered a discontinued
operation. Information regarding discontinued operations is as follows (in
thousands):
Thirteen Weeks Ended Thirty-Nine Weeks Ended
------------------------------------ -----------------------------------
October 30, 2004 November 1, 2003 October 30, 2004 November 1, 2003
---------------- ---------------- ---------------- ----------------
Sales $179 $ 649 $ 954 $ 3,081
Pretax operating losses 42 275 34 669
Impairment losses (included - - - 118
above in pretax operating
loss amounts)
Store closing costs - 10 - 35
(included above in pretax
operating loss amounts)
11. DEBT AND LINES OF CREDIT
We have an unsecured revolving credit facility that allows
borrowings up to $100 million. Our current credit facility was extended
two years to July 2007 by our bank group during the second quarter of
fiscal 2005. No principal repayments are due until the facility expires in
July 2007.
12
BOOKS-A-MILLION, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
12. STOCKHOLDERS' EQUITY
In March 2004, the Board of Directors authorized a common stock
repurchase program for up to 1.6 million shares, or 10% of the outstanding
stock. During the thirty-nine weeks ended October 30, 2004, 558,739 shares
were repurchased under this program.
During the thirty-nine weeks ended October 30, 2004, we have paid
dividends of $2,520,000. During the thirteen weeks ended October 30, 2004,
the Board of Directors approved a dividend of $0.03 per share to
stockholders of record at the close of business November 30, 2004, payable
on December 14, 2004. The Company expects to pay quarterly cash dividends
in the future subject to Board approval.
13. RESTATEMENT OF FINANCIAL STATEMENTS
Subsequent to the issuance of the Company's interim condensed
consolidated financial statements for the period ended October 30, 2004,
and following a review of its lease-related accounting policies, the
Company's management determined that it was appropriate to adjust its
prior financial statements to correct certain errors contained in those
financial statements relating to the computation of depreciation, rent
holidays, straight-line rent expense and the related deferred rent
liability.
Historically, the Company depreciated leasehold improvements over a period
of ten years, regardless of the term of the lease for the store. When
calculating the straight-line rent expense per store, the Company
previously used the store opening date as the starting date for the rent
expense calculation. For certain new stores, the Company receives funding
from landlords for the construction of leasehold improvements.
Historically, these landlord allowances were classified as a reduction of
property and equipment on the Company's balance sheet and as a reduction
in capital expenditures in the Company's statements of cash flows.
The Company has corrected its depreciable life for leasehold improvements
to the lesser of the economic useful life of the asset or the term of the
lease. The Company has corrected the calculation to start straight-line
rent expense on the date when the Company takes possession and has the
right to control use of the leased premises. Also, the Company has
corrected its method of classification of landlord allowances. The Company
will now classify landlord allowances as a deferred rent credit on the
balance sheet and as an operating activity in the statement of cash flows.
Funds received from the landlord intended to reimburse the Company for the
cost of leasehold improvements will be recorded as a deferred rent credit
resulting from a lease incentive and amortized over the lease term as a
reduction to rent expense. As a result, the accompanying condensed
consolidated financial statements have been restated from the amounts
previously reported to incorporate the effects of these policies.
The following is a summary of the impact of the Restatement on the
consolidated balance sheets at January 31, 2004 and October 30, 2004, and
the consolidated statements of operations and the consolidated statements
of cash flows for the thirteen week periods ended October 30, 2004 and
November 1, 2003 and the thirty nine week periods ended October 30, 2004
and November 1, 2003.
13
BOOKS-A-MILLION, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
As of October 30, 2004 As of January 31, 2004
----------------------------------------- ----------------------------------------
As Previously As Previously
CONSOLIDATED BALANCE SHEET Reported Adjustment As Restated Reported Adjustment As Restated
-------------------------- ------------- ---------- ----------- -------------- ---------- -----------
Gross property and equipment 164,361 24,745 189,106 166,466 23,495 189,961
Accumulated depreciation 121,635 14,804 136,439 117,289 12,780 130,069
Deferred income tax (asset) 4,314 532 4,846 4,446 4 4,450
Total assets 299,720 10,473 310,193 285,679 10,719 296,398
Accrued expenses 31,501 - 31,501 30,189 2 30,191
Accrued income taxes - - - 3,527 (301) 3,226
Total current liabilities 150,335 - 150,335 130,477 (299) 130,178
Deferred income tax
(liability) 1,750 347 2,097 1,805 152 1,957
Other Long-Term Liabilities 821 10,429 11,250 1,507 11,115 12,622
Total Non-Current Liabilities 21,271 10,776 32,047 23,952 11,267 35,219
Retained earnings 64,107 (303) 63,804 65,528 (249) 65,279
Total shareholders equity 128,114 (303) 127,811 131,250 (249) 131,001
Total shareholders equity &
liabilities 299,720 10,473 310,193 285,679 10,719 296,398
Thirteen Weeks Ended October 30, 2004 Thirteen Weeks Ended November 1, 2003
---------------------------------------- ----------------------------------------
CONSOLIDATED STATEMENTS OF As Previously As Previously
OPERATIONS Reported Adjustment As Restated Reported Adjustment As Restated
-------------------------- ------------- ---------- ----------- -------------- ---------- -----------
Cost of products sold 77,064 (650) 76,414 76,058 (578) 75,480
Gross profit 27,222 650 27,872 26,360 578 26,938
Depreciation and amortization 3,698 698 4,396 3,809 612 4,421
Operating income (1,268) (48) (1,316) (197) (34) (231)
Income taxes (655) (18) (673) (362) (13) (375)
Net income (1,142) (30) (1,172) (755) (21) (776)
Basic earnings per share ($ 0.07) $ 0.00 ($ 0.07) ($ 0.05) $0.00 ($ 0.05)
Diluted earnings per share ($ 0.07) $ 0.00 ($ 0.07) ($ 0.05) $0.00 ($ 0.05)
Thirty-Nine Weeks Ended October 30, 2004 Thirty-Nine Weeks Ended November 1, 2003
---------------------------------------- ----------------------------------------
CONSOLIDATED STATEMENTS OF As Previously As Previously
OPERATIONS Reported Adjustment As Restated Reported Adjustment As Restated
-------------------------- ------------- ---------- ----------- -------- ---------- -----------
Cost of products sold 238,928 (1,938) 236,990 231,338 (1,733) 229,605
Gross profit 87,163 1,938 89,101 81,970 1,733 83,703
Depreciation and amortization 11,310 2,024 13,334 11,710 1,805 13,515
Operating income 3,287 (86) 3,201 2,429 (72) 2,357
Income taxes 659 (32) 627 (20) (27) (47)
Net income 1,099 (54) 1,045 (436) (45) (481)
Basic earnings per share $ 0.07 ($0.01) $ 0.06 ($0.03) $0.00 ($0.03)
Diluted earnings per share $ 0.06 $0.00 $ 0.06 ($0.03) $0.00 ($0.03)
14
BOOKS-A-MILLION, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Thirty-Nine Weeks Ended October 30, 2004 Thirty-Nine Weeks Ended November 1, 2003
---------------------------------------- ----------------------------------------
As
CONSOLIDATE STATEMENTS OF As Previously Previously
CASH FLOW Reported Adjustment As Restated Reported Adjustment As Restated
------------------------- ------------- ---------- ----------- ----------- ---------- -----------
Net Income 1,099 (54) 1,045 (436) (45) (481)
Depreciation and amortization 11,357 2,024 13,381 11,925 1,805 13,730
Changes in deferred income
taxes 77 51 128 (240) (90) (330)
Changes in certain other
assets and liabilities (6,341) (771) (7,112) 2,898 (1,243) 1,655
Net cash used in operating
activities 3,164 1,250 4,414 (6,141) 427 (5,714)
Capital expenditures (5,776) (1,250) (7,026) (7,568) (427) (7,995)
Net cash used in investing
activities (5,745) (1,250) (6,995) (7,534) (427) (7,961)
15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion & Analysis gives effect to the restatement
discussed in Note 13 to the Condensed Consolidated Financial Statements.
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 our actual
results, performance or achievements, 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 our specific market areas; inflation; economic conditions in general and
in our 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 us; uncertainties related
to the Internet and our 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. We disclaim any obligation 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.
GENERAL
We were founded in 1917 and currently operate 203 retail bookstores,
including 165 superstores, concentrated in the southeastern United States.
Our growth strategy is focused on opening superstores in new and
existing market areas, particularly in the Southeast. In addition to opening new
stores, our management intends to continue its practice of reviewing the
profitability trends and prospects of existing stores and closing or relocating
under-performing stores or converting stores to different formats.
Comparable store sales are determined each fiscal quarter during the
year based on all stores that have been open at least 12 full months as of the
first day of the fiscal quarter. Any stores closed during a fiscal quarter are
excluded from comparable store sales as of the first day of the quarter in which
they close.
RESTATEMENT OF FINANCIAL STATEMENTS
Following a review of its lease-related accounting policies, the Company's
management determined that it was appropriate to adjust its prior financial
statements to correct certain errors contained in those financial statements
relating to the computation of depreciation, rent holidays, straight-line rent
expense and the related deferred rent liability.
Historically, the Company depreciated leasehold improvements over a period
of ten years, regardless of the term of the lease for the store. When
calculating the straight-line rent expense per store, the Company previously
used the store opening date as the starting date for the rent expense
calculation. For certain new stores, the Company receives funding from landlords
for the construction of leasehold improvements. Historically, these landlord
allowances were classified as a reduction of property and equipment on the
Company's balance sheet and as a reduction in capital expenditures in the
Company's statements of cash flows.
The Company has corrected its depreciable life for leasehold improvements
to the lesser of the economic useful life of the asset or the term of the lease.
The Company has corrected the calculation to start straight-line rent expense on
the date when the Company takes possession and has the right to control use of
the leased premises. Also, the Company has corrected its method of
classification of landlord allowances. The Company will now classify landlord
allowances as a deferred rent credit on the balance sheet and as an operating
activity in the statement of cash flows. Funds received from the landlord
intended to reimburse the Company for the cost of leasehold improvements will be
recorded as a deferred rent credit resulting from a lease incentive and
amortized over the lease term as a reduction to rent expense. As a result, the
accompanying condensed consolidated financial statements have been restated from
the amounts previously reported to incorporate the effects of these policies.
16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The effects of the restatement discussed in Note 13 in the notes to the
condensed consolidated financial statements. The following Management's
Discussion & Analysis has been updated to give effect to the restatement.
RESULTS OF OPERATIONS
The following table sets forth statement of operations data expressed as a
percentage of net sales for the periods presented:
Thirteen Weeks Ended Thirty-Nine Weeks Ended
---------------------------------- -----------------------------------
October 30, 2004 November 1, 2003 October 30, 2004 November 1, 2003
(as restated) (as restated) (as restated) (as restated)
---------------- ---------------- ---------------- ----------------
Net sales 100.0% 100.0% 100.0% 100.0%
Gross profit 26.7% 26.3% 27.3% 26.7%
Operating, selling and administrative 23.8% 22.2% 22.2% 21.6%
expenses
Depreciation and amortization 4.2% 4.3% 4.1% 4.3%
----- ----- ----- -----
Operating income (loss) (1.3)% (0.2)% 1.0% 0.8%
Interest expense, net 0.5% 0.7% 0.5% 0.8%
----- ----- ----- -----
Income (loss) from continuing operations (1.8)% (0.9)% 0.5% 0.0%
before income taxes
Income tax provision (0.7)% (0.4)% 0.2% 0.0%
----- ----- ----- -----
Income (loss) from continuing operations (1.1)% (0.5)% 0.3% 0.0%
Loss from discontinued operations - (0.2)% - (0.1)%
----- ----- ----- -----
Net income (loss) (1.1)% (0.7)% 0.3% (0.1)%
===== ===== ===== =====
Net sales increased $1.9 million, or 1.8%, to $104.3 million in the
thirteen weeks ended October 30, 2004, from $102.4 million in the thirteen weeks
ended November 1, 2003. Net sales increased $12.8 million, or 4.1%, to $326.1
million in the thirty-nine weeks ended October 30, 2004, from $313.3 million in
the thirty-nine weeks ended November 1, 2003. Comparable store sales in the
thirteen weeks ended October 30, 2004 increased 0.6% when compared with the same
thirteen week period for the prior year due to higher sales in the book, gifts
and cafe departments. Comparable store sales increased 2.4% for the thirty-nine
weeks ended October 30, 2004 due to higher sales in the book and cafe
departments. The book sales increase was primarily driven by the improving
economy, as well as strong sales in categories such as Humor, Inspirational,
Adventure Games, Teen and Social Science. The cafe department sales increase was
led by our new cold beverage product line of frappes as well as increased store
traffic. During the thirteen weeks ended October 30, 2004, we opened two
superstores and closed one superstore due to substantial hurricane damage. The
Company experienced a loss of sales resulting from temporary closings of
approximately thirty-five stores for periods ranging from two to seven days, as
well as significant property damage to three stores, due to the cumulative
effect of Hurricanes Charley, Frances and Ivan. The Company is insured for
property damage and business interruption, but is liable for the deductible
amounts under the insurance coverage.
Net sales for the retail trade segment increased $1.5 million, or 1.5%, to
$102.2 million in the thirteen weeks ended October 30, 2004 from $100.7 million
in the same period last year. Net sales for the retail trade segment increased
$11.4 million, or 3.7%, to $320.1 million in the thirty-nine weeks ended October
30, 2004 primarily due to higher comparable store sales. Net sales for the
electronic commerce segment were down slightly versus last year at $6.6 million
for the thirteen weeks ended October 30, 2004 compared to $6.8 million in the
same period last year. For the thirty-nine weeks ended October 30, 2004, net
sales for the electronic commerce segment increased $1.0 million, or 5.3%, to
$19.3 million from $18.3 million in the same period last year, related primarily
to higher business to business order volume and increased search engine
marketing which increased traffic on our website.
Gross profit increased $1.0 million, or 3.5%, to $27.9 million in the
thirteen weeks ended October 30, 2004 when compared with $26.9 million in the
same thirteen week period for the prior year. For the thirty-nine weeks ended
October 30, 2004, gross profit increased $5.4 million, or 6.4%, to $89.1 million
from $83.7 million in the same period last year. Gross profit as a percentage of
net sales for the thirteen weeks ended October 30, 2004 was 26.7% versus 26.3%
in the same period last year. The increase in gross profit as a percent of net
sales for the thirteen week period was primarily due to less promotional
discounting and improved margins due to increased sales of proprietary products
versus last year. Gross profit as a percentage of sales for the thirty-nine
weeks ended October 30, 2004 was 27.3% versus 26.7% in the same period last
year. The increase in gross profit as a percent of
17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
net sales for the thirty-nine week period was due to lower promotional
discounting as well as lower occupancy and warehouse distribution costs as a
percentage of sales due to higher sales.
Operating, selling and administrative expenses were $24.8 million in the
thirteen week period ended October 30, 2004 compared to $22.7 million in the
same period last year. For the thirty-nine weeks ended October 30, 2004,
operating, selling and administrative expenses were $72.6 million compared to
$67.8 million in the same period last year. Operating, selling and
administrative expenses as a percentage of net sales for the thirteen weeks
ended October 30, 2004 increased to 23.8% from 22.2% in the same period last
year. Operating, selling and administrative expenses as a percentage of net
sales for the thirty-nine weeks ended October 30, 2004 increased to 22.2% from
21.6% in the same period last year. The increase as a percentage of sales for
the thirteen and thirty-nine week periods was partially due to casualty losses
from damages incurred from four hurricanes, increased costs related to
Sarbanes-Oxley compliance and costs incurred for new store openings and
relocations. Also, store selling costs were higher as a percentage of sales
during the thirteen weeks ended October 30, 2004 due to relatively flat
comparable sales.
Depreciation and amortization was $4.4 million in the thirteen week period
ended October 30, 2004 compared to $4.4 million in the same period last year. In
the thirty-nine week period ended October 30, 2004 depreciation and amortization
decreased 1.3% to $13.3 million from $13.5 million in the same period last year.
Consolidated operating loss was $1.3 million for the thirteen weeks ended
October 30, 2004, compared to $0.2 million in the same period last year. For the
thirty-nine weeks ended October 30, 2004, consolidated operating income was $3.2
million compared to $2.4 million in the same period last year. Operating loss
for the retail trade segment increased $1.1 million for the thirteen weeks ended
October 30, 2004, and operating income increased $0.4 million for the
thirty-nine weeks ended October 30, 2004. The increase in operating loss for the
thirteen week period was due to relatively flat comparable store sales and lost
sales for 35 stores closed temporarily during the quarter due to hurricane
activity. Three of the stores were unable to reopen during the thirteen weeks
ended October 30, 2004 due to the degree of damage sustained. The increase in
operating income for the thirty-nine week period was due to strong profit growth
driven by stronger comparable store sales. The operating profit for the
electronic commerce segment increased $0.3 million for the thirty-nine week
period ended October 30, 2004 compared to the same period last year. The
increase in profit was due to higher sales in the business to business category
and improved sales due to increased search engine marketing which increased
traffic on our website.
Interest expense was $503,000 in the thirteen weeks ended October 30, 2004
versus $747,000 in the same period last year and $1.5 million in the thirty-nine
weeks ended October 30, 2004 versus $2.5 million in the same period last year.
The decrease was primarily due to lower average debt balances compared with the
prior year due to higher earnings, improved inventory management and better
accounts payable leveraging.
Discontinued operations represent the closure in fiscal 2005 of two retail
stores in Alabama and Florida and in fiscal 2004 of four retail stores in
markets located in Georgia (two stores), Louisiana and North Carolina where we
do not expect another of our existing stores to absorb the closed store's
customers and cash flows. The Florida retail store closed in fiscal 2005 was
substantially destroyed by a hurricane in September 2004 and not reopened.
Information regarding discontinued operations is as follows (in thousands):
Thirteen Weeks Ended Thirty-Nine Weeks Ended
----------------------------------- -----------------------------------
October 30, 2004 November 1, 2003 October 30, 2004 November 1, 2003
---------------- ---------------- ---------------- ----------------
Sales $179 $ 649 $ 954 $ 3,081
Pretax operating losses 42 275 34 669
Impairment losses (included - - - 118
above in pretax operating
loss amounts)
Store closing costs (included - 10 - 35
above in pretax operating
loss amounts)
18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OUTLOOK
For the thirty-nine weeks ended October 30, 2004, we have opened three
stores, closed two stores, relocated three stores and remodeled 24 stores. For
the remainder of fiscal 2005, we expect to open five stores, complete remodels
on approximately eight to ten stores, and close one to three stores. Our capital
expenditures totaled $7.0 million in the thirty-nine week period ended October
30, 2004. Management estimates that capital expenditures for the remainder of
fiscal 2005 will be approximately $6.0 million and that such amounts will be
used primarily for new stores and relocations, renovation and improvements to
existing stores, upgrades and expansion of warehouse distribution facilities,
and investments in management information systems. Management believes that
existing cash balances and net cash from operating activities, together with
borrowings under our credit facilities, will be adequate to finance our planned
capital expenditures and to meet our working capital requirements for the
remainder of fiscal 2005.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
Operating activities provided (used) cash of $4.4 million and ($5.7)
million in the thirty-nine week periods ended October 30, 2004 and November 1,
2003, respectively, and included the following effects:
- Cash used for inventories in the thirty-nine week periods ended
October 30, 2004 and November 1, 2003 was $16.9 million and $19.2
million, respectively. The smaller usage in the current period was
primarily due to higher sales and improved inventory management
versus last year.
- Cash provided (used) for accounts payable in the thirty-nine week
periods ended October 30, 2004 and November 1, 2003 was $12.9
million and ($1.7) million, respectively. This change was due to
improved leveraging of accounts payable with vendors in the first
thirty-nine weeks of fiscal 2005.
- Depreciation and amortization expenses were $13.4 million and $13.7
million in the thirty-nine week periods ended October 30, 2004 and
November 1, 2003, respectively.
Cash flows used in investing activities reflected a $7.0 million and $8.0
million net use of cash for the thirty-nine week periods ended October 30, 2004
and November 1, 2003, respectively. Cash was used primarily to fund capital
expenditures for new store openings, store relocations, renovation and
improvements to existing stores and investments in management information
systems.
Financing activities provided cash of $1.9 million and $13.6 million in
the thirty-nine week periods ended October 30, 2004 and November 1, 2003,
respectively, principally from net borrowings under the revolving credit
facility. The reduced borrowings under the credit facility during fiscal 2005
were due to the improved cash flows from operating activities.
Our primary sources of liquidity are cash flows from operations, including
credit terms from vendors, and borrowings under our credit facility. We have an
unsecured revolving credit facility that allows borrowings up to $100 million.
Our current credit facility was extended two years to July 2007 by our bank
group during the second quarter of fiscal 2005. No principal repayments are due
until the facility expires in July 2007. The credit facility has certain
financial and non-financial covenants, the most restrictive of which is the
maintenance of a minimum fixed charge coverage ratio. As of October 30, 2004 and
January 31, 2004, $20.4 million and $13.1 million, respectively, were
outstanding under this credit facility. The maximum and average outstanding
balances during the thirteen weeks ended October 30, 2004 were $30.2 million and
$21.4 million, respectively, compared to $65.3 million and $59.2 million,
respectively for the same period in the prior year. The maximum and average
outstanding balances during the thirty-nine weeks ended October 30, 2004 were
$34.4 million and $24.0 million, respectively, compared to $77.6 million and
$64.1 million, respectively for the same period in the prior year. The decrease
in the maximum and average outstanding balances from the prior year was due to
higher earnings, improved inventory management and better accounts payable
leveraging. The outstanding borrowings as of October 30, 2004 had interest rates
ranging from 1.86% per year to 3.61% per year. Additionally, as of October 30,
2004 and January 31, 2004, we have outstanding borrowings under an industrial
revenue bond totaling $7.5 million, which is secured by certain property.
19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
During the thirty-nine weeks ended October 30, 2004, we have paid
dividends of $2,520,000. During the thirteen weeks ended October 30, 2004, the
Board of Directors approved a dividend of $0.03 per share to stockholders of
record at the close of business November 30, 2004, payable on December 14, 2004.
The Company expects to pay quarterly cash dividends in the future subject to
Board approval.
Future Commitments
The following table lists the aggregate maturities of various classes of
obligations and expiration amounts of our various classes of commitments at
October 30, 2004 (in thousands):
PAYMENTS DUE UNDER CONTRACTUAL OBLIGATIONS
Total FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 Thereafter
----- ------- ------- ------- ------- ------- ----------
Long-term debt- $ 20,420 $ 9,220 $ - $ - $ 11,200 $ - $ -
revolving
credit facility
Long-term debt - 7,500 - - 7,500 - - -
industrial
revenue bond
--------- -------- -------- -------- -------- -------- --------
Subtotal of debt 27,920 9,220 - 7,500 11,200 - -
Operating leases 109,461 7,404 27,051 21,384 17,663 12,998 22,961
--------- -------- -------- -------- -------- -------- --------
Total of obligations $ 137,381 $ 16,624 $ 27,051 $ 28,884 $ 28,863 $ 12,998 $ 22,961
========= ======== ======== ======== ======== ======== ========
Indemnification
From time to time, we enter into certain types of agreements that require
us to indemnify parties against third party claims under certain circumstances.
Generally these agreements relate to: (a) agreements with vendors and suppliers
under which we may provide customary indemnification to our vendors and
suppliers in respect of actions they take at our request or otherwise on our
behalf, (b) agreements with vendors who publish books or manufacture merchandise
specifically for us to indemnify the vendors against trademark and copyright
infringement claims concerning the books published or merchandise manufactured
on behalf of us, (c) real estate leases, under which we may agree to indemnify
the lessors from claims arising from our use of the property, and (d) agreements
with our directors, officers and employees, under which we may agree to
indemnify such persons for liabilities arising out of their relationship with
us. We have Directors and Officers Liability Insurance, which, subject to the
policy's conditions, provides coverage for indemnification amounts payable by us
with respect to our directors and officers up to specified limits and subject to
certain deductibles.
The nature and terms of these types of indemnities vary. The events or
circumstances that would require us to perform under these indemnities are
transaction and circumstance specific. Generally, our maximum liability under
such indemnities is not explicitly stated, and therefore the overall maximum
amount of our obligations cannot be reasonably estimated. Historically, we have
not incurred significant costs related to performance under these types of
indemnities. No liabilities have been recorded for these obligations on our
balance sheet at October 30, 2004 and January 31, 2004 as such liabilities are
considered de minimis.
RELATED PARTY ACTIVITIES
Charles C. Anderson and Terry C. Anderson, both directors of the Company
during the quarter, and Clyde B. Anderson, a director and officer of the Company
have controlling ownership interests in other entities with which we conduct
business. Significant transactions between us and these various other entities
("related parties") are summarized in the following paragraphs.
We purchase a substantial portion of our magazines as well as certain of
our seasonal music and newspapers from Anderson Media Corporation ("Anderson
Media"), an affiliate through common ownership. During the thirty-nine weeks
ended October 30, 2004 and November 1, 2003, purchases of these items from
Anderson Media totaled $24,645,000 and $26,061,000, respectively. We purchase
certain of our collectibles and books from Anderson Press, Inc. ("Anderson
Press"), an affiliate through common ownership. During the thirty-nine weeks
ended October 30, 2004 and November 1, 2003, such purchases from Anderson Press
totaled $580,000 and $660,000, respectively. We purchase certain of our greeting
cards and gift products from C.R. Gibson, Inc., an affiliate through common
ownership. The purchases of these products during the thirty-nine weeks ended
October
20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
30, 2004 and November 1, 2003 were $278,000 and $207,000, respectively. We
purchase certain magazine subscriptions from Magazines.com, an affiliate through
common ownership. During the thirty-nine weeks ended October 30, 2004 and
November 1, 2003, purchases of these items were $53,000 and $59,000,
respectively. We purchase content for publication from Publication Marketing
Corporation, an affiliate through common ownership. During the thirty-nine weeks
ended October 30, 2004 and November 1, 2003, purchases of these items were
$51,000 and $54,000, respectively. We utilize import sourcing and consolidation
services from Anco Far East Importers, LTD ("Anco Far East"), an affiliate
through common ownership. The total paid to Anco Far East was $905,000 and
$723,000 during the thirty-nine weeks ended October 30, 2004 and November 1,
2003, respectively. These amounts paid to Anco Far East primarily included the
actual cost of the product, as well as duty, freight and fees for sourcing and
consolidation services. All costs other than the sourcing and consolidation
service fees were passed through from other vendors. Anco Far East fees, net of
the passed-through costs, were $63,000 and $51,000, respectively.
We sold books to (received returns from) Anderson Media in the amounts of
($78,000) and $501,000 during the thirty-nine weeks ended October 30, 2004 and
November 1, 2003, respectively. During the thirty-nine weeks ended October 30,
2004 and November 1, 2003, we provided $253,000 and $204,000, respectively, of
internet services to Magazines.com. During the thirty-nine weeks ended October
30, 2004 and November 1, 2003, we provided $62,000 and $54,000, respectively, of
internet services to American Promotional Events, an affiliate through common
ownership.
We lease our principal executive offices from a trust, which was
established for the benefit of the grandchildren of Mr. Charles C. Anderson, a
member of the Board of Directors. The lease extends to January 31, 2006. During
the thirty-nine weeks ended October 30, 2004 and November 1, 2003, we paid rent
of $103,000 in each period to the trust under this lease. Anderson & Anderson
LLC ("A&A"), which is an affiliate through common ownership, also leases three
buildings to us. During the thirty-nine weeks ended October 30, 2004 and
November 1, 2003, we paid A&A a total of $331,000 and $339,000, respectively, in
connection with such leases. Total minimum future rental payments under all of
these leases are $172,000 at October 30, 2004. We sublease certain property to
Hibbett Sporting Goods, Inc. ("Hibbett"), a sporting goods retailer in the
southeastern United States. Our Executive Chairman, Clyde B. Anderson, is a
member of Hibbett's board of directors. During the thirty-nine weeks ended
October 30, 2004 and November 1, 2003, we received $143,000 and $141,000,
respectively, in rent payments from Hibbett.
The Company shares ownership of a plane, which the Company uses in the
operations of its business, with an affiliated company. The Company rents the
plane to affiliated companies at rates that cover all the variable cost and a
portion of the fixed cost. The total amounts received from affiliated companies
for use of the plane during the thirty-nine weeks ended October 30, 2004 and
November 1, 2003, was $144,000 and $428,000, respectively.
21
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are subject to interest rate fluctuations involving our credit
facilities and debt related to our industrial revenue bond. The average amount
of debt outstanding under our credit facilities was $57.5 million during fiscal
2004. However, we utilize both fixed and variable debt to manage this exposure.
We entered into two separate $10 million swaps on July 24, 2002. Both expire
August 2005 and effectively fix the interest rate on an aggregate of $20 million
of variable rate debt at 5.00% per year. Also, on May 14, 1996, we 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 our industrial revenue bond at 8.48% per year. The swap agreement expires on
June 7, 2006. The counter parties to the interest rate swaps are parties to our
revolving credit facilities. We believe the credit and liquidity risk of the
counter parties failing to meet their obligations is remote as we settle our
interest position with the banks on a quarterly basis.
To illustrate the sensitivity of the results of operations to changes in
interest rates on its debt, we estimate that a 66% increase in LIBOR rates would
increase interest expense by approximately $4,000 for the thirteen weeks ended
October 30, 2004. Likewise, a 66% decrease in LIBOR rates would decrease
interest expense by $4,000 for the thirteen weeks ended October 30, 2004. This
hypothetical change in LIBOR rates was calculated based on the fluctuation in
LIBOR in 2002, which was the maximum LIBOR fluctuation in the last ten years.
The estimates do not consider the effect of the potential termination of the
interest rate swaps associated with the debt will have on interest expense.
22
ITEM 4. CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures that are designed to ensure
that information required to be disclosed in the Company's Exchange Act reports
is recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms, and that such information is accumulated
and communicated to our management, including our Chief Executive Officer and
Chief Financial Officer, as appropriate, to allow timely decisions regarding
required disclosure. In designing and evaluating the disclosure controls and
procedures, management recognized that any controls and procedures, no matter
how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives, and management necessarily was
required to apply its judgment in evaluating the cost-benefit relationship of
possible controls and procedures.
As required by SEC Rule 13a-15(b), the Company carried out an evaluation,
under the supervision and with the participation of the Company's management,
including the Company's Chief Executive Officer and the Company's Chief
Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures as of the end of the fiscal quarter
covered by this amended report. In performing this evaluation, in light of the
pronouncement of February 7, 2005 by the Office of the Chief Accountant of the
SEC in a letter to the AICPA, management focused on our lease accounting
policies. Specifically, as further discussed in Note 13 to the accompanying
condensed consolidated financial statements, we determined that: (i) our
practice of depreciating leasehold improvements over a period of ten years was
incorrect, which we corrected by changing the depreciable life for leasehold
improvements to the lesser of the economic useful life of the asset or the term
of the lease; (ii) our practice of using the store opening date as the starting
date for the rent expense calculation was incorrect, which we corrected by
changing the calculation of leasehold expense so that straight-line rent expense
begins on the date we take possession and have the right to control use of the
leased premises; and (iii) our practice of classifying landlord allowances as a
reduction of property and equipment on our balance sheet and as a reduction in
capital expenditures in our statements of cash flows was incorrect, which we
corrected by changing our method of classification so that landlord allowances
are classified as a deferred rent credit on our balance sheet and as an
operating activity in our statement of cash flows. Funds received from the
landlord intended to reimburse the Company for the cost of leasehold
improvements will be recorded as a deferred rent credit resulting from a lease
incentive and amortized over the lease term as a reduction to rent expense.
Further, after consulting with the Audit Committee and our independent
certified public accountants we determined to restate our financial statements
for each of the three years in the period ended January 31, 2004 and for the
first three quarters of fiscal 2005 and to file a Form 10-K/A amending our
Annual Report on Form 10-K for our fiscal year ended January 31, 2004 with
restated consolidated financial statements and Forms 10-Q/A amending our interim
condensed consolidated financial statements for the first three quarters of
fiscal 2005. The restatement is further discussed in "Explanatory Note" in the
forepart of this Form 10-Q/A and in Note 13, "Restatement of Financial
Statements," to the accompanying condensed consolidated financial statements. We
do not consider the impact of correcting the previously issued financial
statements to be material with respect to any individual reporting period.
Based on the foregoing, the Company's Chief Executive Officer and Chief
Financial Officer concluded that, as of the end of the period covered by this
Quarterly Report, the Company's disclosure controls and procedures were
effective at the reasonable assurance level. In concluding that our disclosure
controls and procedures were effective as of October 30, 2004, our management
considered, among other things, the circumstances that resulted in the
restatement of our previously issued financial statements. We also considered
the materiality of the restatement adjustments on our consolidated balance sheet
and statement of operations (as more fully set forth in Note 11, "Restatement of
Financial Statements," to the accompanying condensed consolidated financial
statements) and that these non-cash adjustments have no effect on historical or
future cash flows or the timing of payments under our operating leases.
There was no change in the Company's internal controls over financial
reporting during the Company's fiscal quarter covered by this amended report
that has materially affected, or is reasonably likely to materially affect, the
Company's internal controls over financial reporting. However, as a result of
the review of our lease accounting policies described above, during the first
quarter of fiscal 2006 we made changes in internal controls over financial
23
reporting to implement additional review processes over our leasing arrangements
to ensure the collection and communication of information necessary for the
proper accounting for each lease in accordance with generally accepted
accounting principles. The Company implemented the following accounting changes:
(i) we changed depreciable life for leasehold improvements to the lesser of the
economic useful life of the asset or the term of the lease, (ii) we changed the
calculation to start straight-line rent expense on the date when the Company
takes possession and has the right to control use of the leased premises, and
(iii) we changed our method of classification of landlord allowances. As
explained above, the Company will now classify landlord allowances as a deferred
rent credit on the balance sheet and as an operating activity in the statement
of cash flows. Funds received from the landlord intended to reimburse the
Company for the cost of leasehold improvements will be recorded as a deferred
rent credit resulting from a lease incentive and amortized over the lease term
as a reduction to rent expense. Management believes that these control changes
have fully remediated the issues described above.
24
II - OTHER INFORMATION
ITEM 1: Legal Proceedings
We are a party to various legal proceedings incidental to our 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 our financial position, results of operations or cash
flows.
ITEM 2: Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
In March 2004, the Board of Directors authorized a new common stock
repurchase program for up to 10% of the outstanding stock, or 1,646,624 shares.
The following table shows common stock repurchases under the program:
Maximum Number of
Total Number of Shares that May Yet
Shares Purchased as Be Purchased Under
Total Number of Average Price Paid Part of Publicly the Program at End
Period Shares Purchased per Share Announced Program of Period
------ ---------------- ------------------ ------------------- -------------------
3/17/2004 to 4/3/2004 54,400 $6.3416 54,400 1,592,224
4/4/2004 to 5/1/2004 30,300 $6.5535 30,300 1,561,924
5/2/2004 to 5/29/2004 - - - 1,561,924
5/30/2004 to 7/3/2004 - - - 1,561,924
7/4/2004 to 7/31/2004 - - - 1,561,924
8/1/2004 to 8/28/2004 33,500 $7.1851 33,500 1,528,425
8/29/2004 to 10/2/2004 207,678 $7.5621 207,678 1,320,747
10/3/2004 to 10/30/2004 232,861 $8.1234 232,861 1,087,886
------- ------- ------- 1,087,886
Total 558,739 $7.6000 558,739
======= ======= =======
ITEM 3: Defaults Upon Senior Securities
None
ITEM 4: Submission of Matters to a Vote of Security Holders
None
ITEM 5: Other Information
None
ITEM 6: Exhibits and Reports on Form 8-K
Exhibits
Exhibit 3.1 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 (Registration No.
33-52256))
Exhibit 3.2 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 (Registration No.
33-52256))
Exhibit 4.1 See Exhibits 3.1 and 3.2 hereto incorporated
herein by reference to the Exhibits of the same number to the
S-1 Registration Statement.
Exhibit 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 the S-1 Registration Statement).
25
Exhibit 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).
Exhibit 10.3 Employee Stock Purchase Plan (incorporated by
reference to Exhibit 10.7 to the S-1 Registration Statement).
Exhibit 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).
Exhibit 10.5 1999 Amended and Restated Employee Stock Purchase
Plan (incorporated by reference to Exhibit 10.5 to Annual
Report on Form 10-K for the fiscal year ended January 29,
2000, File No. 0-20664, filed on April 28, 2000).
Exhibit 10.6 401(k) Plan adopted September 15, 2003, with
Suntrust Bank as Trustee (incorporated by reference to Exhibit
10.6 to Annual report of Form 10-K for fiscal year ended
January 31, 2004, File No. 0-20664, filed on April 27, 2004.
Exhibit 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).
Exhibit 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).
Exhibit 10.9 Stock Option Plans for Booksamillion.com,
American Internet Service, Inc., Netcentral, Inc. and
Faithpoint, Inc. (incorporated by reference to Exhibit 10.19
to Annual Report on Form 10-K for the fiscal year ended
February 3, 2001, File No. 0-20664, filed on May 4, 2001).
Exhibit 10.10 Credit agreement dated as of July 1, 2002,
between the Company and Bank of America, N.A., SunTrust Bank,
N.A., Wells Fargo Bank, N.A., SouthTrust Bank N.A. and Amsouth
Bank, N.A. (incorporated by reference to Exhibit 10.20 to Form
10-Q for the quarter ended August 3, 2002).
Exhibit 31.1 Certification of Clyde B. Anderson, Executive
Chairman of the Board of Books-A-Million, Inc., pursuant to
Rule 13a-14(a) under the Securities Exchange Act of 1934, as
amended.
Exhibit 31.2 Certification of Sandra B. Cochran, President and
Chief Executive Officer of Books-A-Million, Inc., pursuant to
Rule 13a-14(a) under the Securities Exchange Act of 1934, as
amended.
Exhibit 31.3 Certification of Richard S. Wallington, Chief
Financial Officer of Books-A-Million, Inc., pursuant to Rule
13a-14(a) under the Securities Exchange Act of 1934, as
amended.
Exhibit 32.1 Certification of Clyde B. Anderson, Executive
Chairman of the Board of Books-A-Million, Inc., pursuant to 18
U.S.C. Section 1350, as amended.
Exhibit 32.2 Certification of Sandra B. Cochran, President and
Chief Executive Officer of Books-A-Million, Inc., pursuant to
18 U.S.C. Section 1350, as amended.
Exhibit 32.3 Certification of Richard S. Wallington, Chief
Financial Officer of Books-A-Million, Inc., pursuant to 18
U.S.C. Section 1350, as amended.
26
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: April 28, 2005 by: /s/ Clyde B. Anderson
---------------------
Clyde B. Anderson
Executive Chairman of the Board
Date: April 28, 2005 by: /s/ Sandra B. Cochran
---------------------
Sandra B. Cochran
President and Chief Executive Officer
Date: April 28, 2005 by: /s/ Richard S. Wallington
-------------------------
Richard S. Wallington
Chief Financial Officer
27