UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K/A
AMENDMENT NO. 1
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended January 31, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from______________ to _______________
Commission File No. 0-20664
BOOKS-A-MILLION, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 63-0798460
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
402 INDUSTRIAL LANE
BIRMINGHAM, ALABAMA 35211
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (205) 942-3737
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
CONTINUED
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [ ].
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [ ] No [X]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant (assuming for these purposes, but without conceding, that all
executive officers and directors are "affiliates" of the Registrant) as of
August 2, 2003 (based on the closing sale price as reported on the NASDAQ
National Market on such date), was $26,923,550.
The number of shares outstanding of the Registrant's Common Stock as of
April 5, 2004 was 16,513,725.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Stockholders for the fiscal year ended
January 31, 2004 are incorporated by reference into Part II of this report.
Portions of the Proxy Statement for the Annual Meeting of Stockholders to
be held on June 3, 2004 are incorporated by reference into Part III of this
report.
2
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 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 construction allowances. For certain new stores, the Company receives
funding from landlords for the construction of leasehold improvements.
Historically, landlord construction 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. However, the
Company will now classify landlord allowances as a deferred rent liability on
the balance sheet and as an operating activity in the statement of cash flows.
The resulting change in classification for landlord construction allowances will
increase leasehold improvements (Property and Equipment, asset) and increase
other long-term liabilities by a corresponding amount on the balance sheet.
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 11 to the consolidated financial statements.
This amendment No. 1 on Form 10-K/A to the Company's annual report on Form
10-K for the fiscal year ended January 31, 2004, initially filed with the
Securities and Exchange Commission ("SEC") on April 27, 2004 ("Original
Filing"), is being filed to reflect restatements of the Company's consolidated
balance sheets at January 31, 2004 and February 1, 2003 and the Company's
consolidated statements of operations, and consolidated cash flows for the fifty
two weeks ended January 31, 2004, February 1, 2003, February 2, 2002 and the
notes related thereto. For a more detailed description of these restatements,
see Note 11, "Restatement of Financial Statements" to the accompanying
consolidated financial statements.
For the convenience of the reader, this Form 10-K/A includes the Original
Filing in its entirety. However, this Form 10-K/A only amends and restates Items
1 and 2 of Part I, Items 6, 7, 8, and 9A of Part II and Item 15 of Part IV of
the Original Filing for the effects of the restatement 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. Information
on events occurring after the date of the original filing are included in the
Company's Forms 10-Q/A and 8-K's as amended. In addition, pursuant to the rules
of the SEC, Item 15 of Part IV 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-K/A as Exhibits 31.1, 31.2, 31.3, 32.1, 32.2 and 32.3, respectively.
Concurrently with the filing of this Form 10-K/A, we are filing amended
quarterly reports on Form 10-Q/A for the quarters ended May 1, 2004, July 31,
2004 and October 30, 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 31, 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.
3
PART I
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995
This document contains certain forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995, that involve a number
of risks and uncertainties. A number of factors could cause actual results,
performance, achievements of the Company, or industry results to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. These factors include, but are not
limited to, the competitive environment in the book retail industry in general
and in the Company's specific market areas; inflation; economic conditions in
general and in the Company's specific market areas; the number of store openings
and closings; the profitability of certain product lines, capital expenditures
and future liquidity; liability and other claims asserted against the Company;
uncertainties related to the Internet and the Company's Internet initiative ;
and other factors referenced herein. In addition, such forward-looking
statements are necessarily dependent upon assumptions, estimates and dates that
may be incorrect or imprecise and involve known and unknown risks, uncertainties
and other factors. Accordingly, any forward-looking statements included herein
do not purport to be predictions of future events or circumstances and may not
be realized. Given these uncertainties, shareholders and prospective investors
are cautioned not to place undue reliance on such forward-looking statements.
The Company disclaims any obligations to update any such factors or to publicly
announce the results of any revisions to any of the forward-looking statements
contained herein to reflect future events or developments.
ITEM 1. BUSINESS
GENERAL
Books-A-Million, Inc. is a leading book retailer in the southeastern
United States. The Company was founded in 1917 and operates both superstores and
traditional bookstores. Superstores, the first of which was opened in 1987,
range in size from 8,000 to 36,000 square feet and operate under the names
"Books-A-Million" and "Books and Co." Traditional bookstores are smaller stores
operated under the names "Bookland" and "Books-A-Million". These stores range in
size from 2,000 to 7,000 square feet and are located primarily in enclosed
malls. We also operate newsstands under the name "Joe Muggs Newsstands".
Newsstands range in size from 1,000 to 5,000 square feet and are located in high
traffic areas. All store formats, excluding newsstands, offer an extensive
selection of best sellers and other hardcover and paperback books, magazines,
and newspapers. In addition to the retail store formats, we offer our products
over the Internet at Booksamillion.com and Joemuggs.com.
We were originally incorporated under the laws of the State of Alabama in
1964 and were reincorporated in Delaware in September 1992. Our principal
executive offices are located at 402 Industrial Lane, Birmingham, Alabama 35211,
and our telephone number is (205) 942-3737. Unless the context otherwise
requires, references to "we" or "the Company" include our wholly owned
subsidiaries, American Wholesale Book Company, Inc. ("American Wholesale") and
American Internet Service, Inc. ("AIS").
Our periodic and current reports filed with the SEC are made available on
our website at www.booksamillioninc.com as soon as reasonably practicable. Our
corporate governance guidelines, code of conduct and key committee charters are
also available on our website. These reports are available free of charge to
stockholders upon written request. Such requests should be directed to Richard
S. Wallington, the Company's Chief Financial Officer.
BUSINESS SEGMENTS
We have two reportable segments: retail trade and electronic commerce
trade. In the retail trade segment we are engaged in the retail trade of
primarily book merchandise. The retail trade segment includes our distribution
center operations which predominantly supplies merchandise to our retail stores.
In the electronic commerce trade segment we transact business over the Internet
primarily. This segment is managed separately due to divergent technology and
marketing requirements. For additional information, see Note 9 "Business
Segments" in the Notes to Consolidated Financial Statements in the Annual Report
to Stockholders for the year ended January 31, 2004, incorporated herein by
reference.
4
RETAIL STORES
We opened our first Books-A-Million superstore in 1987. We developed
superstores to capitalize on the growing consumer demand for the convenience,
selection and value associated with the superstore retailing format. Each
superstore is designed to be a receptive and open environment conducive to
browsing and reading and includes ample space for promotional events open to the
public, including book autograph sessions and children's storytelling. We
operated 163 superstores as of January 31, 2004.
Our superstores emphasize selection, value and customer service. Each of
our superstores offer an extensive selection of best sellers and other hardcover
and paperback books, magazines, local newspapers and gifts, and also dedicate
space to bargain books that are sold at a discount from publishers' originally
suggested retail prices. Each superstore has a service center staffed with
associates who are knowledgeable about the store's merchandise and who are
trained to answer customers' questions, assist customers in locating books
within the store and place special orders. The majority of our superstores also
include a Joe Muggs cafe, serving Joe Muggs coffee and assorted pastries. Our
superstores are conveniently located on major, high-traffic roads and in
enclosed malls or strip shopping centers with adequate parking, and generally
operate for extended hours up to 11:00 pm local time.
Our traditional stores are tailored to the size, demographics and
competitive conditions of the particular market area. Traditional stores are
located primarily in enclosed malls and feature a wide selection of books,
magazines and gift items. We had 35 traditional stores as of January 31, 2004.
Our newsstands are concentrated in business and entertainment districts
and are tailored to the demographics of the particular market area. Joe Muggs
newsstands operate in centers with high traffic. Each newsstand carries an
extensive selection of magazines and newspapers, along with hardcover and
paperback books. The newsstands also offer Joe Muggs four branded coffee drinks
and assorted pastries, among other items. We operated four newsstands as of
January 31, 2004.
ACQUISITION OF STORES
During the first quarter of fiscal 2002, we acquired the lease rights to
and inventory of 18 stores from Crown Books Corporation for $6.5 million. The
stores are located in the Chicago, Illinois and Washington, D.C. metropolitan
areas. The results of operations for these stores were reflected in the
consolidated financial statements beginning in the first quarter of fiscal 2002.
MERCHANDISING
We employ several value-oriented merchandising strategies. Our best-seller
list, which is developed exclusively by us based on the sales and customer
demand in our stores, are generally sold in the Company's superstores below
publishers' suggested retail prices. In addition, customers can join the
Millionaire's Club and save 10% on all purchases in any of our stores, including
already discounted best-sellers. Our point-of-sale computer system provides the
data necessary to enable us to anticipate consumer demand and customize store
inventory selection to reflect local customer interest.
MARKETING
We promote our bookstores principally through the use of direct mail
advertising, as well as point-of-sale materials posted and distributed in the
stores. In certain markets, television and newspaper advertising is also used on
a selective basis. We also arrange for special appearances and book autograph
sessions with recognized authors to attract customers and to build and reinforce
customer awareness of our stores. A substantial portion of our advertising
expenses are reimbursed from publishers through their cooperative advertising
programs.
STORE OPERATIONS AND SITE SELECTION
In choosing specific store sites within a market area, we apply
standardized site selection criteria that takes into account numerous factors,
including the local demographics, desirability of available leasing
arrangements, proximity to our existing operations and overall level of retail
activity. In general, stores are located on major high-traffic roads convenient
to customers and have adequate parking. We generally negotiate short-term leases
with renewal options. We also periodically review the profitability trends and
prospects of each of our stores and evaluate whether or not any underperforming
stores should be closed, converted to a different format or relocated to more
desirable locations.
5
INTERNET OPERATIONS
Through our wholly owned subsidiary, AIS, we sell a broad range of
products over the Internet under the names Booksamillion.com and Joemuggs.com.
On Booksamillion.com we sell a wide selection of books, magazines and gift items
similar to those sold in our Books-A-Million superstores. We also operate an
online cafe under the name Joemuggs.com where we offer a wide selection of whole
bean coffee, confections and related gift items for purchase over the Internet.
Internet development efforts are assisted through a wholly owned subsidiary
of AIS, NetCentral, Inc., which is based in Nashville, Tennessee. In addition to
providing web development and maintenance for all of our internet sites and
networking initiatives, NetCentral also serves several outside customers by
offering site development, web hosting and technical services. Management
recognizes web development and maintenance revenue at the time maintenance is
provided or non-returnable product (web development) is delivered. Revenue from
web development and maintenance is less than .01% of the Company's total
revenues.
PURCHASING
Our purchasing decisions are made by our merchandising department on a
centralized basis. Our buyers negotiate terms, discounts and cooperative
advertising allowances for all of our bookstores and decide which books to
purchase, in what quantity and for which stores. The buyers use current
inventory and sales information provided by our in-store point-of-sale computer
system to make reorder decisions.
We purchase merchandise from over 500 vendors. We purchase the majority of
our collectors' supplies from Anderson Press and substantially all of our
magazines from Anderson Media, each of which is a related party. No one vendor
accounted for more than 10.0% of our overall merchandise purchases in the fiscal
year ended January 31, 2004. In general, in excess of 80% of our inventory may
be returned for credit, which substantially reduces our risk of inventory
obsolescence.
DISTRIBUTION CAPABILITIES
American Wholesale receives a substantial portion of its inventory
shipments, including substantially all of its books, at its two facilities
located in Florence and Tuscumbia, Alabama. Orders from our bookstores are
processed by computer and assembled for delivery to the stores on pre-determined
weekly schedules. Substantially all deliveries of inventory from American
Wholesale's facilities are made by their dedicated transportation fleet. At the
time deliveries are made to each of our stores, returns of slow moving or
obsolete books are picked up and returned to the American Wholesale returns
processing center. American Wholesale then returns these books to publishers for
credit.
COMPETITION
The retail bookstore industry is highly competitive and includes
competitors that have substantially greater financial and other resources than
we have. We compete directly with national bookstore chains, independent
bookstores, booksellers on the Internet and certain mass merchandisers. In
recent years, competing bookstore chains have been expanding their businesses
and certain leading regional and national chains have developed and opened
superstores and Internet web sites. We also compete indirectly with retail
specialty stores that offer books in a particular area of specialty. Management
believes that the key competitive factors in the retail book industry are
convenience of location, selection, customer service and price.
SEASONALITY
Similar to many retailers, our business is seasonal, with the highest
retail sales, gross profit and net income historically occurring in our fourth
fiscal quarter. This seasonal pattern reflects the increased demand for books
and gifts during the year-end holiday selling season. Working capital
requirements are generally at their highest during the third fiscal quarter and
the early part of the fourth fiscal quarter due to the seasonality of our
business. As a result, our results of operations depend significantly upon net
sales generated during the fourth fiscal quarter, and any significant adverse
trend in the net sales of such period would have a material adverse effect on
our results of operations for the full year. In addition to seasonality, our
results of operations may fluctuate from quarter to quarter as a result of the
amount and timing of sales and profits contributed by new stores as well as
other factors. Accordingly, the addition of a large number of new stores in a
particular fiscal quarter could adversely affect our results of operations for
that quarter.
6
TRADEMARKS
"Books-A-Million," "BAM!," "Bookland," "Books & Co.," "Millionaire's
Club," "Sweet Water Press," "Thanks-A-Million," "Big Fat Coloring Book," "Up All
Night Reader," "Read & Save Rebate", "Readables Accessories for Readers",
"Kids-A-Million," "Teachers First," "The Write-Price," "Bambeanos," "Book$mart",
"BAMM", "BAMM.com", "BOOKSAMILLION.com", "Chillatte", "Joe Muggs Newsstand" and
"NetCentral" are the primary registered trademarks of the Company. Management
does not believe that these trademarks are materially important to the
continuation of our operations.
EMPLOYEES
As of fiscal year end, we employed approximately 2,700 full-time
associates and 2,100 part-time associates. The number of part-time associates
employed fluctuates based upon seasonal needs. None of our associates are
covered by a collective bargaining agreement. Management believes that relations
with our associates are excellent.
ITEM 2. PROPERTIES
Our bookstores are located either in enclosed malls or strip shopping
centers. All of our stores are leased. Generally, these leases have terms
ranging from five to ten years and require that we pay a fixed minimum rental
fee and/or a rental fee based on a percentage of net sales together with certain
customary costs (such as property taxes, common area maintenance and insurance).
Our principal executive offices are located in a 20,550 square foot leased
building located in Birmingham, Alabama. We also lease a 37,000 square foot
building located in Irondale, Alabama for additional corporate office space.
Both leases involve related parties. The Birmingham, Alabama office space lease
extends to January 31, 2006, and the Irondale, Alabama office space is leased
month-to-month. In addition, we lease approximately 4,025 square feet of office
space in Nashville, Tennessee for the offices of NetCentral. This lease extends
to January 31, 2006.
American Wholesale owns its distribution center located in an
approximately 290,000 square foot facility in Florence, Alabama. During fiscal
1995 and 1996, we financed the acquisition and construction of the distribution
facility through loans obtained from the proceeds of an industrial revenue bond,
which are secured by a mortgage interest in this facility. We also lease, from a
related party, a second 210,000 square foot warehouse facility located in
Tuscumbia, Alabama. In addition we lease all of the tractors that pull the
company-owned trailers, which comprise our transportation fleet.
ITEM 3. 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 or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
7
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information under the heading "Market and Dividend Information" on
page 31 of the Amended Annual Report to Stockholders for the year ended January
31, 2004 is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information under the heading "Selected Consolidated Financial Data"
for the years ended January 29, 2000, through January 31, 2004 on page 4 of the
Amended Annual Report to Stockholders for the year ended January 31, 2004, is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information under the heading "Management's Discussion & Analysis of
Financial Condition & Results of Operations" on pages 5 through 11 of the
Amended Annual Report to Stockholders for the year ended January 31, 2004 is
incorporated herein by reference.
ITEM 7.A. MARKET RISK
We are subject to interest rate fluctuations involving our credit facilities.
The average amount of debt outstanding under our credit facilities was $57.5
million during fiscal 2004. To manage this exposure, the Company utilizes
interest rate swaps to fix the interest rate on variable debt. We entered into
two separate $10 million swaps on July 24, 2002. Both expire August 2005 and,
prior to the payoff of the debt, effectively fix the interest rate on $20
million of variable debt at 5.13%. Also, on May 14, 1996, we entered into a $7.5
million interest rate swap with a ten-year term. The swap effectively fixes the
interest rate on $7.5 million of variable rate debt at 7.98% and expires on June
7, 2006. The counter parties to each of these 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. All of our financial
instruments that are sensitive to market risk are entered into for purposes
other than trading.
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 $70,000 for the year ending January
31, 2004. Likewise, a 66% decrease in LIBOR rates would decrease interest
expense by $70,000 for the year ending January 31, 2004. This hypothetical
change in LIBOR rates was calculated based on the fluctuation in LIBOR in 2003,
which was the maximum LIBOR fluctuation in the last ten years. The estimates
also assume a level of debt consistent with the year-ended January 31, 2004
level and do not consider the effect of the potential termination of the
interest rate swaps associated with the debt will have on interest expense.
The information in note 3 "Debt and Lines of Credit" in the Notes to
Consolidated Financial Statements on page 21 of the Amended Annual Report to
Stockholders for the year ended January 31, 2004 is incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements of the Registrant and its subsidiaries
included in the Amended Annual Report to Stockholders for the year ended January
31, 2004 are incorporated herein by reference:
Consolidated Balance Sheets as of January 31, 2004 (as restated) and
February 1, 2003 (as restated).
Consolidated Statements of Operations for the Fiscal Years Ended January
31, 2004 (as restated), February 1, 2003 (as restated), and February 2,
2002 (as restated).
Consolidated Statements of Changes in Stockholders' Equity for the Fiscal
Years Ended January 31, 2004 (as restated), February 1, 2003 (as
restated), and February 2, 2002 (as restated).
Consolidated Statements of Cash Flows for the Fiscal Years Ended January
31, 2004 (as restated), February 1, 2003 (as restated), and February 2,
2002 (as restated).
Notes to Consolidated Financial Statements (as restated)
8
Report of Independent Registered Public Accounting Firm.
The information under the heading "Summary of Quarterly Results
(Unaudited)" on page 27 of the Amended Annual Report to Stockholders for
the Fiscal Years Ended January 31, 2004 (as restated) and February 1,
2003 (as restated) is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. 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 period
covered by this amended report. In performing this evaluation, in light of the
pronouncement on 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
practices. Specifically, as further discussed in Note 11 to the accompanying
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
registered public accounting firm we determined to restate our financial
statements for fiscal year ending 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-K/A and in Note 11, "Restatement of Financial Statements," to the
accompanying 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
10-K/A and Annual 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 January 31, 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 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
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:
9
(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 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.
10
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
The sections under the heading "Proposal I-Election of Directors" entitled
"Nominees for Election - Term Expiring 2007", "Incumbent Director - Term
Expiring 2005", and "Incumbent Directors - Term Expiring 2006" on pages 3 and 4
of the Proxy Statement for the Annual Meeting of Stockholders to be held June 3,
2004, are incorporated herein by reference for information on the directors of
the Registrant. The information under the heading "Information Concerning the
Board of Directors" on pages 4 through 7 of the Proxy Statement for the Annual
Meeting of Stockholders to be held June 3, 2004 is incorporated herein by
reference.
EXECUTIVE OFFICERS
All of our executive officers are elected annually by and serve at the
discretion of the Board of Directors. Our current executive officers are listed
below:
NAME AGE POSITION WITH THE COMPANY
--------------------- --- -----------------------------------------------------
Clyde B. Anderson 43 Executive Chairman of the Board
Sandra B. Cochran 45 President, Chief Executive Officer and Secretary
Terrance G. Finley 50 Executive Vice President of Books-A-Million, Inc. and
President of American Internet Service, Inc.
Richard S. Wallington 45 Chief Financial Officer
Clyde B. Anderson has served as Executive Chairman of the Board since
February 2004 and has served as a director of the Company since August 1987. Mr.
Anderson served as the Chairman of the Board from January 2000 until February
2004 and also served as the Chief Executive Officer of the Company from July
1992 until February 2004. Mr. Anderson also served as the President of the
Company from November 1987 to August 1999. From November 1987 to March 1994, Mr.
Anderson also served as the Company's Chief Operating Officer. Mr. Anderson
serves on the Board of Directors and the Compensation Committee of Hibbett
Sporting Goods, Inc., a sporting goods retailer. Mr. Anderson is the son of
Charles C. Anderson and the brother of Terry C. Anderson, both members of the
Company's Board of Directors.
Sandra B. Cochran was appointed to the position of Chief Executive Officer
in February 2004, in addition to her duties as President and Secretary. Ms.
Cochran has served as President of the Company since August 1999 and Secretary
since June 1998. Ms. Cochran served as the Executive Vice President from
February 1996 to August 1999 and as Chief Financial Officer from September 1993
to August 1999. Ms. Cochran previously served as Vice President and Assistant
Secretary of the Company from August 1992 to September 1993. Prior to joining
the Company, Ms. Cochran served as a Vice President (as well as in other
capacities) of SunTrust Securities, Inc., a subsidiary of SunTrust Banks, Inc.
for more than five years
Terrance G. Finley has served as Executive Vice President - Merchandising
of the Company since October 2001 and as the President of American Internet
Service, Inc. since December 1998. Mr. Finley served in various other capacities
in the merchandising department from April 1994 to December 1998. Mr. Finley
served as the General Manager of Book$mart from February 1992 to April 1994.
Prior to joining the Company, Mr. Finley served as the Vice President - Sales
for Smithmark Publishers.
Richard S. Wallington has served as the Chief Financial Officer of the
Company since August 1999. Mr. Wallington served as Vice President and
Controller from September 1993 to August 1999. Prior to joining the Company, Mr.
Wallington served as the Director of Financial Reporting for Woodward & Lothrop,
a retail department store company.
The section under the heading "Information Concerning Board of Directors"
entitled "Code of Conduct" on page 6 of the Proxy Statement for the Annual
Meeting of Stockholders to be held June 3, 2004 is incorporated herein by
reference.
11
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires our directors, executive officers and persons who own beneficially more
than 10% of the Company's common stock to file reports of ownership and changes
in ownership of such stock with the Securities and Exchange Commission (the
"SEC") and the NASDAQ Stock Market, Inc. Directors, executive officers and
greater than 10% stockholders are required by SEC regulations to furnish us with
copies of all such forms they file. To our knowledge, based solely on a review
of the copies of such reports furnished to us and written representations that
no other reports were required, our directors, executive officers and greater
than 10% stockholders complied with all applicable Section 16(a) filing
requirements during fiscal 2004.
ITEM 11. EXECUTIVE COMPENSATION
The sections under the heading "Executive Compensation," other than those
entitled "Report on Executive Compensation", "Compensation Committee Interlocks
and Insider Participation", "Certain Relationships and Related Transactions" and
"Performance Graph", on pages 8 through 14 of the Proxy Statement for the Annual
Meeting of Stockholders to be held June 3, 2004 are incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The section under the heading "Information Concerning the Board of
Directors" entitled "Beneficial Ownership of Common Stock" on pages 7 and 8 of
the Proxy Statement for the Annual Meeting of Stockholders to be held June 3,
2004 is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The sections under the heading "Executive Compensation" entitled
"Compensation Committee Interlocks and Insider Participation" and "Certain
Relationships and Related Transactions" on pages 10 and 11 of the Proxy
Statement for the Annual Meeting of Stockholders to be held June 3, 2004 are
incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The section under the heading "Information Concerning Board of Directors"
entitled "Auditor Fees and Services" on page 6 of the Proxy Statement for the
Annual Meeting of Stockholders to be held June 3, 2004 is incorporated herein by
reference.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The following Consolidated Financial Statements of Books-A-Million, Inc.
and its subsidiaries, included in the Registrant's Annual Report to
Stockholders for the fiscal year ended January 31, 2004 are incorporated
by reference in Part II, Item 8:
Consolidated Balance Sheets as of January 31, 2004 (as restated) and
February 1, 2003 (as restated).
Consolidated Statements of Operations for the Fiscal Years Ended January
31, 2004 (as restated), February 1, 2003 (as restated), and February 2,
2002 (as restated).
Consolidated Statements of Changes in Stockholders' Equity for the Fiscal
Years Ended January 31, 2004 (as restated), February 1, 2003 (as
restated), and February 2, 2002 (as restated).
Consolidated Statements of Cash Flows for the Fiscal Years Ended January
31, 2004 (as restated), February 1, 2003 (as restated), and February 2,
2002 (as restated).
12
Notes to Consolidated Financial Statements (as restated).
Report of Independent Registered Public Accounting Firm.
2. Financial Statement Schedule.
The following consolidated financial statement schedule of
Books-A-Million, Inc. is attached hereto:
Report of Independent Registered Public Accounting Firm on Financial
Statement Schedule.
Schedule 2 Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are not applicable, and
therefore have been omitted.
3. Exhibits
Exhibit Number
3.1 -- Certificate of Incorporation of the Company (incorporated by
reference to Exhibit 3.1 to Registration Statement on Form
S-1, File No. 33-52256, originally filed September 21, 1992
(the "S-1 Registration Statement")).
3.2 -- Bylaws of the Company (incorporated by reference to Exhibit
3.2 to the S-1 Registration Statement).
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.
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).
10.2 -- Amended and Restated Stock Option Plan (incorporated by
reference to Exhibit 10.2 to Annual Report on Form 10-K for
the fiscal year ended January 30, 1999, File No. 0-20664,
filed on April 30, 1999).
10.3 -- Employee Stock Purchase Plan (incorporated by reference to
Exhibit 10.7 to the S-1 Registration Statement).
10.4 -- Amendment to Employee Stock Purchase Plan (incorporated by
reference to Exhibit 10.6 to Annual Report on Form 10-K for
the fiscal year ended January 29, 1994, File No. 0-20664,
filed on April 29, 1994).
10.5 -- 1999 Amended and Restated Employee Stock Purchase Plan
(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).
10.6 -- 401(k) Plan adopted September 15, 2003, with Suntrust Bank
as Trustee (incorporated by reference to Exhibit 10.6 to
Annual Report on Form 10-K for the fiscal year ended
January 31, 2004, File No.l 0-20664, filed on April 27, 2004).
10.7 -- Shareholders Agreement dated as of September 1, 1992
(incorporated by reference to Exhibit 10.9 to Annual Report on
Form 10-K for the fiscal year ended January 31, 1993, File No.
0-20664, filed May 3, 1993).
10.8 -- Executive Incentive Plan (incorporated by reference to
Exhibit 10.8 to Annual Report on Form 10-K for the fiscal year
ended January 28, 1995, File No. 0-20664, filed April 28,
1995).
13
10.19 -- 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).
10.20 -- 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).
13 -- Portions of the amended Annual Report to Stockholders for
the year ended January 31, 2004 that are expressly
incorporated by reference into Part II of this Report.
21 -- Subsidiaries of the Registrant (incorporated by reference
to Exhibit 21 to Annual Report on Form 10-K for the fiscal
year ended February 3, 2001, File No. 0-20664, filed May 4,
2001).
23 -- Consent of Independent Registered Public Accounting Firm.
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, filed under Exhibit
31 of Item 601 of Regulation S-K.
31.2 -- 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, filed under Exhibit
31 of Item 601 of Regulation S-K.
31.3 -- 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, filed
under Exhibit 31 of Item 601 of Regulation S-K.
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, filed under Exhibit 32 of Item 601 of Regulation
S-K.
32.2 -- Certification of Richard S. Wallington, Chief Financial
Officer of Books-A-Million, Inc., pursuant to 18 U.S.C.
Section 1350, filed under Exhibit 32 of Item 601 of Regulation
S-K.
32.3 -- Certification of Sandra B. Cochran, President and Chief
Executive Officer of Books-A-Million, Inc., pursuant to 18
U.S.C. Section 1350, filed under Exhibit 32 of Item 601 of
Regulation S-K.
Reports on Form 8-K
None.
(c) See Item 15(a) (3), the Exhibit Index and the Exhibits attached hereto.
(d) See Item 15(a) (2).
14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BOOKS-A-MILLION, INC.
by: /s/ Clyde B. Anderson
-------------------------------------
Clyde B. Anderson
Executive Chairman of the Board
Date: April 28, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
PRINCIPAL EXECUTIVE OFFICER:
/s/ Clyde B. Anderson
----------------------------------------
Clyde B. Anderson
Executive Chairman of the Board
Date: April 28, 2005
PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER:
/s/ Richard S. Wallington
----------------------------------------
Richard S. Wallington
Chief Financial Officer
Date: April 28, 2005
DIRECTORS:
/s/ Clyde B. Anderson
----------------------------------------
Clyde B. Anderson
Date: April 28, 2005
15
DIRECTORS:
/s/ Ronald G. Bruno
----------------------------------------
Ronald G. Bruno
Date: April 28, 2005
/s/ J. Barry Mason
----------------------------------------
J. Barry Mason
Date: April 28, 2005
/s/ Terry C. Anderson
----------------------------------------
Terry C. Anderson
Date: April 28, 2005
/s/ William H. Rogers, Jr.
----------------------------------------
William H. Rogers, Jr.
Date: April 28, 2005
16
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Board of Directors of Books-A-Million, Inc.:
We have audited the consolidated financial statements of Books-A-Million, Inc.
and its subsidiaries (the "Company") as of January 31, 2004 and February 1, 2003
and for each of the three fiscal years in the period ended January 31, 2004, and
have issued our report thereon dated April 19, 2004 (April 25, 2005 as to the
effects of the restatement discussed in Note 11), (which report expresses an
unqualified opinion and includes explanatory paragraphs relating to the adoption
of new accounting principles as described in Note 1 and the restatement
described in Note 11 to the consolidated financial statements); such financial
statements and report are included in the Company's 2004 amended Annual Report
to Stockholders and are incorporated herein by reference. Our audits also
included the financial statement schedule of Books-A-Million, Inc. listed in
Item 15. This financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, such financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Birmingham, Alabama
April 19, 2004 (April 25, 2005 as to the effects of the restatement discussed in
Note 11)
S-1
SCHEDULE 2.
BOOKS-A-MILLION, INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED FEBRUARY 2, 2002, FEBRUARY 1, 2003, AND JANUARY 31, 2004
BALANCE AT CHARGED
BEGINNING TO COSTS (DEDUCTIONS) BALANCE AT
OF YEAR AND EXPENSES NET END OF YEAR
---------- ------------ ------------ -----------
FOR THE YEAR ENDED FEBRUARY 2, 2002:
Allowance for doubtful accounts $ 786,881 $ 567,913 $ (569,902) $ 784,892
FOR THE YEAR ENDED FEBRUARY 1, 2003:
Allowance for doubtful accounts $ 784,892 $ 276,459 $ (349,396) $ 711,955
FOR THE YEAR ENDED JANUARY 31, 2004:
Allowance for doubtful accounts $ 711,955 $ 534,300 $ (701,010) $ 545,245
S-2