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<SEC-DOCUMENT>0000950144-04-004421.txt : 20040427
<SEC-HEADER>0000950144-04-004421.hdr.sgml : 20040427
<ACCEPTANCE-DATETIME>20040427161602
ACCESSION NUMBER: 0000950144-04-004421
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 10
CONFORMED PERIOD OF REPORT: 20040131
FILED AS OF DATE: 20040427
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: BOOKS A MILLION INC
CENTRAL INDEX KEY: 0000891919
STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-MISCELLANEOUS SHOPPING GOODS STORES [5940]
IRS NUMBER: 630798460
STATE OF INCORPORATION: DE
FISCAL YEAR END: 0131
FILING VALUES:
FORM TYPE: 10-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-20664
FILM NUMBER: 04757221
BUSINESS ADDRESS:
STREET 1: 402 INDUSTRIAL LN
CITY: BIRMINGHAM
STATE: AL
ZIP: 35211
BUSINESS PHONE: 2059423737
MAIL ADDRESS:
STREET 1: 402 INDUSTRIAL LANE
CITY: BIRMINGHAM
STATE: AL
ZIP: 35211
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>g88566e10vk.txt
<DESCRIPTION>BOOKS-A-MILLION, INC.
<TEXT>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended January 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
<PAGE>
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 April
5, 2004 (based on the closing sale price as reported on the NASDAQ National
Market on such date), was $63,442,645.
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
<PAGE>
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, which was founded in 1917, has developed several
store formats to address the various market areas it serves. 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 are also a wholesaler of books to
bookstores, wholesale clubs, supermarkets, department stores and mass
merchandisers.
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/wholesale trade and electronic
commerce trade. In the retail/wholesale trade segment we are engaged in the
retail trade of primarily book merchandise. The retail/wholesale 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.
3
<PAGE>
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 branded coffee drinks and
assorted pastries, among other items. We operated 4 newsstands as of January 31,
2004.
ACQUISITION OF STORES
During 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.
4
<PAGE>
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.
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.
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.
5
<PAGE>
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.
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 wholesale 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 wholesale
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.
6
<PAGE>
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 29 of the 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 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 10 of the
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 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 29, 2005. Likewise, a 66% decrease in LIBOR rates would decrease
interest expense by $70,000 for the year ending January 29, 2005. 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 Annual Report to
Stockholders for the year ended January 31, 2003 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 Annual Report to Stockholders for the year ended
January 31, 2004 are incorporated herein by reference:
Consolidated Balance Sheets as of January 31, 2004 and February 1,
2003.
Consolidated Statements of Operations for the Fiscal Years Ended
January 31, 2004, February 1, 2003, and February 2, 2002.
Consolidated Statements of Changes in Stockholders' Equity for the
Fiscal Years Ended January 31, 2004, February 1, 2003, and February 2, 2002.
7
<PAGE>
Consolidated Statements of Cash Flows for the Fiscal Years Ended
January 31, 2004, February 1, 2003, and February 2, 2002.
Notes to Consolidated Financial Statements.
Independent Auditors' Report.
The information under the heading "Summary of Quarterly Results
(Unaudited)" on page 27 of the Annual Report to Stockholders for the
Fiscal Years Ended January 31, 2004 and February 1, 2003 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 quarter
covered by this report. Based on the foregoing, the Company's Chief Executive
Officer and Chief Financial Officer concluded that the Company's disclosure
controls and procedures were effective at the reasonable assurance level. There
has been no change in the Company's internal controls over financial reporting
during the Company's most recent fiscal quarter that has materially affected, or
is reasonably likely to materially affect, the Company's internal controls over
financial reporting.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
The sections under the heading "Proposal I-Election of Directors"
entitled "Nominee for Election - Term Expiring 2007", "Incumbent Director - Term
Expiring 2005", and "Incumbent Director - 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.
8
<PAGE>
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:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
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
</TABLE>
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.
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.
9
<PAGE>
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 and February 1,
2003.
Consolidated Statements of Operations for the Fiscal Years Ended
January 31, 2004, February 1, 2003, and February 2, 2002.
Consolidated Statements of Changes in Stockholders' Equity for the
Fiscal Years Ended January 31, 2004, February 1, 2003, and February 2,
2002.
Consolidated Statements of Cash Flows for the Fiscal Years Ended
January 31, 2004, February 1, 2003, and February 2, 2002.
Notes to Consolidated Financial Statements.
Independent Auditors' Report.
10
<PAGE>
2. Financial Statement Schedule:
The following consolidated financial statement schedule of
Books-A-Million, Inc. is attached hereto:
Independent Auditors' Report 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
<TABLE>
<CAPTION>
Exhibit Number
- --------------
<S> <C>
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.
10.7 -- Shareholders Agreement dated as of September 1, 1992 (incorporated by reference
to Exhibit 10.9 to Annual Report on Form 10-K for the fiscal year ended January
31, 1993, File No. 0-20664, filed May 3, 1993).
10.8 -- Executive Incentive Plan (incorporated by reference to Exhibit 10.8 to Annual
Report on Form 10-K for the fiscal year ended January 28, 1995, File No.
0-20664, filed April 28, 1995).
10.19 -- 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).
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
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 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 Deloitte & Touche LLP.
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.
</TABLE>
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).
12
<PAGE>
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 27, 2004
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 27, 2004
PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER:
/s/ Richard S. Wallington
- --------------------------------------------
Richard S. Wallington
Chief Financial Officer
Date: April 27, 2004
DIRECTORS:
/s/ Clyde B. Anderson
- --------------------------------------------
Clyde B. Anderson
Date: April 27, 2004
/s/ Charles C. Anderson
- --------------------------------------------
Charles C. Anderson
Date: April 27, 2004
13
<PAGE>
DIRECTORS:
/s/ Ronald G. Bruno
- --------------------------------------------
Ronald G. Bruno
Date: April 27, 2004
/s/ J. Barry Mason
- --------------------------------------------
J. Barry Mason
Date: April 27, 2004
/s/ Terry C. Anderson
- --------------------------------------------
Terry C. Anderson
Date: April 27, 2004
/s/ William H. Rogers, Jr.
- --------------------------------------------
William H. Rogers, Jr.
Date: April 27, 2004
14
<PAGE>
INDEPENDENT AUDITORS' REPORT
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 (which report expresses an
unqualified opinion and includes an explanatory paragraph relating to the
adoption of new accounting principles as described in Note 1 to the consolidated
financial statements); such financial statements and report are included in the
Company's 2004 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
S-1
<PAGE>
SCHEDULE 2.
BOOKS-A-MILLION, INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED FEBRUARY 2, 2002, FEBRUARY 1, 2003, AND JANUARY 31, 2004
<TABLE>
<CAPTION>
CHARGED/
BALANCE AT (CREDITED) (DEDUCTIONS)/
BEGINNING TO COSTS RECOVERIES BALANCE AT
OF YEAR AND EXPENSES NET END OF YEAR
---------- ------------ ------------- -----------
<S> <C> <C> <C> <C>
FOR THE YEAR ENDED 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
</TABLE>
S-2
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.6
<SEQUENCE>2
<FILENAME>g88566exv10w6.txt
<DESCRIPTION>EX-10.6 401K PLAN
<TEXT>
<PAGE>
EXHIBIT 10.6
SUNTRUST BANK
NONSTANDARDIZED 401(K) PLAN
By executing this 401(k) plan Adoption Agreement (the "Agreement") under the
SunTrust Bank Prototype Plan, the Employer agrees to establish or continue a
401(k) plan for its Employees. The 401(k) plan adopted by the Employer consists
of the Basic Plan Document #02 (the "BPD") and the elections made under this
Agreement (collectively referred to as the "Plan"). A Related Employer may
jointly co-sponsor the Plan by signing a Co-Sponsor Adoption Page, which is
attached to this Agreement. (See Section 22.164 of the BPD for the definition of
a Related Employer.) THIS PLAN IS EFFECTIVE AS OF THE EFFECTIVE DATE IDENTIFIED
ON THE SIGNATURE PAGE OF THIS AGREEMENT.
1. EMPLOYER INFORMATION
a. NAME AND ADDRESS OF EMPLOYER EXECUTING THE SIGNATURE PAGE OF THIS
AGREEMENT: Books-A-Million, Inc. 402 Industrial Lane Birmingham,
Alabama 35211
b. EMPLOYER IDENTIFICATION NUMBER (EIN) FOR THE EMPLOYER: 63-0798460
c. BUSINESS ENTITY OF EMPLOYER (optional):
[X] (1) C-Corporation [ ] (2) S-Corporation
[ ] (3) Limited Liability Corporation [ ] (4) Sole Proprietorship
[ ] (5) Partnership [ ] (6) Limited Liability Partnership
[ ] (7) Government [ ] (8) Other ___________
d. LAST DAY OF EMPLOYER'S TAXABLE YEAR (optional): January 31
e. DOES THE EMPLOYER HAVE ANY RELATED EMPLOYERS (as defined in Section
22.164 of the BPD)?
[X] (1) Yes [ ] (2) No
f. IF e. IS YES, LIST THE RELATED EMPLOYERS (optional):
American Internet Service, Inc.
American Wholesale Book Company, Inc.
NetCentral, Inc.
booksamillion.com, Inc.
[NOTE: This Plan will cover Employees of a Related Employer only if
such Related Employer executes a Co-Sponsor Adoption Page. Failure to
cover the Employees of a Related Employer may result in a violation of
the minimum coverage rules under Code Section 410(b). See Section 1.3
of the BPD.]
2. PLAN INFORMATION
a. NAME OF PLAN: Books-A-Million, Inc. 401(k) Profit Sharing Plan
b. PLAN NUMBER (as identified on the Form 5500 series filing for the
Plan): 001
c. TRUST IDENTIFICATION NUMBER (optional): _____________________________
d. PLAN YEAR: [Check (1) or (2). Selection (3) may be selected in addition
to (1) or (2) to identify a Short Plan Year.]
[X] (1) The calendar year.
[ ] (2) The 12-consecutive month period ending _______.
[X] (3) The Plan has a Short Plan Year beginning February 1, 2003 and
ending December 31, 2003 .
3. TYPES OF CONTRIBUTIONS
The following types of contributions are authorized under this Plan.
The selections made below should correspond with the selections made
under Parts 4A, 4B, 4C, 4D and 4E of this Agreement.
[X] a. SECTION 401(k) DEFERRALS (see Part 4A).
[X] b. EMPLOYER MATCHING CONTRIBUTIONS (see Part 4B).
? 2001 SunTrust Bank
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<PAGE>
[ ] c. EMPLOYER NONELECTIVE CONTRIBUTIONS (see Part 4C).
[ ] d. EMPLOYEE AFTER-TAX CONTRIBUTIONS (see Part 4D).
[ ] e. SAFE HARBOR MATCHING CONTRIBUTIONS (see Part 4E, #27).
[ ] f. SAFE HARBOR NONELECTIVE CONTRIBUTIONS (see Part 4E, #28).
[ ] g. NONE. This Plan is a Frozen Plan Effective ____________
(see Section 2.1(d) of the BPD).
PART 1 - ELIGIBILITY CONDITIONS
(See Article 1 of the BPD)
4. EXCLUDED EMPLOYEES. [Check a. or any combination of b. - f. for those
contributions the Employer elects to make under Part 4 of this
Agreement. See Section 1.2 of the BPD for rules regarding the
determination of Excluded Employees for Employee After-Tax
Contributions, QNECs, QMACs and Safe Harbor Contributions.]
<TABLE>
<CAPTION>
(1) (2) (3)
SECTION 401(k) EMPLOYER EMPLOYER
DEFERRALS MATCH NONELECTIVE
<S> <C> <C> <C> <C>
a. [X] [X] [ ] No excluded categories of Employees.
b. [ ] [ ] [ ] Union Employees (see Section 22.202 of the BPD).
c. [ ] [ ] [ ] Nonresident Alien Employees (see Section 22.124 of the BPD).
d. [ ] [ ] [ ] Leased Employees (see Section 1.2(b) of the BPD).
e. [ ] [ ] [ ] Highly Compensated Employees (see Section 22.99 of the BPD).
f. [ ] [ ] [ ] (Describe Excluded Employees): _____________________________
</TABLE>
5. MINIMUM AGE AND SERVICE CONDITIONS FOR BECOMING AN ELIGIBLE
PARTICIPANT. [Check a. or check b. and/or any one of c. - e. for those
contributions the Employer elects to make under Part 4 of this
Agreement. Selection f. may be checked instead of or in addition to any
selections under b. - e. See Section 1.4 of the BPD for the application
of the minimum age and service conditions for purposes of Employee
After - Tax Contributions, QNECs, QMACs and Safe Harbor Contributions.
See Part 7 of this Agreement for special service crediting rules.]
<TABLE>
<CAPTION>
(1) (2) (3)
SECTION 401 EMPLOYER EMPLOYER
(k)DEFERRALS MATCH NONELECTIVE
<S> <C> <C> <C> <C>
a. [ ] [ ] [ ] None (conditions are met on Employment Commencement Date).
b. [X] [X] [ ] Age 21 (cannot exceed age 21).
c. [ ] [ ] [ ] One Year of Service.
d. [X] [X] [ ] 6 consecutive months (not more than 12) during which the Employee
completes at least 1 Hours of Service (cannot exceed 1,000). If an
Employee does not satisfy this requirement in the first designated
period of months following his/her Employment Commencement Date, such
Employee will be deemed to satisfy this condition upon completing a Year
of Service (as defined in Section 1.4(b) of the BPD).
e. N/A [ ] [ ] Two Years of Service. [Full and immediate vesting must be selected under
Part 6 of this Agreement.]
f. [ ] [ ] [ ] (Describe eligibility conditions): _____________________________________
[NOTE: Any conditions provided under f. must be described in a manner
that precludes Employer discretion and must satisfy the
nondiscrimination requirements of Section 1.401(a)(4) of the regulations,
and may not cause the Plan to violate the provisions of Code
Section 410(a).]
</TABLE>
? 2001 SunTrust Bank
2
<PAGE>
[ ]6. DUAL ELIGIBILITY. Any Employee (other than an Excluded Employee) who is
employed on the date designated under a. or b. below, as applicable, is
deemed to be an Eligible Participant as of the later of the date
identified under this #6 or the Effective Date of this Plan, without
regard to any Entry Date selected under Part 2. See Section 1.4(d)(2)
of the BPD. [NOTE: If this #6 is checked, also check a. or b. If this
#6 is not checked, the provisions of Section 1.4(d)(1) of the BPD
apply.]
[ ] a. The Effective Date of this Plan.
[ ] b. (Identify date) _______________________________
[NOTE: Any date specified under b. may not cause the Plan to violate
the provisions of Code Section 410(a). See Section 1.4 of the BPD.]
PART 2 - COMMENCEMENT OF PARTICIPATION
(See Section 1.5 of the BPD)
7. ENTRY DATE UPON WHICH PARTICIPATION BEGINS AFTER COMPLETING MINIMUM AGE
AND SERVICE CONDITIONS UNDER PART 1, #5 ABOVE. [Check one of a. - e.
for those contributions the Employer elects to make under Part 4 of
this Agreement. See Section 1.5 of the BPD for determining the Entry
Date applicable to Employee After-Tax Contributions, QNECs, QMACs and
Safe Harbor Contributions.]
<TABLE>
<CAPTION>
(1) (2) (3)
SECTION 401(k) EMPLOYER EMPLOYER
DEFERRALS MATCH NONELECTIVE
<S> <C> <C> <C> <C>
a. [ ] [ ] [ ] The next following Entry Date (as defined in #8 below).
b. [X] [X] [ ] The Entry Date (as defined in #8 below) coinciding with or next
following the completion of the age and service conditions.
c. N/A [ ] [ ] The nearest Entry Date (as defined in #8 below).
d. N/A [ ] [ ] The preceding Entry Date (as defined in #8 below).
e. [ ] [ ] [ ] The date the age and service conditions are satisfied. [Also
check #8.e. below for the same type of contribution(s) checked here.]
</TABLE>
8. DEFINITION OF ENTRY DATE. [Check one of a. - e. for those contributions
the Employer elects to make under Part 4 of this Agreement. Selection
f. may be checked instead of or in addition to a. - e. See Section 1.5
of the BPD for determining the Entry Date applicable to Employee
After-Tax Contributions, QNECs, QMACs and Safe Harbor Contributions.]
<TABLE>
<CAPTION>
(1) (2) (3)
SECTION 401(k) EMPLOYER EMPLOYER
DEFERRALS MATCH NONELECTIVE
<S> <C> <C> <C> <C>
a. [ ] [ ] [ ] The first day of the Plan Year and the first day of 7th month of
the Plan Year.
b. [ ] [ ] [ ] The first day of each quarter of the Plan Year.
c. [ ] [ ] [ ] The first day of each month of the Plan Year.
d. [ ] [ ] [ ] The first day of the Plan Year. [If #7.a. or #7.b. above is checked
for the same type of contribution as checked here, see the restrictions
in Section 1.5(b) of the BPD.]
e. [X] [X] [ ] The date the conditions in Part 1, #5. above are satisfied. [This
e. should be checked for a particular type of contribution only if
#7.e. above is also checked for that type of contribution.]
f. [ ] [ ] [ ] (Describe Entry Date) ______________________
[NOTE: Any Entry Date designated in f. must comply with the
requirements of Code Section 410(a)(4) and must satisfy the nondiscrimination
requirements under Section 1.401(a)(4) of the regulations. See Section 1.5(a)
of the BPD.]
</TABLE>
? 2001 SunTrust Bank
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<PAGE>
PART 3 - COMPENSATION DEFINITIONS
(See Sections 22.102 and 22.197 of the BPD)
9. DEFINITION OF TOTAL COMPENSATION:
[X] a. W-2 Wages.
[ ] b. Withholding Wages.
[ ] c. Code Section 415 Safe Harbor Compensation.
[NOTE: Each of the above definitions is increased for Elective
Deferrals (as defined in Section 22.61 of the BPD, for pre-tax
contributions to a cafeteria plan or a Code Section 457 plan, and for
qualified transportation fringes under Code Section 132(f)(4). See
Section 22.197 of the BPD.]
10. DEFINITION OF INCLUDED COMPENSATION for allocation of contributions or
forfeitures: [Check a. or b. for those contributions the Employer
elects under Part 4 of this Agreement. If b. is selected for a
particular contribution, also check any combination of c. through j.
for that type of contribution. See Section 22.102 of the BPD for
determining Included Compensation for Employee After-Tax Contributions,
QNECs, QMACs and Safe Harbor Contributions.]
<TABLE>
<CAPTION>
(1) (2) (3)
SECTION 401(k) EMPLOYER EMPLOYER
DEFERRALS MATCH NONELECTIVE
<S> <C> <C> <C> <C>
a. [X] [X] [ ] Total Compensation, as defined in #9 above.
b. [ ] [ ] [ ] Total Compensation, as defined in #9 above, with the
following exclusions:
c. N/A [ ] [ ] Elective Deferrals, pre-tax contributions to a cafeteria plan
or a Code Section 457 plan, and qualified transportation fringes under
Code Section 132(f)(4) are excluded. See Section 22.102 of the BPD.
d. [ ] [ ] [ ] Fringe benefits, expense reimbursements, deferred compensation,
welfare benefits are excluded.
e. [ ] [ ] [ ] Compensation above $_____ is excluded.
f. [ ] [ ] [ ] Bonuses are excluded.
g. [ ] [ ] [ ] Commissions are excluded.
h. [ ] [ ] [ ] Overtime is excluded.
i. [ ] [ ] [ ] Amounts paid for services performed for a Related Employer that
does not execute the Co-Sponsor Adoption Page under this Agreement
are excluded.
j. [ ] [ ] [ ] (Describe modifications to Included Compensation): _____
</TABLE>
[NOTE: Unless otherwise provided under j., any exclusions selected
under f. through j. above do not apply to Nonhighly Compensated
Employees in determining allocations under the Permitted Disparity
Method under Part 4C, #21.b. of this Agreement or for purposes of
applying the Safe Harbor 401(k) Plan provisions under Part 4E of this
Agreement.]
[ ] 11. SPECIAL RULES.
[ ] a. HIGHLY COMPENSATED EMPLOYEES ONLY. For all purposes under the
Plan, the modifications to Included Compensation elected in
#10.f. through #10.j. above will apply only to Highly
Compensated Employees.
[ ] b. MEASUREMENT PERIOD (SEE THE OPERATING RULES UNDER SECTION
2.2(c)(3) OF THE BPD). Instead of the Plan Year, Included
Compensation is determined on the basis of the period under (1)
or (2) below.
[ ] (1) The calendar year ending in the Plan Year.
[ ] (2) The 12-month period ending on __________ which ends
during the Plan Year.
[NOTE: If this selection b. is checked, Included Compensation
will be determined on the basis of the period designated in (1)
or (2) for all contribution types. If this selection b. is not
checked, Included Compensation is based on the Plan Year. See
Part 4 for the ability to use partial year Included
Compensation.]
? 2001 SunTrust Bank
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<PAGE>
[PRACTITIONER TIP: If #11.b is checked, it is recommended that
the Limitation Year for purposes of applying the Annual Additions
Limitation under Code Section 415 correspond to the period used
to determine Included Compensation. This modification to the
Limitation Year may be made in Part 13, #69.a. of this
Agreement.]
PART 4A - SECTION 401(k) DEFERRALS
(See Section 2.3(a) of the BPD)
[X] Check this selection and complete the applicable sections of this Part
4A to allow for Section 401(k) Deferrals under the Plan.
[X] 12. SECTION 401(k) DEFERRAL LIMIT. 15 % of Included Compensation. [If this
#12 is NOT checked, the Code Section 402(g) deferral limit described in
Section 17.1 of the BPD and the Annual Additions Limitation under
Article 7 of the BPD still apply.]
[X] a.APPLICABLE PERIOD. The limitation selected under #12 applies with
respect to Included Compensation earned during:
[X] (1) the Plan Year.
[ ] (2) the portion of the Plan Year in which the Employee is an
Eligible Participant.
[ ] (3) each separate payroll period during which the Employee is
an Eligible Participant.
[NOTE: If Part 3, #11.b. is checked, any period selected under
this a. will be determined as if the Plan Year were the period
designated under Part 3, #11.b. See Section 2.2(c)(3) of the
BPD.]
[ ] b.LIMIT APPLICABLE ONLY TO HIGHLY COMPENSATED EMPLOYEES. [If this
b. is not checked, any limitation selected under #12 applies to
all Eligible Participants.]
[ ] (1) The limitation selected under #12 applies only to Highly
Compensated Employees.
[ ] (2) The limitation selected under #12 applies only to
Nonhighly Compensated Employees. Highly Compensated
Employees may defer up to ____% of Included Compensation
(as determined under a. above). [The percentage inserted
in this (2) for Highly Compensated Employees must be
lower than the percentage inserted in #12 for Nonhighly
Compensated Employees.]
[X] 13. MINIMUM DEFERRAL RATE: [If this #13 is not checked, no minimum
deferral rate applies to Section 401(k) Deferrals under the Plan.]
[X] a. 1 % of Included Compensation for a payroll period.
[ ] b. $ ___ for a payroll period.
[ ] 14. AUTOMATIC DEFERRAL ELECTION. (See Section 2.3(a)(2) of the BPD.) An
Eligible Participant will automatically defer ____ % of Included
Compensation for each payroll period, unless the Eligible Participant
makes a contrary Salary Reduction Agreement election on or after ____.
This automatic deferral election will apply to:
[ ] a. all Eligible Participants.
[ ] b. only those Employees who become Eligible Participants on or
after the following date:
________________________________________________________________
[ ] 15. EFFECTIVE DATE. If this Plan is being adopted as a new 401(k) plan or
to add a 401(k) feature to an existing plan, Eligible Participants may
begin making Section 401(k) Deferrals as of:_____
? 2001 SunTrust Bank
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<PAGE>
PART 4B - EMPLOYER MATCHING CONTRIBUTIONS
(See Sections 2.3(b) and (c) of the BPD)
[X] CHECK THIS SELECTION AND COMPLETE THIS PART 4B TO ALLOW FOR EMPLOYER
MATCHING CONTRIBUTIONS. Each formula allows for Employer Matching
Contributions to be allocated to Section 401(k) Deferrals and/or
Employee After-Tax Contributions (referred to as "applicable
contributions"). If a matching formula applies to both types of
contributions, such contributions are aggregated to determine the
Employer Matching Contribution allocated under the formula. If any
formula applies to Employee After-Tax Contributions, Part 4D must be
completed. [NOTE: Do not check this selection if the only Employer
Matching Contributions authorized under the Plan are Safe Harbor
Matching Contributions. Instead, complete the applicable elections
under Part 4E of this Agreement. If a "regular" Employer Matching
Contribution will be made in addition to a Safe Harbor Matching
Contribution, complete this Part 4B for the "regular" Employer Matching
Contribution and Part 4E for the Safe Harbor Matching Contribution. To
avoid ACP Testing with respect to any "regular" Employer Matching
Contributions, such contributions may not be based on applicable
contributions in excess of 6% of Included Compensation and any
discretionary "regular" Employer Matching Contributions may not exceed
4% of Included Compensation.]
16. EMPLOYER MATCHING CONTRIBUTION FORMULA(S): [See the operating rules
under #17 below.]
<TABLE>
<CAPTION>
(1) (2)
SECTION 401(k) EMPLOYEE
DEFERRALS AFTER-TAX
<S> <C> <C> <C>
a. [ ] [ ] FIXED MATCHING CONTRIBUTION.___ % of each Eligible Participant's
applicable contributions. The Employer Matching Contribution
does not apply to applicable contributions that exceed:
[ ] (a) ___% of Included Compensation.
[ ] (b) $___.
[NOTE: If neither (a) nor (b) is checked, all applicable contributions
are eligible for the Employer Matching Contribution under this
formula.]
b. [X] [ ] DISCRETIONARY MATCHING CONTRIBUTION. A uniform percentage, as determined
by the employer, of each Eligible Participant's applicable contributions.
[ ] (a) The Employer Matching Contribution allocated to any Eligible
Participant may not exceed____ % of Included Compensation.
[X] (b) The Employer Matching Contribution will apply only to a
Participant's applicable contributions that do not exceed:
[ ] 1. ___% of Included Compensation.
[ ] 2. $___.
[X] 3. a dollar amount or percentage of Included Compensation that is
uniformly determined by the Employer for all Eligible
Participants.
[NOTE: If none of the selections 1. - 3. is checked, all applicable
contributions are eligible for the Employer Matching Contribution
under this formula.]
</TABLE>
? 2001 SunTrust Bank
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<TABLE>
<S> <C> <C> <C>
c. [ ] [ ] TIERED MATCHING CONTRIBUTION. A uniform percentage of each tier of
each Eligible Participant's applicable contributions, determined as follows:
Tiers of contributions Matching percentage
---------------------- -------------------
(indicate $ or %)
(a) First ______________ (b) ______________
(c) Next _______________ (d) ______________
(e) Next _______________ (f) ______________
(g) Next _______________ (h) ______________
[NOTE: Fill in only percentages or dollar amounts, but not both. If
percentages are used, each tier represents the amount of the
Participant's applicable contributions that equals the specified
percentage of the Participant's Included Compensation.]
d. [ ] [ ] DISCRETIONARY TIERED MATCHING CONTRIBUTION. The Employer will determine
a matching percentage for each tier of each Eligible Participant's
applicable contributions. Tiers are determined in increments of:
Tiers of contributions
----------------------
(indicate $ or %)
(a) First _____________
(b) Next _____________
(c) Next _____________
(d) Next _____________
[NOTE: Fill in only percentages or dollar amounts, but not both. If
percentages are used, each tier represents the amount of the
Participant's applicable contributions that equals the specified
percentage of the Participant's Included Compensation.]
e. [ ] [ ] YEAR OF SERVICE MATCHING CONTRIBUTION. A uniform percentage of each
Eligible Participant's applicable contributions based on Years of
Service with Employer, determined as follows:
Years of Service Matching Percentage
---------------- -------------------
(a) ____________ (b) ______________%
(c) ____________ (d) ______________%
(e) ____________ (f) ______________%
[ ] 1. In applying the Year of Service matching contribution formula,
a Year of Service is: [If not checked, a Year of Service is
1,000 Hours of Service during the Plan Year.]
[ ] a. as defined for purposes of eligibility under Part 7.
[ ] b. as defined for purposes of vesting under Part 7.
[ ] 2. Special limits on Employer Matching Contributions under the Year of
Service formula:
[ ] a. The Employer Matching Contribution allocated to any Eligible
Participant may not exceed _____% of Included Compensation.
[ ] b. The Employer Matching Contribution will apply only to a
Participant's applicable contributions that do not exceed:
[ ] (1) ___% of Included Compensation.
[ ] (2) $___.
</TABLE>
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<TABLE>
<S> <C> <C> <C>
f. [ ] [ ] NET PROFITS. Any Employer Matching Contributions made in accordance
with the elections under this #16 are limited to Net Profits. [If this f. is
checked, also select (a) or (b) below.]
[ ] (a) DEFAULT DEFINITION OF NET PROFITS. For purposes of this selection
f., Net Profits is defined in accordance with Section 2.2(a)(2)
of the BPD.
[ ] (b) MODIFIED DEFINITION OF NET PROFITS. For purposes of this selection
f., Net Profits is defined as follows:
[NOTE: Any definition of Net Profits under this (b) must be described in a manner that
precludes Employer discretion and must satisfy the nondiscrimination requirements of
Section 1.401(a)(4) of the regulations and must apply uniformly to all Participants.]
</TABLE>
17. OPERATING RULES FOR APPLYING THE MATCHING CONTRIBUTION FORMULAS:
a. APPLICABLE CONTRIBUTIONS TAKEN INTO ACCOUNT: (See Section
2.3(b)(3) of the BPD.) The matching contribution formula(s)
elected in #16. above (and any limitations on the amount of a
Participant's applicable contributions considered under such
formula(s)) are applied separately for each:
[X] (1) Plan Year. [ ] (2) Plan Year quarter.
[ ] (3) calendar month. [ ] (4) payroll period.
[NOTE: If Part 3, #11.b. is checked, the period selected under
this a. (to the extent such period refers to the Plan Year)
will be determined as if the Plan Year were the period
designated under Part 3, #11.b. See Section 2.2(c)(3) of the
BPD.]
b. SPECIAL RULE FOR PARTIAL PERIOD OF PARTICIPATION. If an
Employee is an Eligible Participant for only part of the
period designated in a. above, Included Compensation is taken
into account for:
[X] (1) the entire period, including the portion of the
period during which the Employee is not an Eligible
Participant.
[ ] (2) the portion of the period in which the Employee is an
Eligible Participant.
[ ] (3) the portion of the period during which the Employee's
election to make the applicable contributions is in
effect.
[ ] 18. QUALIFIED MATCHING CONTRIBUTIONS (QMACs): [NOTE: Regardless of any
elections under this #18, the Employer may make a QMAC to the Plan to
correct a failed ADP or ACP Test, as authorized under Sections
17.2(d)(2) and 17.3(d)(2) of the BPD. Any QMAC allocated to correct the
ADP or ACP Test which is not specifically authorized under this #18
will be allocated to all Eligible Participants who are Nonhighly
Compensated Employees as a uniform percentage of Section 401(k)
Deferrals made during the Plan Year. See Section 2.3(c) of the BPD.]
[ ] a. All Employer Matching Contributions are designated as QMACs.
[ ] b. Only Employer Matching Contributions described in selection(s)
___ under #16 above are designated as QMACs.
[ ] c. In addition to any Employer Matching Contribution provided
under #16 above, the Employer may make a discretionary QM AC
that is allocated equally as a percentage of Section 401(k)
Deferrals made during the Plan Year. The Employer may allocate
QMACs only on Section 401(k) Deferrals that do not exceed a
specific dollar amount or a percentage of Included Compensation
that is uniformly determined by the Employer. QMACs will be
allocated to:
[ ] (1) Eligible Participants who are Nonhighly Compensated
Employees.
[ ] (2) all Eligible Participants.
19. ALLOCATION CONDITIONS. An Eligible Participant must satisfy the
following allocation conditions for an Employer Matching Contribution:
[Check a. or b. or any combination of c. - f. Selection e. may not be
checked if b. or d. is checked. Selection g. and/or h. may be checked
in addition to b. - f.]
[ ] a. NONE.
[ ] b. SAFE HARBOR ALLOCATION CONDITION. An Employee must be employed
by the Employer on the last day of the Plan Year OR must have
more than ____ (not more than 500) Hours of Service for the
Plan Year.
[X] c. LAST DAY OF EMPLOYMENT CONDITION. An Employee must be employed
with the Employer on the last day of the Plan Year.
? 2001 SunTrust Bank
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[X] d. HOURS OF SERVICE CONDITION. An Employee must be credited with
at least 1000 Hours of Service (may not exceed 1,000) during
the Plan Year.
[ ] e. ELAPSED TIME METHOD. (See Section 2.6(d) of the BPD.)
[ ] (1) SAFE HARBOR ALLOCATION CONDITION. An Employee must be
employed by the Employer on the last day of the Plan
Year OR must have more than ___ (not more than 91)
consecutive days of employment with the Employer
during the Plan Year.
[ ] (2) SERVICE CONDITION. An Employee must have more than
___ (not more than 182) consecutive days of employment
with the Employer during the Plan Year.
[ ] f. DISTRIBUTION RESTRICTION. An Employee must not have taken a
distribution of the applicable contributions eligible for an
Employer Matching Contribution prior to the end of the period
for which the Employer Matching Contribution is being made (as
defined in #17.a. above). See Section 2.6(c) of the BPD.
[ ] g. APPLICATION TO A SPECIFIED PERIOD. In applying the allocation
condition(s) designated under b. through e. above, the
allocation condition(s) will be based on the period designated
under #17.a. above. In applying an Hours of Service condition
under d. above, the following method will be used: [This g.
should be checked only if a period other than the Plan Year is
selected under #17.a. above. Selection (1) or (2) must be
selected only if d. above is also checked.]
[ ] (1) FRACTIONAL METHOD (see Section 2.6(e)(2)(i) of the
BPD).
[ ] (2) PERIOD-BY-PERIOD METHOD (see Section 2.6(e)(2)(ii) of
the BPD).
[PRACTITIONER NOTE: If this g. is not checked, any allocation
condition(s) selected under b. through e. above will apply with
respect to the Plan Year, regardless of the period selected
under #17.a. above. See Section 2.6(e) of the BPD for
procedural rules for applying allocation conditions for a
period other than the Plan Year.]
[X] h. The above allocation condition(s) will NOT apply if:
[X] (1) the Participant dies during the Plan Year.
[X] (2) the Participant is Disabled.
[X] (3) the Participant, by the end of the Plan Year, has
reached:
[X] (a) Normal Retirement Age.
[ ] (b) Early Retirement Age.
PART 4C - EMPLOYER NONELECTIVE CONTRIBUTIONS
(See Sections 2.3(d) and (e) of the BPD)
[ ] CHECK THIS SELECTION AND COMPLETE THIS PART 4C TO ALLOW FOR EMPLOYER
NONELECTIVE CONTRIBUTIONS. [NOTE: Do not check this selection if the
only Employer Nonelective Contributions authorized under the Plan are
Safe Harbor Nonelective Contributions. Instead, complete the applicable
elections under Part 4E of this Agreement.]
[ ] 20. EMPLOYER NONELECTIVE CONTRIBUTION (OTHER THAN QNECs):
[ ] a. DISCRETIONARY. Discretionary with the Employer.
[ ] b. FIXED UNIFORM PERCENTAGE. ___% of each Eligible Participant's
Included Compensation.
[ ] c. UNIFORM DOLLAR AMOUNT.
[ ] (1) A uniform discretionary dollar amount for each
Eligible Participant.
[ ] (2) $___ for each Eligible Participant.
[ ] d. DAVIS-BACON CONTRIBUTION FORMULA. (See Section 2.2(a)(1) of the
BPD for rules regarding the application of the Davis-Bacon
Contribution Formula.) The Employer will make a contribution
for each Eligible Participant's Davis-Bacon Act Service based
on the hourly contribution rate for the Participant's
employment classification, as designated under Schedule A of
this Agreement. The contributions under this formula will be
allocated under the Pro Rata Allocation Formula under #21.a.
below, but based on the amounts designated in Schedule A as
attached to this Agreement. [If this d. is selected, #21.a.
below also must be selected.]
? 2001 SunTrust Bank
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[ ] (1) The contributions under the Davis-Bacon Contribution
Formula will offset the following contributions under
the Plan: [Check (a) and/or (b). If this (1) is not
checked, contributions under the Davis Bacon
Contribution Formula will NOT offset any other
Employer Contributions under the Plan.]
[ ] (a) Employer Nonelective Contributions
[ ] (b) Employer Matching Contributions
[ ] (2) The default provisions under Section 2.2(a)(1) are
modified as follows: _________________________________
[NOTE: Any modification to the default provisions
under (2) must satisfy the nondiscrimination
requirements under Section 1.401(a)(4) of the
regulations. Any modification under (2) will not allow
the offset of any contributions to any other Plan.]
[ ] e. NET PROFITS. Check this e. if the contribution selected above
is limited to Net Profits. [If this e. is checked, also select
(1) or (2) below.]
[ ] (1) DEFAULT DEFINITION OF NET PROFITS. For purposes of
this subsection e., Net Profits is defined in
accordance with Section 2.2(a)(2) of the BPD.
[ ] (2) MODIFIED DEFINITION OF NET PROFITS. For purposes of
this subsection e., Net Profits is defined as follows:
____________________________
[NOTE: Any definition of Net Profits under this (2)
must be described in a manner that precludes Employer
discretion, must satisfy the nondiscrimination
requirements of Section 1.401(a)(4) of the
regulations, and must apply uniformly to all
Participants.]
[ ] 21. ALLOCATION FORMULA FOR EMPLOYER NONELECTIVE CONTRIBUTIONS (OTHER THAN
QNECs): (See Section 2.3(d) of the BPD.)
[ ] a. PRO RATA ALLOCATION METHOD. The allocation for each Eligible
Participant is a uniform percentage of Included Compensation
(or a uniform dollar amount if #20.c. is selected above).
[ ] b. PERMITTED DISPARITY METHOD. The allocation for each Eligible
Participant is determined under the following formula:
[Selection #20.a. above must also be checked.]
[ ] (1) Two-Step Formula.
[ ] (2) Four-Step Formula.
[ ] c. UNIFORM POINTS ALLOCATION. The allocation for each Eligible
Participant is determined based on the Eligible Participant's
points. Each Eligible Participant's allocation shall bear the
same relationship to the Employer Contribution as his/her total
points bears to all points awarded. An Eligible Participant
will receive: [Check (1) and/or (2). Selection (3) may be
checked in addition to (1) and (2). Selection #20.a. above also
must be checked.]
[ ] (1) ____ points for each ____ year(s) of age (attained as
of the end of the Plan Year).
[ ] (2) ____ points for each ____ Year(s) of Service,
determined as follows: [Check (a) or (b). Selection
(c) may be checked in addition to (a) or (b).]
[ ] (a) In the same manner as determined for
eligibility.
[ ] (b) In the same manner as determined for vesting.
[ ] (c) Points will not be provided with respect to
Years of Service in excess of ____.
[ ] (3) ____ points for each $____ (not to exceed $200) of
Included Compensation.
[ ] d. ALLOCATION BASED ON SERVICE. The Employer Nonelective
Contribution will be allocated to each Eligible Participant as:
[Check (1) or (2). Also check (a), (b), and/or (c). Selection
(3) may be checked in addition to (1) or (2).]
[ ] (1) a uniform dollar amount [ ] (2) a uniform percentage
of Included Compensation for the following periods of
service:
[ ] (a) Each Hour of Service.
[ ] (b) Each week of employment.
[ ] (c) (Describe period) ___________________________
? 2001 SunTrust Bank
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[ ] (3) The contribution is subject to the following minimum
and/or benefit limitations:
[PRACTITIONER NOTE: If #20.b. or #20.c. is checked, the
selection in (1) or (2) must conform to the selection made in
#20.b. or #20.c. Thus, if #20.b. is checked along with this
subsection d., the allocation must be a uniform percentage of
Included Compensation under (2). If #20.c. is checked along
with this subsection d. the allocation must be a uniform
dollar amount under (1).]
[ ] e. TOP-HEAVY MINIMUM CONTRIBUTION. In applying the Top-Heavy Plan
requirements under Article 16 of the BPD, the top-heavy minimum
contribution will be allocated to all Eligible Participants, in
accordance with Section 16.2(a) of the BPD. [NOTE: If this e.
is not checked, any top-heavy minimum contribution will be
allocated only to Non-Key Employees, in accordance with Section
16.2(a) of the BPD.]
[ ] 22. QUALIFIED NONELECTIVE CONTRIBUTION (QNEC). The Employer may make a
discretionary QNEC that is allocated under the following method. [NOTE:
Regardless of any elections under this #22, the Employer may make a
QNEC to the Plan to correct a failed ADP or ACP Test, as authorized
under Sections 17.2(d)(2) and 17.3(d)(2) of the BPD. Any QNEC allocated
to correct the ADP or ACP Test which is not specifically authorized
under this #22 will be allocated as a uniform percentage of Included
Compensation to all Eligible Participants who are Nonhighly Compensated
Employees. See Section 2.3(e) of the BPD.]
[ ] a. PRO RATA ALLOCATION METHOD. (See Section 2.3(e)(1) of the BPD.)
The QNEC will be allocated as a uniform percentage of Included
Compensation to:
[ ] (1) all Eligible Participants who are Nonhighly
Compensated Employees.
[ ] (2) all Eligible Participants.
[ ] b. BOTTOM-UP QNEC METHOD. The QNEC will be allocated to Eligible
Participants who are Nonhighly Compensated Employees in reverse
order of Included Compensation. (See Section 2.3(e)(2) of the
BPD.)
[ ] c. APPLICATION OF ALLOCATION CONDITIONS. If this c. is checked,
QNECs will be allocated only to Eligible Participants who have
satisfied the allocation conditions under #24 below. [If this
c. is not checked, QNECs will be allocated without regard to
the allocation conditions under #24 below.]
23. OPERATING RULES FOR DETERMINING AMOUNT OF EMPLOYER NONELECTIVE
CONTRIBUTIONS.
a. SPECIAL RULES REGARDING INCLUDED COMPENSATION.
(1) APPLICABLE PERIOD FOR DETERMINING INCLUDED COMPENSATION. In
determining the amount of Employer Nonelective
Contributions to be allocated to an Eligible Participant
under this Part 4C, Included Compensation is determined
separately for each: [If #21.b. above is checked, the Plan
Year must be selected under
(a) below.]
[ ] (a) Plan Year. [ ] (b) Plan Year quarter.
[ ] (c) calendar month. [ ] (d) payroll period.
[NOTE: If Part 3, #11.b. is checked, the period selected
under this (1) (to the extent such period refers to the
Plan Year) will be determined as if the Plan Year were the
period designated under Part 3, #11.b. See Section
2.2(c)(3) of the BPD.]
[ ] (2) SPECIAL RULE FOR PARTIAL PERIOD OF PARTICIPATION. If an
Employee is an Eligible Participant for only part of the
period designated under (1) above, Included Compensation is
taken into account for the entire period, including the
portion of the period during which the Employee is not an
Eligible Participant. [If this selection (2) is not
checked, Included Compensation is taken into account only
for the portion of the period during which the Employee is
an Eligible Participant.]
[ ] b. SPECIAL RULES FOR APPLYING THE PERMITTED DISPARITY METHOD.
[Complete this b. only if #21.b. above is also checked.]
[ ] (1) APPLICATION OF FOUR-STEP FORMULA FOR TOP-HEAVY PLANS.
If this (1) is checked, the Four-Step Formula applies
instead of the Two-Step Formula for any Plan Year in
which the Plan is a Top Heavy Plan. [This (1) may only
be checked if #21.b.(1) above is also checked.]
[ ] (2) EXCESS COMPENSATION UNDER THE PERMITTED DISPARITY
METHOD is the amount of Included Compensation that
exceeds: [If this selection (2) is not checked, Excess
Compensation under the Permitted Disparity Method is
the amount of Included Compensation that exceeds the
Taxable Wage Base.]
[ ] (a) ____% (may not exceed 100%) of the Taxable
Wage Base.
[ ] 1. The amount determined under (a) is
not rounded.
? 2001 SunTrust Bank
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[ ] 2. The amount determined under (a) is
rounded (but not above the Taxable
Wage Base) to the next higher:
[ ] a. $1.
[ ] b. $100.
[ ] c. $1,000.
[ ] (b) _____________________________(may not exceed
the Taxable Wage Base).
[NOTE: The maximum integration percentage of 5.7%
must be reduced to (i) 5.4% if Excess Compensation is
based on an amount that is GREATER than 80% but less
than 100% of the Taxable Wage Base or (ii) 4.3% if
Excess Compensation is based on an amount that is
greater than 20% but less than or equal to 80% of the
Taxable Wage Base. See Section 2.2(b)(2) of the BPD.]
24. ALLOCATION CONDITIONS. An Eligible Participant must satisfy the
following allocation conditions for an Employer Nonelective
Contribution: [Check a. or b. or any combination of c. - e. Selection
e. may not be checked if b. or d. is checked. Selection f. and/or g.
may be checked in addition to b. - e.]
[ ] a. NONE.
[ ] b. SAFE HARBOR ALLOCATION CONDITION. An Employee must be employed
by the Employer on the last day of the Plan Year OR must have
more than ____ (not more than 500) Hours of Service for the
Plan Year.
[ ] c. LAST DAY OF EMPLOYMENT CONDITION. An Employee must be employed
with the Employer on the last day of the Plan Year.
[ ] d. HOURS OF SERVICE CONDITION. An Employee must be credited with
at least ___ Hours of Service (may not exceed 1,000) during
the Plan Year.
[ ] e. ELAPSED TIME METHOD. (See Section 2.6(d) of the BPD.)
[ ] (1) SAFE HARBOR ALLOCATION CONDITION. An Employee must be
employed by the Employer on the last day of the Plan
Year OR must have more than ___ (not more than 91)
consecutive days of employment with the Employer
during the Plan Year.
[ ] (2) SERVICE CONDITION. An Employee must have more than
___ (not more than 182) consecutive days of employment
with the Employer during the Plan Year.
[ ] f. APPLICATION TO A SPECIFIED PERIOD. In applying the allocation
condition(s) designated under b. through e. above, the
allocation condition(s) will be based on the period designated
under #23.a.(1) above. In applying an Hours of Service
condition under d. above, the following method will be used:
[This f. should be checked only if a period other than the Plan
Year is selected under #23.a.(1) above. Selection (1) or (2)
must be selected only if d. above is also checked.]
[ ] (1) FRACTIONAL METHOD (see Section 2.6(e)(2)(i) of the
BPD).
[ ] (2) PERIOD-BY-PERIOD METHOD (see Section 2.6(e)(2)(ii) of
the BPD).
[PRACTITIONER NOTE: If this f. is not checked, any allocation
condition(s) selected under b. through e. above will apply with
respect to the Plan Year, regardless of the period selected
under #23.a.(1) above. See Section 2.6(e) of the BPD for
procedural rules for applying allocation conditions for a
period other than the Plan Year.]
[ ] g. The above allocation condition(s) will NOT apply if:
[ ] (1) the Participant dies during the Plan Year.
[ ] (2) the Participant is Disabled.
[ ] (3) the Participant, by the end of the Plan Year, has
reached:
[ ] (a) Normal Retirement Age.
[ ] (b) Early Retirement Age.
? 2001 SunTrust Bank
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PART 4D - EMPLOYEE AFTER-TAX CONTRIBUTIONS
(See Section 3.1 of the BPD)
[ ] CHECK THIS SELECTION TO ALLOW FOR EMPLOYEE AFTER-TAX CONTRIBUTIONS. If
Employee After-Tax Contributions will not be permitted under the Plan,
do not check this selection and skip the remainder of this Part 4D.
[NOTE: The eligibility conditions for making Employee After-Tax
Contributions are listed in Part 1 of this Agreement under
"Section 401(k) Deferrals."]
[ ] 25. MAXIMUM. ___% of Included Compensation for:
[ ] a. the entire Plan Year.
[ ] b. the portion of the Plan Year during which the Employee is an
Eligible Participant.
[ ] c. each separate payroll period during which the Employee is an
Eligible Participant.
[NOTE: If this #25 is not checked, the only limit on Employee After-Tax
Contributions is the Annual Additions Limitation under Article 7 of the
BPD. If Part 3, #11.b. is checked, any period selected under this #25
will be determined as if the Plan Year were the period designated under
Part 3, #11.b. See Section 2.2(c)(3) of the BPD.]
[ ] 26. MINIMUM. For any payroll period, no less than:
[ ] a. ___% of Included Compensation.
[ ] b. $___.
PART 4E - SAFE HARBOR 401(k) PLAN ELECTION
(See Section 17.6 of the BPD)
[ ] CHECK THIS SELECTION AND COMPLETE THIS PART 4E IF THE PLAN IS DESIGNED
TO BE A SAFE HARBOR 401(k) PLAN.
[ ]27. SAFE HARBOR MATCHING CONTRIBUTION: The Employer will make an Employer
Matching Contribution with respect to an Eligible Participant's Section
401(k) Deferrals and/or Employee After-Tax Contributions ("applicable
contributions") under the following formula: [Complete selection a. or
b. In addition, complete selection c. Selection d. may be checked in
addition to a. or b. and c.]
[ ] a. BASIC FORMULA: 100% of applicable contributions up to the first
3% of Included Compensation, plus 50% of applicable
contributions up to the next 2% of Included Compensation.
[ ] b. ENHANCED FORMULA:
[ ] (1) ___% (not less than 100%) of applicable contributions
up to ___% of Included Compensation (not less than 4%
and not more than 6%).
[ ] (2) The sum of: [THE CONTRIBUTIONS UNDER THIS (2) MUST NOT
BE LESS THAN THE CONTRIBUTIONS THAT WOULD BE
CALCULATED UNDER a. AT EACH LEVEL OF APPLICABLE
CONTRIBUTIONS.]
[ ] (a) ___% of applicable contributions up to the
first (b) ___% of Included Compensation, plus
[ ] (c) ___% of applicable contributions up to the
next (d) ___% of Included Compensation.
[NOTE: The percentage in (c) may not be greater than
the percentage in (a). In addition, the sum of the
percentages in (b) and (d) may not exceed 6%.]
c. APPLICABLE CONTRIBUTIONS TAKEN INTO ACCOUNT: (See Section 17.6
(a)(1)(i) of the BPD.) The Safe Harbor Matching Contribution
formula elected in a. or b. above (and any limitations on the
amount of a Participant's applicable contributions considered
under such formula(s)) are applied separately for each:
[ ] (1) Plan Year. [ ] (2) Plan Year quarter.
[ ] (3) calendar month. [ ] (4) payroll period.
[NOTE: If Part 3, #11.b. is checked, any period selected under
this #25 will be determined as if the Plan Year were the period
designated under Part 3, #11.b. See Section 2.2(c)(3) of the
BPD.]
[ ] d. DEFINITION OF APPLICABLE CONTRIBUTIONS. Check this d. if the
Plan permits Employee After-Tax Contributions but the Safe
Harbor Matching Contribution formula selected under a. or b.
above does not apply to such Employee After-Tax Contributions.
[ ] 28. SAFE HARBOR NONELECTIVE CONTRIBUTION: ___% (no less than 3%) of
Included Compensation.
? 2001 SunTrust Bank
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[ ] a. Check this selection if the Employer will make this Safe Harbor
Nonelective Contribution pursuant to a supplemental notice as
described in Section 17.6(a)(1)(ii) of the BPD. If this a. is
checked, the Safe Harbor Nonelective Contribution will be
required only for a Plan Year for which the appropriate
supplemental notice is provided. For any Plan Year in which the
supplemental notice is not provided, the Plan is not a Safe
Harbor 401(k) Plan.
[ ] b. Check this selection to provide the Employer with the
discretion to increase the above percentage to a higher
percentage.
[ ] c. Check this selection if the Safe Harbor Nonelective
Contribution will be made under another plan maintained by
the Employer and identify the plan:
_______________________________________________________________
[ ] d. Check this d. if the Safe Harbor Nonelective Contribution
offsets the allocation that would otherwise be made to the
Participant under Part 4C, #21 above. If the Permitted
Disparity Method is elected under Part 4C, #21.b., this offset
applies only to the second step of the Two-Step Formula or the
fourth step of the Four-Step Formula, as applicable.
[ ]29. SPECIAL RULE FOR PARTIAL PERIOD OF PARTICIPATION. If an Employee is an
Eligible Participant for only part of a Plan Year, Included
Compensation is taken into account for the entire Plan Year, including
the portion of the Plan Year during which the Employee is not an
Eligible Participant. [If this #29 is not checked, Included
Compensation is taken into account only for the portion of the Plan
Year in which the Employee is an Eligible Participant.]
30. ELIGIBLE PARTICIPANT. For purposes of the Safe Harbor Contributions
elected above, "Eligible Participant" means: [Check a., b. or c.
Selection d. may be checked in addition to a., b. or c.]
[ ] a. All Eligible Participants (as determined for Section 401(k)
Deferrals).
[ ] b. All Nonhighly Compensated Employees who are Eligible
Participants (as determined for Section 401(k) Deferrals).
[ ] c. All Nonhighly Compensated Employees who are Eligible
Participants (as determined for Section 401(k) Deferrals) and
all Highly Compensated Employees who are Eligible Participants
(as determined for Section 401(k) Deferrals) but who are not
Key Employees.
[ ] d. Check this d. if the selection under a., b. or c., as
applicable, applies only to Employees who would be Eligible
Participants for any portion of the Plan Year if the
eligibility conditions selected for Section 401(k) Deferrals in
Part 1, #5 of this Agreement were one Year of Service and age
21. (See Section 17.6(a)(1) of the BPD.)
PART 4F - SPECIAL 401(k) PLAN ELECTIONS
(See Article 17 of the BPD)
31. ADP/ACP TESTING METHOD. In performing the ADP and ACP tests, the
Employer will use the following method: (See Sections 17.2 and 17.3 of
the BPD for an explanation of the ADP/ACP testing methods.)
[ ] a. Prior Year Testing Method.
[X] b. Current Year Testing Method.
[PRACTITIONER NOTE: If this Plan is intended to be a Safe-Harbor 401(k)
Plan under Part 4E above, the Current Year Testing Method MUST be
elected under b. See Section 17.6 of the BPD.]
[ ]32. FIRST PLAN YEAR FOR SECTION 401(k) DEFERRALS. (See Section 17.2(b) of
the BPD.) Check this selection if this Agreement covers the first Plan
Year that the Plan permits Section 401(k) Deferrals. The ADP for the
Nonhighly Compensated Employ ee Group for such first Plan Year is
determined under the following method:
[ ] a. the Prior Year Testing Method, assuming a 3% deferral
percentage for the Nonhighly Compensated Employee Group.
[ ] b. the Current Year Testing Method using the actual deferral
percentages of the Nonhighly Compensated Employee Group.
[ ]33. FIRST PLAN YEAR FOR EMPLOYER MATCHING CONTRIBUTIONS OR EMPLOYEE
AFTER-TAX CONTRIBUTIONS. (See Section 17.3(b) of the BPD.) Check this
selection if this Agreement covers the first Plan Year that the Plan
includes either an Employer Matching Contribution formula or permits
Employee After-Tax Contributions. The ACP for the Nonhighly Compensated
Employee Group for such first Plan Year is determined under the
following method:
? 2001 SunTrust Bank
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[ ] a. the Prior Year Testing Method, assuming a 3% contribution
percentage for the Nonhighly Compensated Employee Group.
[ ] b. the Current Year Testing Method using the actual contribution
percentages of the Nonhighly Compensated Employee Group.
PART 5 - RETIREMENT AGES
(See Sections 22.57 and 22.126 of the BPD)
34. NORMAL RETIREMENT AGE:
[X] a. Age 65 (not to exceed 65).
[ ] b. The later of (1) age ____ (not to exceed 65) or (2) the _____
(not to exceed 5th) anniversary of the date the Employee
commenced participation in the Plan.
[ ] c. __________(may not be later than the maximum age permitted
under b.)
35. EARLY RETIREMENT AGE: [Check a. or check b. and/or c.]
[X] a. Not applicable.
[ ] b. Age _____.
[ ] c. Completion of _______ Years of Service, determined as follows:
[ ] (1) Same as for eligibility.
[ ] (2) Same as for vesting.
PART 6 - VESTING RULES
(See Article 4 of the BPD)
* COMPLETE THIS PART 6 ONLY IF THE EMPLOYER HAS ELECTED TO MAKE EMPLOYER
MATCHING CONTRIBUTIONS UNDER PART 4B OR EMPLOYER NONELECTIVE
CONTRIBUTIONS UNDER PART 4C. SECTION 401(k) DEFERRALS, EMPLOYEE
AFTER-TAX CONTRIBUTIONS, QMACS, QNECS, SAFE HARBOR CONTRIBUTIONS, AND
ROLLOVER CONTRIBUTIONS ARE ALWAYS 100% VESTED. (SEE SECTION 4.2 OF THE
BPD FOR THE DEFINITIONS OF THE VARIOUS VESTING SCHEDULES.)
36. NORMAL VESTING SCHEDULE: [Check one of a. - f. for those contributions
the Employer elects to make under Part 4 of this Agreement.]
(1) (2)
EMPLOYER EMPLOYER
MATCH NONELECTIVE
a. [ ] [ ] Full and immediate vesting.
b. [ ] [ ] 7-year graded vesting schedule.
c. [ ] [ ] 6-year graded vesting schedule.
d. [ ] [ ] 5-year cliff vesting schedule.
e. [ ] [ ] 3-year cliff vesting schedule.
f. [X] [ ] Modified vesting schedule:
(1) 20% % after 1 Year of Service
(2) 40% % after 2 Years of Service
(3) 60% % after 3 Years of Service
(4) 80% % after 4 Years of Service
(5) 100% % after 5 Years of Service
(6) ____ % after 6 Years of Service, and
(7) 100% after 7 Years of Service.
[NOTE: The percentages selected under the
modified vesting schedule must not be less
than the percentages that would be required
under the 7-year graded vesting schedule,
unless 100% vesting occurs after no more than
5 Years of Service.]
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37. VESTING SCHEDULE WHEN PLAN IS TOP-HEAVY: [Check one of a. - d. for
those contributions the Employer elects to make under Part 4 of this
Agreement.]
(1) (2)
EMPLOYER EMPLOYER
MATCH NONELECTIVE
a. [ ] [ ] Full and immediate vesting.
b. [ ] [ ] 6-year graded vesting schedule.
c. [ ] [ ] 3-year cliff vesting schedule.
d. [X] [ ] Modified vesting schedule:
(1) 20% % after 1 Year of Service
(2) 40% % after 2 Years of Service
(3) 60% % after 3 Years of Service
(4) 80% % after 4 Years of Service
(5) 100% % after 5 Years of Service, and
(6) 100% after 6 Years of Service.
[NOTE: The percentages selected under the
modified vesting schedule must not be less
than the percentages that would be required
under the 6-year graded vesting schedule,
unless 100% vesting occurs after no more than
3 Years of Service.]
[ ] 38. SERVICE EXCLUDED UNDER THE ABOVE VESTING SCHEDULE(S):
[ ] a. Service before the original Effective Date of this Plan.
(See Section 4.5(b)(1) of the BPD for rules that require
service under a Predecessor Plan to be counted.)
[ ] b. Years of Service completed before the Employee's ____ birthday
(cannot exceed the 18th birthday).
[X] 39. SPECIAL 100% VESTING. An Employee's vesting percentage increases to
100% if, while employed with the Employer, the Employee:
[X] a. dies.
[X] b. becomes Disabled (as defined in Section 22.53 of the BPD).
[ ] c. reaches Early Retirement Age (as defined in Part 5, #35
above).
[ ] 40. SPECIAL VESTING PROVISIONS: ___________________________________________
[NOTE: Any special vesting provision designated in #40 must satisfy the
requirements of Code Section 411(a) and must satisfy the
nondiscrimination requirements under Section 1.401(a)(4) of the
regulations.]
PART 7 - SPECIAL SERVICE CREDITING RULES
(See Article 6 of the BPD)
IF NO MINIMUM SERVICE REQUIREMENT APPLIES UNDER PART 1, #5 OF THIS AGREEMENT AND
ALL CONTRIBUTIONS ARE 100% VESTED UNDER PART 6, SKIP THIS PART 7.
* YEAR OF SERVICE - ELIGIBILITY. 1,000 Hours of Service during an
Eligibility Computation Period. Hours of Service are calculated using
the Actual Hours Crediting Method. [To modify, complete #41 below.]
* ELIGIBILITY COMPUTATION PERIOD. If one Year of Service is required for
eligibility, the Shift-to-Plan-Year Method is used. If two Years of
Service are required for eligibility, the Anniversary Year Method is
used. [To modify, complete #42 below.]
* YEAR OF SERVICE - VESTING. 1,000 Hours of Service during a Vesting
Computation Period. Hours of Service are calculated using the Actual
Hours Crediting Method. [To modify, complete #43 below.]
* VESTING COMPUTATION PERIOD. The Plan Year. [To modify, complete #44
below.]
* BREAK IN SERVICE RULES. The Rule of Parity Break in Service rule
applies for both eligibility and vesting but the one-year holdout Break
in Service rule is NOT used for eligibility or vesting. [To modify,
complete #45 below.]
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<PAGE>
[ ] 41. ALTERNATIVE DEFINITION OF YEAR OF SERVICE FOR ELIGIBILITY.
[ ] a. A Year of Service is ___ Hours of Service (may not exceed
1,000) during an Eligibility Computation Period.
[ ] b. Use the Equivalency Method (as defined in Section 6.5(a) of
the BPD) to count Hours of Service. If this b. is checked,
each Employee will be credited with 190 Hours of Service for
each calendar month for which the Employee completes at least
one Hour of Service, unless a different Equivalency Method is
selected under #46 below. The Equivalency Method applies to:
[ ] (1) All Employees.
[ ] (2) Employees who are not paid on an hourly basis.
For hourly Employees, the Actual Hours Method will be
used.
[ ] c. Use the Elapsed Time Method instead of counting Hours of
Service. (See Section 6.5(b) of the BPD.)
[ ] 42. ALTERNATIVE METHOD FOR DETERMINING ELIGIBILITY COMPUTATION PERIODS.
(See Section 1.4(c) of the BPD.)
[ ] a. ONE YEAR OF SERVICE ELIGIBILITY. Eligibility Computation
Periods are determined using the Anniversary Year Method
instead of the Shift-to-Plan-Year Method.
[ ] b. TWO YEARS OF SERVICE ELIGIBILITY. Eligibility Computation
Periods are determined using the Shift-to-Plan-Year Method
instead of the Anniversary Year Method.
[ ] 43. ALTERNATIVE DEFINITION OF YEAR OF SERVICE FOR VESTING.
[ ] a. A Year of Service is ______ Hours of Service (may not exceed
1,000) during a Vesting Computation Period.
[ ] b. Use the Equivalency Method (as defined in Section 6.5(a) of
the BPD) to count Hours of Service. If this b. is checked,
each Employee will be credited with 190 Hours of Service for
each calendar month for which the Employee completes at least
one Hour of Service, unless a different Equivalency Method is
selected under #46 below. The Equivalency Method applies to:
[ ] (1) All Employees.
[ ] (2) Employees who are not paid on an hourly basis. For
hourly Employees, the Actual Hours Method will be
used.
[ ] c. Use the Elapsed Time Method instead of counting Hours of
Service. (See Section 6.5(b) of the BPD.)
[ ] 44. ALTERNATIVE METHOD FOR DETERMINING VESTING COMPUTATION PERIODS.
Instead of Plan Years, use:
[ ] a. Anniversary Years. (See Section 4.4 of the BPD.)
[ ] b. (Describe Vesting Computation Period): _______________________
[PRACTITIONER NOTE: Any Vesting Computation Period described
in b. must be a 12-consecutive month period and must apply
uniformly to all Participants.]
[ ] 45. BREAK IN SERVICE RULES.
[ ] a. The RULE OF PARITY BREAK IN SERVICE RULE does not apply for
purposes of determining eligibility or vesting under the Plan.
[If this selection a. is not checked, the Rule of Parity Break
in Service Rule applies for purposes of eligibility and
vesting. (See Sections 1.6 and 4.6 of the BPD.)]
[ ] b. ONE-YEAR HOLDOUT BREAK IN SERVICE RULE.
[ ] (1) Applies to determine eligibility for: [Check one or
both.]
[ ] (a) Employer Contributions (other than Section
401(k) Deferrals).
[ ] (b) Section 401(k) Deferrals. (See Section
1.6(c) of the BPD.)
[ ] (2) Applies to determine vesting. (See Section 4.6(a) of
the BPD.)
[ ] 46. SPECIAL RULES FOR APPLYING EQUIVALENCY METHOD. [This #46 may only be
checked if #41.b. and/or #43.b. is checked above.]
[ ] a. ALTERNATIVE METHOD. Instead of applying the Equivalency
Method on the basis of months worked, the following method
will apply. (See Section 6.5(a) of the BPD.)
[ ] (1) DAILY METHOD. Each Employee will be credited with 10
Hours of Service for each day worked.
[ ] (2) WEEKLY METHOD. Each Employee will be credited with 45
Hours of Service for each week worked.
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<PAGE>
[ ] (3) SEMI -MONTHLY METHOD. Each Employee will be credited
with 95 Hours of Service for each semi-monthly
payroll period worked.
[ ] b. APPLICATION OF SPECIAL RULES. The alternative method elected
in a. applies for purposes of: [Check (1) and/or (2).]
[ ] (1) Eligibility. [Check this (1) only if #41.b. is
checked above.]
[ ] (2) Vesting. [Check this (2) only if #43.b. is checked
above.]
PART 8 - ALLOCATION OF FORFEITURES
(See Article 5 of the BPD)
[ ] CHECK THIS SELECTION IF ALL CONTRIBUTIONS UNDER THE PLAN ARE 100%
VESTED AND SKIP THIS PART 8. (SEE SECTION 5.5 OF THE BPD FOR THE
DEFAULT FORFEITURE RULES IF NO FORFEITURE ALLOCATION METHOD IS SELECTED
UNDER THIS PART 8.)
47. TIMING OF FORFEITURE ALLOCATIONS:
(1) (2)
EMPLOYER EMPLOYER
MATCH NONELECTIVE
a. [X] [ ] In the same Plan Year in which the forfeitures
occur.
b. [ ] [ ] In the Plan Year following the Plan Year in
which the forfeitures occur.
48. METHOD OF ALLOCATING FORFEITURES: (See the operating rules in Section
5.5 of the BPD.)
(1) (2)
EMPLOYER EMPLOYER
MATCH NONELECTIVE
a. [ ] [ ] Reallocate as additional Employer Nonelective
Contributions using the allocation method
specified in Part 4C, #21 of this Agreement.
If no allocation method is specified, use the
Pro Rata Allocation Method under Part 4C,
#21.a. of this Agreement.
b. [ ] [ ] Reallocate as additional Employer Matching
Contributions using the discretionary
allocation method in Part 4B, #16.b. of this
Agreement.
c. [X] [ ] Reduce the: [Check one or both.]
[X] (a) Employer Matching Contributions
[ ] (b) Employer Nonelective Contributions
the Employer would otherwise make for the Plan
Year in which the forfeitures are allocated.
[NOTE: If both (a) and (b) are checked, the
Employer may adjust its contribution deposits
in any manner, provided the total Employer
Matching Contributions and Employer
Nonelective Contributions (as applicable)
properly take into account the forfeitures
used to reduce such contributions for that
Plan Year.]
[X] 49. PAYMENT OF PLAN EXPENSES. Forfeitures are first used to pay Plan
expenses for the Plan Year in which the forfeitures are to be
allocated. (See Section 5.5(c) of the BPD.) Any remaining forfeitures
are allocated as provided in #48 above.
[X] 50. MODIFICATION OF CASH-OUT RULES. The Cash-Out Distribution rules are
modified in accordance with Sections 5.3(a)(1)(i)(C) and
5.3(a)(1)(ii)(C) of the BPD to allow for an immediate forfeiture,
regardless of any additional allocations during the Plan Year.
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<PAGE>
PART 9 - DISTRIBUTIONS AFTER TERMINATION OF EMPLOYMENT
(See Section 8.3 of the BPD)
* THE ELECTIONS IN THIS PART 9 ARE SUBJECT TO THE OPERATING RULES IN
ARTICLES 8 AND 9 OF THE BPD.
51. VESTED ACCOUNT BALANCES IN EXCESS OF $5,000. Distribution is first
available as soon as administratively feasible following:
[X] a. the Participant's employment termination date.
[ ] b. the end of the Plan Year that contains the Participant's
employment termination date.
[ ] c. the first Valuation Date following the Participant's
termination of employment.
[ ] d. the Participant's Normal Retirement Age (or Early Retirement
Age, if applicable) or, if later, the Participant's employment
termination date.
[ ] e. (Describe distribution event) _______________________________
[PRACTITIONER NOTE: Any distribution event described in e.
will apply uniformly to all Participants under the Plan.]
52. VESTED ACCOUNT BALANCES OF $5,000 OR LESS. Distribution will be made in
a LUMP SUM as soon as administratively feasible following:
[X] a. the Participant's employment termination date.
[ ] b. the end of the Plan Year that contains the Participant's
employment termination date.
[ ] c. the first Valuation Date following the Participant's
termination of employment.
[ ] d. (Describe distribution event): _______________________________
[PRACTITIONER NOTE: Any distribution event described in d.
will apply uniformly to all Participants under the Plan.]
[X] 53. DISABLED PARTICIPANT. A Disabled Participant (as defined in Section
22.53 of the BPD) may request a distribution (if earlier than otherwise
permitted under #51 or #52 (as applicable)) as soon as administratively
feasible following:
[X] a. the date the Participant becomes Disabled.
[ ] b. the end of the Plan Year in which the Participant becomes
Disabled.
[ ] c. (Describe distribution event): _______________________________
[PRACTITIONER NOTE: Any distribution event described in c.
will apply uniformly to all Participants under the Plan.]
[ ] 54. HARDSHIP WITHDRAWALS FOLLOWING TERMINATION OF EMPLOYMENT. A terminated
Participant may request a Hardship withdrawal (as defined in Section
8.6 of the BPD) before the date selected in #51 or #52 above, as
applicable.
[ ] 55. SPECIAL OPERATING RULES.
[ ] a. MODIFICATION OF PARTICIPANT'S CONSENT REQUIREMENT. A
Participant must consent to a distribution from the Plan, even
if the Participant's vested Account Balance does not exceed
$5,000. See Section 8.3(b) of the BPD. [NOTE: If this a. is
not checked, the involuntary distribution rules under Section
8.3(b) of the BPD apply.]
[ ] b. DISTRIBUTION UPON ATTAINMENT OF NORMAL RETIREMENT AGE (OR AGE
62, IF LATER). A distribution from the Plan will be made
without a Participant's consent if such Participant has
terminated employment and has attained Normal Retirement Age
(or age 62, if later). See Section 8.7 of the BPD.
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PART 10 - IN-SERVICE DISTRIBUTIONS
(See Section 8.5 of the BPD)
* THE ELECTIONS IN THIS PART 10 ARE SUBJECT TO THE OPERATING RULES IN
ARTICLES 8 AND 9 OF THE BPD.
56. PERMITTED IN-SERVICE DISTRIBUTION EVENTS: [Elections under the
Section 401(k) Deferrals column also apply to any QNECs, QMACs, and
Safe Harbor Contributions unless otherwise specified in 57d. below.]
(1) (2) (3)
SECTION 401(k) EMPLOYER EMPLOYER
DEFERRALS MATCH NONELECTIVE
a. [X] [X] [ ] In-service distributions
are not available.
b. [ ] [ ] [ ] After age ______ . [If
earlier than age 59 1/2
age is deemed to be age
59 1/2 for Section 401(k)
Deferrals if the
selection is checked
under that column.]
c. [ ] [ ] [ ] A safe harbor Hardship
described in Section
8.6(a) of the BPD. [Note:
Not applicable to QNECs,
QMACs and Safe Harbor
Contributions.]
d. N/A [ ] [ ] A Hardship described in
Section 8.6(b) of the
BPD.
e. N/A [ ] [ ] After the Participant has
participated in the Plan
for at least ______ years
(cannot be less than 5
years).
f. N/A [ ] [ ] At any time with respect
to the portion of the
vested Account Balance
derived from
contributions accumulated
in the Plan for at least
2 years.
g. [ ] [ ] [ ] Upon a Participant
becoming Disabled (as
defined in Section
22.53).
h. [ ] [ ] [ ] Attainment of Normal
Retirement Age. [If
earlier than age 59 1/2,
age is deemed to be 59
1/2 for Section 401(k)
Deferrals if the
selection is checked
under that column.]
i. N/A [ ] [ ] Attainment of Early
Retirement Age.
57. LIMITATIONS THAT APPLY TO IN-SERVICE DISTRIBUTIONS:
[ ] a. Available only if the Account which is subject to withdrawal
is 100% vested. (See Section 4.8 of the BPD for special vesting rules
if NOT checked.)
[ ] b. No more than _____ in-service distribution(s) in a Plan Year.
[ ] c. The minimum amount of any in-service distribution will be $ __
(may not exceed $1,000).
[ ] d. (Describe limitations on in-service distributions) ___________
[PRACTITIONER NOTE: Any limitations described in d. will apply
uniformly to all Participants under the Plan.]
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<PAGE>
PART 11 - DISTRIBUTION OPTIONS
(See Section 8.1 of the BPD)
58. OPTIONAL FORMS OF PAYMENT AVAILABLE UPON TERMINATION OF EMPLOYMENT:
[X] a. Lump sum distribution of entire vested Account Balance.
[X] b. Single sum distribution of a portion of vested Account
Balance.
[ ] c. Installments for a specified term.
[ ] d. Installments for required minimum distributions only.
[ ] e. Annuity payments (see Section 8.1 of the BPD).
[ ] f. (Describe optional forms or limitations on available forms)
____________________
[PRACTITIONER NOTE: Unless specified otherwise in f., a
Participant may receive a distribution in any combination of
the forms of payment selected in a. - f. Any optional forms or
limitations described in f. will apply uniformly to all
Participants under the Plan.]
59. APPLICATION OF THE QUALIFIED JOINT AND SURVIVOR ANNUITY (QJSA) AND
QUALIFIED PRERETIREMENT SURVIVOR ANNUITY (QPSA) PROVISIONS: (See
Article 9 of the BPD.)
[X] a. DO NOT APPLY. [NOTE: The QJSA and QPSA provisions
automatically apply to any assets of the Plan that were
received as a transfer from another plan that was subject to
the QJSA and QPSA rules. If this a. is checked, the QJSA and
QPSA rules generally will apply only with respect to
transferred assets or if distribution is made in the form of
life annuity. See Section 9.1(b) of the BPD.]
[ ] b. APPLY, with the following modifications: [Check this b. to
have all assets under the Plan be subject to the QJSA and QPSA
requirements. See Section 9.1(a) of the BPD.]
[ ] (1) NO MODIFICATIONS.
[ ] (2) MODIFIED QJSA BENEFIT. Instead of a 50% survivor
benefit, the normal form of the QJSA provides the
following survivor benefit to the spouse:
[ ] (a) 100%.
[ ] (b) 75%.
[ ] (c) 66 2/3%.
[ ] (3) MODIFIED QPSA BENEFIT. Instead of a 50% QPSA benefit,
the QPSA benefit is 100% of the Participant's vested
Account Balance.
[ ] c. ONE-YEAR MARRIAGE RULE. The one-year marriage rule under
Sections 8.4(c)(4) and 9.3 of the BPD applies. Under this
rule, a Participant's spouse will not be treated as a
surviving spouse unless the Participant and spouse were
married for at least one year at the time of the Participant's
death.
PART 12 - ADMINISTRATIVE ELECTIONS
* Use this Part 12 to identify administrative elections authorized by the
BPD. These elections may be changed without reexecuting this Agreement
by substituting a replacement of this page with new elections. To the
extent this Part 12 is not completed, the default provisions in the BPD
apply.
60. Are PARTICIPANT LOANS permitted? (See Article 14 of the BPD.)
[ ] a. No
[X] b. Yes
[ ] (1) Use the default loan procedures under Article 14 of
the BPD.
[X] (2) Use a separate written loan policy to modify the
default loan procedures under Article 14 of the BPD.
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<PAGE>
61. Are Participants permitted to DIRECT INVESTMENTS? (See Section 13.5(c)
of the BPD.)
[ ] a. No
[X] b. Yes
[X] (1) Specify Accounts: All Accounts
[X] (2) Check this selection if the Plan is intended to
comply with ERISA SECTION 404(c). (See Section
13.5(c)(2) of the BPD.)
62. Is any portion of the Plan DAILY VALUED? (See Section 13.2(b) of the
BPD.)
[ ] a. No
[X] b. Yes. Specify Accounts and/or investment options: All Accounts
63. Is any portion of the Plan VALUED PERIODICALLY (other than daily)? (See
Section 13.2(a) of the BPD.)
[X] a. No
[ ] b. Yes
[ ] (1) Specify Accounts and/or investment options:______
[ ] (2) Specify valuation date(s):______
[ ] (3) The following special allocation rules apply: [If
this (3) is not checked, the Balance Forward Method
under Section 13.4(a) of the BPD applies.]
[ ] (a) Weighted average method. (See Section
13.4(a)(2)(i) of the BPD.)
[ ] (b) Adjusted percentage method, taking into
account ___ % of contributions made during
the valuation period. (See Section
13.4(a)(2)(ii) of the BPD.)
[ ] (c) (Describe allocation rules) ________________
[PRACTITIONER NOTE: Any allocation rules described in
(c) must be in accordance with a definite
predetermined formula that is not based on
compensation, that satisfies the nondiscrimination
requirements of Section 1.401(a)(4) of the
regulations, and that is applied uniformly to all
Participants.]
64. Does the Plan accept ROLLOVER CONTRIBUTIONS? (See Section 3.2 of the
BPD.)
[ ] a. No [X] b. Yes
65. Are LIFE INSURANCE investments permitted? (See Article 15 of the BPD.)
[X] a. No [ ] b. Yes
66. Do the DEFAULT QDRO PROCEDURES under Section 11.5 of the BPD apply?
[ ] a. No [X] b. Yes
67. Do the DEFAULT CLAIMS PROCEDURES under Section 11.6 of the BPD apply?
[ ] a. No [X] b. Yes
PART 13 - MISCELLANEOUS ELECTIONS
* THE FOLLOWING ELECTIONS OVERRIDE CERTAIN DEFAULT PROVISIONS UNDER THE
BPD AND PROVIDE SPECIAL RULES FOR ADMINISTERING THE PLAN. COMPLETE THE
FOLLOWING ELECTIONS TO THE EXTENT THEY APPLY TO THE PLAN.
[ ] 68. DETERMINATION OF HIGHLY COMPENSATED EMPLOYEES.
[ ] a. The TOP-PAID GROUP TEST applies. [If this selection a. is not
checked, the Top-Paid Group Test will NOT apply. See Section
22.99(b)(4) of the BPD.]
[ ] b. The CALENDAR YEAR ELECTION applies. [This selection b. may
only be chosen if the Plan Year is NOT the calendar year. See
Section 22.99(b)(5) of the BPD.]
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<PAGE>
[ ] 69. SPECIAL ELECTIONS FOR APPLYING THE ANNUAL ADDITIONS LIMITATION UNDER
CODE SECTION 415.
[ ] a. The LIMITATION YEAR is the 12-month period ending ____. [If
this selection a. is not checked, the Limitation Year is the
same as the Plan Year.]
[ ] b. Total Compensation includes IMPUTED COMPENSATION for a
terminated Participant who is permanently and totally
Disabled. (See Section 7.4(g)(3) of the BPD.)
[ ] c. OPERATING RULES. Instead of the default provisions under
Article 7 of the BPD, the following rules apply:
[ ] 70. ELECTION TO USE OLD-LAW REQUIRED BEGINNING DATE. The Old-Law Required
Beginning Date (as defined in Section 10.3(a)(2) of the BPD) applies
instead of the Required Beginning Date rules under Section 10.3(a)(1)
of the BPD.
[ ] 71. SERVICE CREDITED WITH PREDECESSOR EMPLOYERS: (See Section 6.7 of the
BPD.)
[ ] a. (Identify Predecessor Employers) ______
[ ] b. Service is credited with these Predecessor Employers for the
following purposes:
[ ] (1) The eligibility service requirements elected in
Part 1 of this Agreement.
[ ] (2) The vesting schedule(s) elected in Part 6 of this
Agreement.
[ ] (3) The allocation requirements elected in Part 4 of this
Agreement.
[ ] c. The following service will not be recognized: ________________
[NOTE: If the Employer is maintaining the Plan of a
Predecessor Employer, service with such Predecessor Employer
must be counted for all purposes under the Plan. This #71 may
be completed with respect to such Predecessor Employer
indicating all service under selections (1), (2) and (3) will
be credited. The failure to complete this #71 where the
Employer is maintaining the Plan of a Predecessor Employer
will not override the requirement that such predecessor
service be credited for all purposes under the Plan. (See
Section 6.7 of the BPD.) If the Employer is not maintaining
the Plan of a Predecessor Employer, service with such
Predecessor Employer will be credited under this Plan ONLY if
specifically elected under this #71. If the above crediting
rules are to apply differently to service with different
Predecessor Employers, attach separately completed elections
for this item, using the same format as above but listing only
those Predecessor Employers to which the separate attachment
relates.]
[ ] 72. SPECIAL RULES WHERE EMPLOYER MAINTAINS MORE THAN ONE PLAN.
[ ] a. TOP-HEAVY MINIMUM CONTRIBUTION - EMPLOYER MAINTAINS THIS PLAN
AND ONE OR MORE DEFINED CONTRIBUTION PLANS. If this Plan is a
Top-Heavy Plan, the Employer will provide any required
top-heavy minimum contribution under: (See Section
16.2(a)(5)(i) of the BPD.)
[ ] (1) This Plan.
[ ] (2) The following Defined Contribution Plan maintained by
the Employer:________________
[ ] (3) Describe method for providing the top-heavy minimum
contribution:____________________________________
_________________
[ ] b. TOP-HEAVY MINIMUM BENEFIT - EMPLOYER MAINTAINS THIS PLAN AND
ONE OR MORE DEFINED BENEFIT PLANS. If this Plan is a Top
-Heavy Plan, the Employer will provide any required top -heavy
minimum contribution or benefit under: (See Section
16.2(a)(5)(ii) of the BPD.)
[ ] (1) This Plan, but the minimum required contribution is
increased from 3% to 5% of Total Compensation for the
Plan Year.
[ ] (2) The following Defined Benefit Plan maintained by the
Employer:________________
[ ] (3) Describe method for providing the top-heavy minimum
contribution:_________________
[ ] c. LIMITATION ON ANNUAL ADDITIONS. This c. should be checked only
if the Employer maintains another Defined Contribution Plan in
which any Participant is a participant, and the Employer will
not apply the rules set forth under Section 7.2 of the BPD.
Instead, the Employer will limit Annual Additions in the
following manner:
? 2001 SunTrust Bank
23
<PAGE>
[X] 73. SPECIAL DEFINITION OF DISABLED. In applying the allocation conditions
under Parts 4B and 4C, the special vesting provisions under Part 6, and
the distribution provisions under Parts 9 and 10 of this Agreement, the
following definition of Disabled applies instead of the definition
under Section 22.53 of the BPD: means unable to engage in any
substantial gainful activity of Participant's current job duties, or
any other available position of comparable pay and benefits with
Employer, by reason of any medically determinable physical or mental
impairment that can be expected to result in death or which has lasted
or can be expected to last for a continuous period of not less than 12
months. The permanence and degree of impairment shall be supported by
medical evidence.
[NOTE: Any definition included under this #73 must satisfy the
requirements of Section 1.401(a)(4) of the regulations and must be
applied uniformly to all Participants.]
[X] 74. FAIL-SAFE COVERAGE PROVISION. [This selection #74 must be checked to
apply the Fail-Safe Coverage Provision under Section 2.7 of the BPD.]
[X] a. The Fail-Safe Coverage Provision described in Section 2.7 of
the BPD applies without modification.
[ ] b. The Fail-Safe Coverage Provisions described in Section 2.7 of
the BPD applies with the following modifications:
[ ] (1) The special rule for Top-Heavy Plans under Section
2.7(a) of the BPD does not apply.
[ ] (2) The Fail-Safe Coverage Provision is based on Included
Compensation as described under Section 2.7(d) of the
BPD.
[ ] 75. ELECTION NOT TO PARTICIPATE (SEE SECTION 1.10 OF THE BPD). An Employee
may make a one-time irrevocable election not to participate under the
Plan upon inception of the Plan or at any time prior to the time the
Employee first becomes eligible to participate under any plan
maintained by the Employer. [NOTE: Use of this provision could result
in a violation of the minimum coverage rules under Code Section
410(b).]
[ ] 76. PROTECTED BENEFITS. If there are any Protected Benefits provided under
this Plan that are not specifically provided for under this Agreement,
check this #76 and attach an addendum to this Agreement describing the
Protected Benefits.
? 2001 SunTrust Bank
24
<PAGE>
SIGNATURE PAGE
By signing this page, the Employer agrees to adopt (or amend) the Plan which
consists of BPD #02 and the provisions elected in this Agreement. The Employer
agrees that the Prototype Sponsor has no responsibility or liability regarding
the suitability of the Plan for the Employer's needs or the options elected
under this Agreement. It is recommended that the Employer consult with legal
counsel before executing this Agreement.
77. NAME AND TITLE OF AUTHORIZED REPRESENTATIVE(S): SIGNATURE(S): DATE:
Sandra B. Cochran, President _____________ _______
___________________________________ _____________ _______
___________________________________ _____________ _______
78. EFFECTIVE DATE OF THIS AGREEMENT:
[ ] a. NEW PLAN. Check this selection if this is a new Plan.
Effective Date of the Plan is:_________
[X] b. RESTATED PLAN. Check this selection if this is a restatement
of an existing plan. Effective Date of the restatement is:
September 15, 2003
(1) Designate the plan(s) being amended by this restatement:
Books-A-Million, Inc. 401(k) Profit Sharing Plan
(2) Designate the original Effective Date of this Plan
(optional): December 31, 1972
[ ] c. AMENDMENT BY PAGE SUBSTITUTION. Check this selection if this
is an amendment by substitution of certain pages of this
Adoption Agreement. [If this c. is checked, complete the
remainder of this Signature Page in the same manner as the
Signature Page being replaced.]
(1) Identify the page(s) being replaced: _____________________
(2) Effective Date(s) of such changes: _______________________
[ ] d. SUBSTITUTION OF SPONSOR. Check this selection if a successor
to the original plan sponsor is continuing this Plan as a
successor sponsor, and substitute page 1 to identify the
successor as the Employer.
(1) Effective Date of the amendment is: ______________________
[X] 79. Check this #79 if any SPECIAL EFFECTIVE DATES apply under Appendix A of
this Agreement and complete the relevant sections of Appendix A.
80. PROTOTYPE SPONSOR INFORMATION. The Prototype Sponsor will inform the
Employer of any amendments made to the Plan and will notify the
Employer if it discontinues or abandons the Plan. The Employer may
direct inquiries regarding the Plan or the effect of the Favorable IRS
Letter to the Prototype Sponsor or its authorized representative at the
following location:
a. NAME OF PROTOTYPE SPONSOR (OR AUTHORIZED REPRESENTATIVE):
SunTrust Bank
b. ADDRESS OF PROTOTYPE SPONSOR (OR AUTHORIZED REPRESENTATIVE):
8515 E. Orchard Rd. Greenwood Village, CO 80111
c. TELEPHONE NUMBER OF PROTOTYPE SPONSOR (OR AUTHORIZED
REPRESENTATIVE):
1-800-211-8757
IMPORTANT INFORMATION ABOUT THIS PROTOTYPE PLAN. A failure to properly complete
the elections in this Agreement or to operate the Plan in accordance with
applicable law may result in disqualification of the Plan. The Employer may rely
on the Favorable IRS Letter issued by the National Office of the Internal
Revenue Service to the Prototype Sponsor as evidence that the Plan is qualified
under Section 401 of the Code, to the extent provided in Announcement 2001-77.
The Employer may not rely on the Favorable IRS Letter in certain circumstances
or with respect to certain qualification requirements, which are specified in
the Favorable IRS Letter issued with respect to the Plan and in Announcement
2001-77. In order to obtain reliance in such circumstances or with respect to
such qualification requirements, the Employer must apply to the office of
Employee Plans Determinations of the Internal Revenue Service for a
determination letter. See Section 22.87 of the BPD.
? 2001 SunTrust Bank
25
<PAGE>
TRUSTEE DECLARATION
By signing this Trustee Declaration, the Trustee agrees to the duties,
responsibilities and liabilities imposed on the Trustee by the BPD #02 and this
Agreement.
81. NAME(S) OF TRUSTEE(S): SIGNATURE(S) OF TRUSTEE(S): DATE:
SunTrust Bank ______________________ _________
______________________ ______________________ _________
______________________ ______________________ _________
______________________ ______________________ _________
______________________ ______________________ _________
______________________ ______________________ _________
______________________ ______________________ _________
______________________ ______________________ _________
82. EFFECTIVE DATE OF THIS TRUSTEE DECLARATION:____________________________
83. THE TRUSTEE'S INVESTMENT POWERS ARE:
[ ] a. DISCRETIONARY TRUSTEE. The Trustee has discretion to invest Plan
assets. This discretion is limited to the extent Participants are
permitted to give investment direction, or to the extent the Trustee is
subject to direction from the Plan Administrator, the Employer, an
Investment Manager or other Named Fiduciary.
[X] b. DIRECTED TRUSTEE ONLY. The Trustee may only invest Plan assets as
directed by Participants or by the Plan Administrator, the Employer, an
Investment Manager or other Named Fiduciary.
[ ] c. SEPARATE TRUST AGREEMENT. The Trustee's investment powers are
determined under a separate trust document which replaces (or is
adopted in conjunction with) the trust provisions under the BPD. [NOTE:
The separate trust document is incorporated as part of this Plan and
must be attached hereto. The responsibilities, rights and powers of the
Trustee are those specified in the separate trust agreement. If this c.
is checked, the Trustee need not sign or date this Trustee Declaration
under #81 above.]
? 2001 SunTrust Bank
26
<PAGE>
CO-SPONSOR ADOPTION PAGE #1
[X] CHECK THIS SELECTION AND COMPLETE THE REMAINDER OF THIS PAGE IF A RELATED
EMPLOYER WILL EXECUTE THIS PLAN AS A COSPONSOR. [NOTE: Only a Related
Employer (as defined in Section 22.164 of the BPD) that executes this
Co-Sponsor Adoption Page may adopt the Plan as a Co-Sponsor. See Article 21
of the BPD for rules relating to the adoption of the Plan by a CoSponsor.
If there is more than one Co-Sponsor, each one should execute a separate
Co-Sponsor Adoption Page. Any reference to the "Employer" in this Agreement
is also a reference to the Co-Sponsor, unless otherwise noted.]
84. NAME OF CO-SPONSOR: American Internet Service, Inc.
85. EMPLOYER IDENTIFICATION NUMBER (EIN) OF THE CO-SPONSOR: 63-1238069
By signing this page, the Co-Sponsor agrees to adopt (or to continue its
participation in) the Plan identified on page 1 of this Agreement. The Plan
consists of the BPD #02 and the provisions elected in this Agreement.
86. NAME AND TITLE OF AUTHORIZED REPRESENTATIVE(S): SIGNATURE(S): DATE:
Sandra B. Cochran, President _____________ _______
____________________________________ _____________ _______
____________________________________ _____________ _______
87. EFFECTIVE DATE OF THIS CO-SPONSOR ADOPTION PAGE: September 15, 2003
[ ] a. Check here if this is the initial adoption of a new Plan by the
Co-Sponsor.
[ ] b. Check here if this is an amendment or restatement of an existing
plan maintained by the Co-Sponsor, which is merging into the Plan
being adopted.
(1) Designate the plan(s) being amended by this restatement:
______________________
(2) Designate the original Effective Date of the Co-Sponsor's
Plan (optional):__________________
[ ] 88. ALLOCATION OF CONTRIBUTIONS. If this #103 is checked, contributions
made by the Related Employer signing this CoSponsor Adoption Page (and
any forfeitures relating to such contributions) will be allocated only
to Participants actually employed by the Related Employer making the
contribution and Employees of the Related Employer will not share in an
allocation of contributions (or forfeitures relating to such
contributions) made by the Employer or any other Related Employer.
[NOTE: The selection of this #103 may require additional testing of the
Plan. See Section 21.3 of the BPD.]
[ ] 89. DESCRIBE ANY SPECIAL EFFECTIVE DATES: _________________________________
? 2001 SunTrust Bank
27
<PAGE>
CO-SPONSOR ADOPTION PAGE #2
[X] CHECK THIS SELECTION AND COMPLETE THE REMAINDER OF THIS PAGE IF A RELATED
EMPLOYER WILL EXECUTE THIS PLAN AS A CO-SPONSOR. [NOTE: Only a Related
Employer (as defined in Section 22.164 of the BPD) that executes this
Co-Sponsor Adoption Page may adopt the Plan as a Co-Sponsor. See Article 21
of the BPD for rules relating to the adoption of the Plan by a Co-Sponsor.
If there is more than one Co-Sponsor, each one should execute a separate
Co-Sponsor Adoption Page. Any reference to the "Employer" in this Agreement
is also a reference to the Co-Sponsor, unless otherwise noted.]
90. NAME OF CO-SPONSOR: American Wholesale Book Company, Inc.
91. EMPLOYER IDENTIFICATION NUMBER (EIN) OF THE CO-SPONSOR: 63-1071940
By signing this page, the Co-Sponsor agrees to adopt (or to continue its
participation in) the Plan identified on page 1 of this Agreement. The Plan
consists of the BPD #02 and the provisions elected in this Agreement.
92. NAME AND TITLE OF AUTHORIZED REPRESENTATIVE(S): SIGNATURE(S): DATE:
Sandra B. Cochran, President _____________ _______
_________________________________ _____________ _______
_________________________________ _____________ _______
93. EFFECTIVE DATE OF THIS CO-SPONSOR ADOPTION PAGE: September 15, 2003
[ ] a. Check here if this is the initial adoption of a new Plan by the
Co-Sponsor.
[ ] b. Check here if this is an amendment or restatement of an existing
plan maintained by the Co-Sponsor, which is merging into the Plan
being adopted.
(1) Designate the plan(s) being amended by this restatement:
____________________________
(2) Designate the original Effective Date of the Co-Sponsor's
Plan (optional): ____________________
[ ] 94. ALLOCATION OF CONTRIBUTIONS. If this #109 is checked, contributions
made by the Related Employer signing this Co-Sponsor Adoption Page (and
any forfeitures relating to such contributions) will be allocated only
to Participants actually employed by the Related Employer making the
contribution and Employees of the Related Employer will not share in an
allocation of contributions (or forfeitures relating to such
contributions) made by the Employer or any other Related Employer.
[NOTE: The selection of this #109 may require additional testing of the
Plan. See Section 21.3 of the BPD.]
[ ] 95. DESCRIBE ANY SPECIAL EFFECTIVE DATES:__________________________________
? 2001 SunTrust Bank
28
<PAGE>
CO-SPONSOR ADOPTION PAGE #3
[X] CHECK THIS SELECTION AND COMPLETE THE REMAINDER OF THIS PAGE IF A RELATED
EMPLOYER WILL EXECUTE THIS PLAN AS A CO-SPONSOR. [NOTE: Only a Related
Employer (as defined in Section 22.164 of the BPD) that executes this
Co-Sponsor Adoption Page may adopt the Plan as a Co-Sponsor. See Article 21
of the BPD for rules relating to the adoption of the Plan by a Co-Sponsor.
If there is more than one Co-Sponsor, each one should execute a separate
Co-Sponsor Adoption Page. Any reference to the "Employer" in this Agreement
is also a reference to the Co-Sponsor, unless otherwise noted.]
96. NAME OF CO-SPONSOR: NetCentral, Inc.
97. EMPLOYER IDENTIFICATION NUMBER (EIN) OF THE CO-SPONSOR: 62-1596749
By signing this page, the Co-Sponsor agrees to adopt (or to continue its
participation in) the Plan identified on page 1 of this Agreement. The Plan
consists of the BPD #02 and the provisions elected in this Agreement.
98. NAME AND TITLE OF AUTHORIZED REPRESENTATIVE(S): SIGNATURE(S): DATE:
Terrance G. Finley, President _____________ _______
_____________________________________ _____________ _______
_____________________________________ _____________ _______
99. EFFECTIVE DATE OF THIS CO-SPONSOR ADOPTION PAGE: September 15, 2003
[ ] a. Check here if this is the initial adoption of a new Plan by the
Co-Sponsor.
[ ] b. Check here if this is an amendment or restatement of an existing
plan maintained by the Co-Sponsor, which is merging into the Plan
being adopted.
(1) Designate the plan(s) being amended by this restatement:
______________________
(2) Designate the original Effective Date of the Co-Sponsor's
Plan (optional): _____________________
[ ] 100. ALLOCATION OF CONTRIBUTIONS. If this #116 is checked, contributions
made by the Related Employer signing this Co-Sponsor Adoption Page
(and any forfeitures relating to such contributions) will be allocated
only to Participants actually employed by the Related Employer making
the contribution and Employees of the Related Employer will not share
in an allocation of contributions (or forfeitures relating to such
contributions) made by the Employer or any other Related Employer.
[NOTE: The selection of this #116 may require additional testing of
the Plan. See Section 21.3 of the BPD.]
[ ] 101. DESCRIBE ANY SPECIAL EFFECTIVE DATES: ________________________________
? 2001 SunTrust Bank
29
<PAGE>
CO-SPONSOR ADOPTION PAGE #4
[X] CHECK THIS SELECTION AND COMPLETE THE REMAINDER OF THIS PAGE IF A RELATED
EMPLOYER WILL EXECUTE THIS PLAN AS A CO-SPONSOR. [NOTE: Only a Related Employer
(as defined in Section 22.164 of the BPD) that executes this Co-Sponsor Adoption
Page may adopt the Plan as a Co-Sponsor. See Article 21 of the BPD for rules
relating to the adoption of the Plan by a Co-Sponsor. If there is more than one
Co-Sponsor, each one should execute a separate Co-Sponsor Adoption Page. Any
reference to the "Employer" in this Agreement is also a reference to the
Co-Sponsor, unless otherwise noted.]
102. NAME OF CO-SPONSOR: booksamillion.com, Inc.
103. EMPLOYER IDENTIFICATION NUMBER (EIN) OF THE CO-SPONSOR: 63-1263503
By signing this page, the Co-Sponsor agrees to adopt (or to continue its
participation in) the Plan identified on page 1 of this Agreement. The Plan
consists of the BPD #02 and the provisions elected in this Agreement.
104. NAME AND TITLE OF AUTHORIZED REPRESENTATIVE(S): SIGNATURE(S): DATE:
Terrance G. Finley, President _____________ _______
_______________________________________________ _____________ _______
_______________________________________________ _____________ _______
105. EFFECTIVE DATE OF THIS CO-SPONSOR ADOPTION PAGE: September 15, 2003
[ ] a. Check here if this is the initial adoption of a new Plan by
the Co-Sponsor.
[ ] b. Check here if this is an amendment or restatement of an
existing plan maintained by the Co-Sponsor, which is merging
into the Plan being adopted.
(1) Designate the plan(s) being amended by this restatement:
____________________________________
(2) Designate the original Effective Date of the Co-Sponsor's
Plan (optional): ________________________
[ ]106. ALLOCATION OF CONTRIBUTIONS. If this #123 is checked, contributions
made by the Related Employer signing this CoSponsor Adoption Page (and
any forfeitures relating to such contributions) will be allocated only
to Participants actually employed by the Related Employer making the
contribution and Employees of the Related Employer will not share in an
allocation of contributions (or forfeitures relating to such
contributions) made by the Employer or any other Related Employer.
[NOTE: The selection of this #123 may require additional testing of the
Plan. See Section 21.3 of the BPD.]
[ ]107. DESCRIBE ANY SPECIAL EFFECTIVE DATES: _______________________________
? 2001 SunTrust Bank
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<PAGE>
APPENDIX A - SPECIAL EFFECTIVE DATES
A-1 [X] ELIGIBILITY CONDITIONS. The eligibility conditions specified
in Part 1 of this Agreement are effective: January 1, 2004.
Prior to January 1, 2004, the minimum age and service
conditions for becoming an Eligible Participant were one Year
of Service and age 21.
A-2 [ ] ENTRY DATE. The Entry Date provisions specified in Part 2 of
this Agreement are effective:_________________________________
A-3 [ ] SECTION 401(k) DEFERRALS. The provisions regarding Section
401(k) Deferrals selected under Part 4A of this Agreement are
effective:____________________________________________________
A-4 [ ] MATCHING CONTRIBUTION FORMULA. The Employer Matching
Contribution formula(s) selected under Part 4B of this
Agreement are effective:______________________________________
A-5 [ ] EMPLOYER CONTRIBUTION FORMULA. The Employer Nonelective
Contribution formula(s) selected under Part 4C of this
Agreement are effective:______________________________________
A-6 [ ] ALLOCATION CONDITIONS FOR RECEIVING AN EMPLOYER MATCHING
CONTRIBUTION. The allocation conditions designated under Part
4B, #19 of this Agreement are effective:______________________
A-7 [ ] ALLOCATION CONDITIONS FOR RECEIVING AN EMPLOYER NONELECTIVE
CONTRIBUTION. The allocation conditions designated under Part
4C, #24 of this Agreement are effective:______________________
A-8 [ ] SAFE HARBOR 401(k) PLAN PROVISIONS. The Safe Harbor 401(k)
Plan provisions under Part 4E of this Agreement are effective:
______________________________________________________________
A-9 [X] VESTING RULES. The vesting schedules selected under Part 6 of
this Agreement are effective: January 1, 2004. Prior to
January 1, 2004, there was a six-year graded vesting schedule.
A-10 [ ] SERVICE CREDITING RULES FOR ELIGIBILITY. The service crediting
rules for determining a Year of Service for eligibility
purposes under Section 1.4 of the BPD and Part 7 of this
Agreement are effective:______________________________________
A-11 [ ] SERVICE CREDITING RULES FOR VESTING. The service crediting
rules for determining a Year of Service for vesting purposes
under Section 4.5 of the BPD and Part 7 of this Agreement are
effective:____________________________________________________
A-12 [ ] FORFEITURE PROVISIONS. The forfeiture provisions selected
under Part 8 of this Agreement are effective:_________________
A-13 [ ] DISTRIBUTION PROVISIONS. The distribution options selected
under Part 9 of the Agreement are effective for distributions
occurring after:______________________________________________
A-14 [ ] IN-SERVICE DISTRIBUTION PROVISIONS. The in-service
distribution options selected under Part 10 of the Agreement
are effective for distributions occurring after:______________
A-15 [ ] FORMS OF DISTRIBUTION. The optional forms of distribution
selected under Part 11 of this Agreement are eligible for
distributions occurring after:________________________________
A-16 [ ] SPECIAL EFFECTIVE DATE PROVISIONS FOR MERGED PLANS. If any
qualified retirement plans have been merged into this Plan,
the provisions of Section 22.59 apply, except as otherwise
provided under this A-16:_____________________________________
A-17 [ ] OTHER SPECIAL EFFECTIVE DATES:________________________________
? 2001 SunTrust Bank
31
<PAGE>
APPENDIX B - GUST OPERATIONAL COMPLIANCE
[X] Check this selection and complete the remainder of this page if this
Plan is being adopted to comply retroactively with the GUST
Legislation. An Employer need only check those provisions that apply.
If this Plan is not being adopted to comply with the GUST Legislation,
this Appendix B need not be completed and may be removed from the
Agreement.
[ ] B-1. HIGHLY COMPENSATED EMPLOYEE RULES. (See Section 20.2 of the
BPD.)
[ ] a. TOP-PAID GROUP TEST. The election under Part 13, #68.a.
above to use (or to not use) the Top -Paid Group Test did not
apply for the following post-1996 Plan Year(s): _____________.
[ ] b. CALENDAR YEAR ELECTION. The election under Part 13, #68.b.
above to use (or to not use) the Calendar Year Election did
not apply for the following post-1996 Plan Year(s):
_______________.
[ ] c. The OLD-LAW CALENDAR YEAR Election applied for the Plan Year
that began in 1997.
[ ] B-2. REQUIRED MINIMUM DISTRIBUTIONS. (See Section 10.4 of the BPD.)
[ ] a. OPTION TO POSTPONE MINIMUM DISTRIBUTIONS. For calendar year(s)
_______________, the Plan permitted Participants (other than
Five-Percent Owners) who were still employed with the Employer
to postpone minimum distributions in accordance with the
Required Beginning Date rules under Section 10.3(a)(1) of the
BPD, even though the Plan had not been amended to contain such
rules.
[ ] b. ELECTION TO STOP REQUIRED MINIMUM DISTRIBUTIONS. Starting
in calendar year ______________, a Participant (other than a
Five-Percent Owner) who had already started receiving
in-service minimum distributions under the Old-Law Required
Beginning Date rules may stop receiving such minimum
distributions until the Participant's Required Beginning Date
under Section 10.3(a)(1) of the BPD. [If this b. is not
checked, Participants who began receiving minimum
distributions under the Old-Law Required Beginning Date rules
must continue to receive such minimum distributions.]
[ ] c. APPLICATION OF JOINT AND SURVIVOR ANNUITY RULES. If
Employees are permitted to stop their required minimum
distributions under b. above and the Joint and Survivor
Annuity requirements apply to the Plan under Article 9 of the
BPD, the Participant:
[ ] (1) will [ ] (2) will not
be treated as having a new Distribution Commencement Date when
distributions recommence. [NOTE: Do not check this c. if the
Plan is not subject to the Joint and Survivor Annuity
requirements. See Section 10.4(c) of the BPD for operating
rules concerning the application of the Joint and Survivor
Annuity rules under this subsection c.]
[ ] d. APPLICATION OF PROPOSED REGULATIONS FOR THE 2001 PLAN
YEAR. [This d. should be checked only if required minimum
distributions made for calendar years beginning on or after
January 1, 2001 will be made in accordance with the proposed
regulations under Code Section 401(a)(9), which were issued in
January 2001. If this d. is checked, required minimum
distributions made for calendar years beginning on or after
January 1, 2001 may be made in accordance with the proposed
regulations, notwithstanding any provision in the Plan to the
contrary. An election under this d. applies until the end of
the last calendar year beginning before the effective date of
final regulations under Code Section 401(a)(9) or such other
date specified in guidance published by the Internal Revenue
Service. If this d. is not checked, required minimum
distributions will continue to be made in accordance with the
provisions of Code Section 401(a)(9), without regard to the
proposed regulations.]
[ ] (1) EFFECTIVE DATE. The election under d. to apply the
proposed regulations under Code Section 401(a)(9)
applies only for required minimum distributions that
are made on or after _______. [In no event may the
proposed regulations apply to a required minimum
distribution that is made for a calendar year that
begins before January 1, 2001.]
? 2001 SunTrust Bank
32
<PAGE>
[ ] B-3. SPECIAL EFFECTIVE DATES.
[ ] a. INVOLUNTARY DISTRIBUTION THRESHOLD OF $5,000 is first
effective under this Plan for distributions made after _______
(no earlier than the first day of the first Plan Year
beginning on or after August 5, 1997 and no later than the
date the Plan is adopted). [If this a. is not checked, the
$5,000 threshold applies to all distributions made on or after
the first day of the first Plan Year beginning on or after
August 5, 1997, except as provided in an earlier restatement
or amendment of the Plan. See Section 20.4 of the BPD.]
[ ] b. FAMILY AGGREGATION is repealed for purposes of determining the
allocation of Employer Contributions for Plan Years beginning
________ (no earlier than the first Plan Year beginning on or
after January 1, 1997 and no later than the date the Plan is
adopted). [If this b. is not checked, family aggregation is
repealed as of the first Plan Year beginning on or after
January 1, 1997. See Section 20.5 of the BPD.]
[ ] c. QUALIFIED TRANSPORTATION FRINGES. The inclusion of qualified
transportation fringes in the definition of Total Compensation
(and Included Compensation) is applicable for years beginning
on or after __________ (no earlier than January 1, 1998 and no
later than January 1, 2001). [If this c. is not checked, the
inclusion of qualified transportation fringes is effective for
years beginning on or after January 1, 2001. An earlier date
should be entered under this c. only if the Plan was operated
to include qualified transportation fringes in Total
Compensation (and Included Compensation) during such period.]
[ ] B-4. CODE SECTION 415 LIMITATION. Complete this B-4 if for any Limitation
Year in which the Code Section 415(e) limitation was applicable under
Section 7.5 of the BPD, the Code Section 415(e) limitations were
applied in a manner other than that described in Section 7.5(b) of the
BPD. Any alternative method described in this B-4 that is used to
comply with the Code Section 415(e) limitation must be consistent with
Plan operation.
[ ] B-5. SPECIAL 401(k) PLAN ELECTIONS. (See Article 17 of the BPD)
[ ] a. ADP/ACP TESTING METHODS DURING GUST REMEDIAL AMENDMENT PERIOD.
Check this a. if, in any Plan Year beginning after December
31, 1996, but before the adoption of this Agreement, the ADP
Test or ACP Test was performed using a different testing
method than the one selected under Part 4F, #31.a. or Part 4F,
#31.b. and specify the Plan Year(s) in which the other testing
method was used:
[ ] (1) ADP TEST: ____________
[ ] (2) ACP TEST: ____________
[ ] b. APPLICATION OF SAFE HARBOR 401(k) PLAN PROVISIONS. Check this
b. if, prior to the adoption of this Agreement, the Plan was
operated in accordance with the Safe Harbor 401(k) Plan
provisions, and this Agreement is conforming the document to
such operational compliance for the period prior to the
adoption of this Agreement. [NOTE: This b. should be checked
only if this Agreement is executed within the remedial
amendment period applicable to the GUST Legislation. See
Article 20 of the BPD.]
[ ] (1) GUST EFFECTIVE DATE. The Safe Harbor 401(k) Plan
provisions under Part 4E are effective for the Plan
Year beginning __________ (may not be earlier than
the first Plan Year beginning on or after January 1,
1999).
[ ] (2) MODIFICATIONS TO PART 4E. Describe here, if
applicable, any Safe Harbor 401(k) Plan provisions
applied in operation that are not described or are
inconsistent with the selections under Part 4E:
[NOTE: The Safe Harbor 401(k) Plan provisions under Part 4E of
this Agreement will apply for all Plan Years beginning on or
after January 1, 1999 or the GUST effective date designated
under (1) above unless specifically modified under this (2).]
? 2001 SunTrust Bank
33
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>3
<FILENAME>g88566exv13.txt
<DESCRIPTION>EX-13 PORTIONS OF THE ANNUAL REPORT
<TEXT>
<PAGE>
BOOKS-A-MILLION
2004 Annual Report
COMPANY PROFILE
Books-A-Million is one of the nation's leading book retailers and sells on the
Internet at www.booksamillion.com. The Company presently operates more than 200
stores in 18 states and the District of Columbia. The Company operates three
distinct store formats, including large superstores operating under the names
Books-A-Million and Books & Co., traditional bookstores operating under the
names Books-A-Million and Bookland, and Joe Muggs Newsstands. The Company's
wholesale operations include American Wholesale Book Company and Book$mart, both
based in Florence, Alabama.
FIVE-YEAR HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED
-------------------------------------------------------------------
(In thousands, except per share amounts) 1/31/04 (1) 2/1/03 (2) 2/2/02 2/3/01 1/29/00 (3)
- ---------------------------------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
52 WEEKS 52 weeks 52 weeks 53 weeks 52 weeks
STATEMENT OF OPERATIONS DATA
Net sales $ 460,159 $ 438,215 $ 437,583 $ 412,876 $ 397,188
Income before cumulative effect of a change
in accounting principle (2) 7,201 2,602 3,919 2,980 5,851
Net income 7,201 1,401 3,919 2,980 5,851
Earnings per share - diluted, before cumulative
effect of a change in accounting principle (2) 0.43 0.16 0.23 0.17 0.32
Earnings per share - diluted 0.43 0.08 0.23 0.17 0.32
Weighted average shares - diluted 16,789 16,566 16,945 17,991 18,250
Capital investment 9,008 17,042 11,709 12,417 13,462
BALANCE SHEET DATA
Property and equipment, net $ 49,177 $ 57,146 $ 56,716 $ 60,659 $ 64,232
Total assets 285,679 307,718 294,858 292,199 287,327
Long-term debt 20,640 44,942 38,846 41,526 35,936
Stockholders' equity 131,250 122,868 121,338 122,259 120,520
OTHER DATA
Working capital $ 104,420 $ 112,596 $ 105,483 $ 103,153 $ 92,987
Debt to total capital ratio 0.14 0.27 0.24 0.25 0.23
OPERATIONAL DATA
Total number of stores 202 207 204 185 180
Number of superstores 163 163 157 145 135
Number of traditional stores 35 37 40 37 43
Number of Joe Muggs newsstands 4 7 7 3 2
</TABLE>
(1) Effective February 2, 2003, the Company changed its method of accounting
for inventories to the last-in, first-out method, as discussed in Note 1 to
the Consolidated Financial Statements.
(2) Effective February 3, 2002, the Company adopted the provisions of Emerging
Issues Task Force ("EITF") No. 02-16, Accounting by a Customer (Including a
Reseller) for Certain Consideration Received from a Vendor, as discussed in
Note 1 to the Consolidated Financial Statements.
(3) During the fiscal year ended February 1, 2003, the Company restated its
consolidated financial statements for the fiscal year ended January 29,
2000. As a result, financial information for the year ended January 29,
2000 is unaudited.
1
<PAGE>
BOOKS-A-MILLION
2004 Annual Report
LETTER TO STOCKHOLDERS:
Fiscal year 2004 was a successful one for Books-A-Million. After the difficult
retail environment of the past two years and a weak first quarter influenced by
the onset of the war in Iraq, sales rebounded and remained strong throughout the
year. June brought the publication of Harry Potter And The Order Of The Phoenix,
an event that led to record breaking sales and provided strong momentum for our
entire industry.
Sales trends in our core book business were encouraging with several standout
categories. Diet and health, driven by the low carbohydrate diet phenomenon, led
the way. Religion and inspiration, children's books, politics, movie tie-ins and
graphic novels also produced strong sales increases. We had several media driven
blockbuster bestsellers such as The South Beach Diet, The Da Vinci Code, Harry
Potter And The Order Of The Phoenix, Hillary Clinton's memoir Living History and
The Purpose Driven Life. These titles not only sold at record levels but also
spawned spin-offs, non-book product sales and increased sales of related
titles.
During the year we gave renewed focus to our proprietary publishing and import
programs. The trend toward increased custom publishing was pronounced in the
industry last year and we plan to continue to be competitive in this arena. Our
cafe business continued to grow with several new lines of drinks.
The positive sales environment in the latter part of the year allowed us to
pursue a less expensive marketing strategy. We also increased the membership
price of the Millionaire's Club program and continued our efforts in cost
control to produce improved margins and profitability. Our store remodel program
continued with an additional 36 stores converted to our new layout and design
criteria. Approximately half of all stores have now completed our remodel
program. In addition we opened four new stores during the year, relocated one
store and closed nine underperforming stores.
2
<PAGE>
BOOKS-A-MILLION
2004 Annual Report
Our overall strategy of focusing on top line sales while pursuing improvements
in inventory management and expense control led to positive results. We plan to
build on the progress we have made to deliver improved sales, margin and profits
in the year to come.
Sandy Cochran was named Chief Executive Officer, in addition to her
responsibilities as President, effective February 1, 2004. Together, we will
strive to build on this year's solid results and to add value for both our
shareholders and our associates.
Thank you for your continued interest and support.
/s/ Clyde B. Anderson /s/ Sandra B. Cochran
Clyde B. Anderson Sandra B. Cochran
Executive Chairman of the Board President, Chief Executive
Officer, and Secretary
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------
(In thousands, except per share amounts) 1/31/04 (1) 2/1/03 (2)
---------------------------------------- ------------ -----------
<S> <C> <C>
Net sales $ 460,159 $438,215
Operating profit 15,220 9,285
Income before cumulative effect of change in accounting principle 7,201 2,602
Net income 7,201 1,401
Income per share - diluted, before cumulative effect of change in 0.43 0.16
accounting principle
Net income per share 0.43 0.08
</TABLE>
<TABLE>
<CAPTION>
As of
-------------------------------
(In thousands) 1/31/04 (1) 2/1/03 (2)
-------------- ----------- ----------
<S> <C> <C>
Working capital $ 104,420 $ 112,596
Total assets 285,679 307,718
Stockholders' equity 131,250 122,868
</TABLE>
(1) Effective February 2, 2003, the Company changed its method of accounting
for inventories to the last-in, first-out method, as discussed in Note 1 to
the Consolidated Financial Statements.
(2) Effective February 3, 2002, the Company adopted the provisions of Emerging
Issues Task Force ("EITF") No. 02-16, Accounting by a Customer (Including a
Reseller) for Certain Consideration Received from a Vendor, as discussed in
Note 1 to the Consolidated Financial Statements.
3
<PAGE>
BOOKS-A-MILLION
2004 Annual Report
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------------------------------
(In thousands, except per share data) 1/31/04 (1) 2/1/03 (2) 2/2/02 2/3/01 1/29/00 (3)
------------------------------------- ----------- ---------- ------ ------ -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA: 52 WEEKS 52 weeks 52 weeks 53 weeks 52 weeks
Net sales $ 460,159 $ 438,215 $ 437,583 $ 412,876 $ 397,188
Cost of products sold, including warehouse distribution
and store occupancy costs 334,697 320,704 315,556 299,875 287,649
--------- --------- --------- --------- ---------
Gross profit 125,462 117,511 122,027 113,001 109,539
Operating, selling and administrative expenses 94,530 92,178 95,870 88,853 82,783
Depreciation and amortization 15,712 16,048 15,296 14,499 13,530
--------- --------- --------- --------- ---------
Operating profit 15,220 9,285 10,861 9,649 13,226
Interest expense, net 2,909 4,171 4,429 4,804 4,211
--------- --------- --------- --------- ---------
Income from continuing operations before income taxes and
cumulative effect of change in accounting principle 12,311 5,114 6,432 4,845 9,015
Provision for income taxes 4,678 1,943 2,444 1,841 3,425
--------- --------- --------- --------- ---------
Income from continuing operations before cumulative effect of
change in accounting principle 7,633 3,171 3,988 3,004 5,590
Discontinued operations:
Loss from discontinued operations (including impairment charges) (696) (917) (111) (39) 421
Income tax benefit (provision) 264 348 42 15 (160)
--------- --------- --------- --------- ---------
Income (loss) from discontinued operations (432) (569) (69) (24) 261
--------- --------- --------- --------- ---------
Income before cumulative effect of change in accounting principle 7,201 2,602 3,919 2,980 5,851
Cumulative effect of change in accounting principle, net of
income taxes (2) -- (1,201) -- -- --
--------- --------- --------- --------- ---------
Net income $ 7,201 $ 1,401 $ 3,919 $ 2,980 $ 5,851
========= ========= ========= ========= =========
Net income per common share:
BASIC:
Income from continuing operations before cumulative effect of
change in accounting principle $ 0.47 $ 0.20 $ 0.24 $ 0.17 $ 0.32
Income (loss) from discontinued operations (0.03) (0.04) -- -- 0.01
--------- --------- --------- --------- ---------
Income before cumulative effect of change in accounting 0.44 0.16 0.24 0.17 0.33
principle
Cumulative effect of change in accounting
principle (2) -- (0.07) -- -- --
--------- --------- --------- --------- ---------
Net income per share $ 0.44 $ 0.09 $ 0.24 $ 0.17 $ 0.33
========= ========= ========= ========= =========
Weighted average number of shares outstanding - basic 16,279 16,190 16,667 17,955 17,981
========= ========= ========= ========= =========
DILUTED:
Income from continuing operations before cumulative effect of
change in accounting principle $ 0.45 $ 0.19 $ 0.24 $ 0.17 $ 0.31
Income (loss) from discontinued operations (0.02) (0.03) (0.01) -- 0.01
--------- --------- --------- --------- ---------
Income before cumulative effect of change in accounting principle 0.43 0.16 0.23 0.17 0.32
Cumulative effect of change in accounting principle (2) -- (0.08) -- -- --
--------- --------- --------- --------- ---------
Net income per share $ 0.43 $ 0.08 $ 0.23 $ 0.17 $ 0.32
========= ========= ========= ========= =========
Weighted average number of shares outstanding - diluted 16,789 16,566 16,945 17,991 18,250
========= ========= ========= ========= =========
Pro forma amounts assuming the change in accounting principle was
applied retroactively: (2)
Net income N/A N/A $ 3,866 $ 2,728 $ 5,772
Net income per share - basic N/A N/A 0.23 0.15 0.32
Net income per share - diluted N/A N/A 0.23 0.15 0.32
BALANCE SHEET DATA:
Property and equipment, net $ 49,177 $ 57,146 $ 56,716 $ 60,659 $ 64,232
Total assets 285,679 307,718 294,858 292,199 287,327
Long-term debt 20,640 44,942 38,846 41,526 35,936
Stockholders' equity 131,250 122,868 121,338 122,259 120,520
OTHER DATA:
Working capital $ 104,420 $ 112,596 $ 105,483 $ 103,153 $ 92,987
</TABLE>
(1) Effective February 2, 2003, the Company changed its method of accounting
for inventories to the last-in, first-out method, as discussed in Note 1 to
the Consolidated Financial Statements.
(2) Effective February 3, 2002, the Company adopted the provisions of Emerging
Issues Task Force ("EITF") No. 02-16, Accounting by a Customer (Including a
Reseller) for Certain Consideration Received from a Vendor, as discussed in
Note 1 to the Consolidated Financial Statements.
(3) During the fiscal year ended February 1, 2003, the Company restated its
consolidated financial statements for the fiscal year ended January 29,
2000. As a result, financial information for the year ended January 29,
2000 is unaudited.
4
<PAGE>
BOOKS-A-MILLION
2004 Annual Report
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION & RESULTS OF OPERATIONS
GENERAL
The Company was founded in 1917 and currently operates 202 retail
bookstores concentrated primarily in the southeastern United States. Of the 202
stores, 163 are superstores which operate under the names Books-A-Million and
Books & Co., 35 are traditional stores which operate under the Bookland and
Books-A-Million names and four are newsstands which operate under the name Joe
Muggs Newsstand. In addition to the retail store formats, the Company offers its
products over the Internet at www.booksamillion.com and www.joemuggs.com. As of
January 31, 2004, the Company employed approximately 4,800 full and part-time
employees.
The Company's growth strategy is focused on opening superstores in new
and existing market areas, particularly in the Southeast. In addition to opening
new stores, management intends to continue its practice of reviewing the
profitability trends and prospects of existing stores and closing or relocating
under-performing stores, or converting stores to different formats. With the
Company's focus on superstores, the number of traditional stores has decreased
over the years as new superstores are opened nearby and the traditional stores
are closed. During fiscal 2004, the Company opened four stores, closed nine
stores and relocated one store. In fiscal 2002, the Company began an extensive
remodeling program to bring a consistent look to each store and also to update
equipment. Certain stores completed a major remodeling, including new flooring,
resetting the fixtures and / or relocating the cafe. Other stores completed a
minor remodeling which was limited to resetting fixtures, new signage and paint.
Over the past two years, the remodeled stores have outpaced the chain in
comparable store sales. During fiscal 2004, the Company remodeled 36 stores.
Approximately 50 percent of the Company's stores have been remodeled to date as
part of this remodel program.
The Company's performance is partially measured based on comparable
store sales, which is similar to most retailers. 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.
CRITICAL ACCOUNTING POLICIES
Inventories
Inventory counts are taken throughout the fiscal period. Store
inventory counts are performed by an independent inventory service while
warehouse inventory counts are performed internally. All physical inventory
counts are reconciled to the Company's records. The Company accrues for
inventory shortages based upon historical inventory shortage results.
Cost is assigned to store and warehouse inventories using the retail
inventory method. Using this method, store and warehouse inventories are valued
by applying a calculated cost-to-retail ratio to the retail value of
inventories. The retail method is an averaging method that is widely used within
the retail industry. Inventory costing also requires certain significant
management estimates and judgments involving markdowns, the allocation of vendor
allowances and shrinkage. These practices affect ending inventories at cost as
well as the resulting gross margins and inventory turnover ratios.
Effective February 2, 2003, the Company changed from the first-in,
first-out (FIFO) method of accounting for inventories to the last-in, first-out
(LIFO) method. Management believes this change is preferable in that it achieves
a more appropriate matching of revenues and expenses. The impact of this
accounting change was to increase "Costs of Products Sold" in the consolidated
statements of operations by $0.7 million for the fiscal year ended January 31,
2004. This resulted in an after-tax decrease to net income of $0.4 million or a
decrease in net income per diluted share of $0.02. The cumulative effect of a
change in accounting principle from the FIFO method to LIFO method is not
determinable. Accordingly, such change has been accounted for prospectively. In
addition, pro forma amounts from retroactively applying the change cannot be
reasonably estimated and have not been disclosed.
Vendor Allowances
The Company receives allowances from its vendors related to a variety
of programs and arrangements, including merchandise placement and cooperative
advertising programs. Effective February 3, 2002, the Company adopted the
provisions of Emerging Issues Task Force ("EITF") No. 02-16, Accounting by a
Customer (Including a Reseller) for Certain Consideration Received from a
Vendor, which addresses the accounting for vendor allowances. As a result of the
adoption of this statement, vendor allowances in excess of incremental direct
costs are reflected as a reduction of inventory costs and recognized in cost of
products sold upon the sales of the related inventory. The charge for the
adoption of EITF No. 02-16 at the beginning of fiscal 2003 is reflected as a
cumulative effect of a change in accounting principle of approximately $1.2
million (net of income tax benefit of $736,000), or $0.08 per diluted share.
Prior to fiscal 2003, the Company recognized these vendor allowances over the
period covered by the vendor arrangement.
5
<PAGE>
BOOKS-A-MILLION
2004 Annual Report
Impairment of Long-Lived Assets
The Company reviews property and equipment and intangibles periodically
to determine whether events or changes in circumstances indicate that their
carrying amounts may not be recoverable or their depreciation or amortization
periods should be accelerated. The Company's long-lived assets are retail store
leasehold improvements, lease-rights intangibles and goodwill. The Company
assesses recoverability based upon several factors, including management's
intention with respect to its stores and those stores' projected undiscounted
cash flows. If an impairment is indicated, an impairment loss is generally
recognized for the amount by which the carrying amount of the assets exceeds the
present value of their projected cash flows. Impairment losses from continuing
operations are included in selling, general and administrative costs. For fiscal
2004, 2003 and 2002, impairment losses of $983,000, $241,000 and $232,000,
respectively, were recorded in selling, general and administrative costs. For
all years presented, the impairment losses related to the retail trade business
segment.
Accrued Expenses
On a monthly basis, certain material expenses are estimated and accrued
to properly record those expenses in the period incurred. Such estimates include
those made for payroll and employee benefits costs, occupancy costs and
advertising expenses among other items.
Certain estimates are made based upon analysis of historical results.
Differences in management's estimates and assumptions could result in accruals
that are materially different from the actual results.
Income Taxes
The Company recognizes deferred tax assets and liabilities for the
expected future tax consequences of events that result in temporary differences
between the amounts recorded in its financial statements and tax returns. Under
this method, deferred tax assets and liabilities are determined based on the
differences between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
RESULTS OF OPERATIONS
The following table sets forth statement of operations data expressed
as a percentage of net sales for the periods presented.
<TABLE>
<CAPTION>
Fiscal Year Ended
----------------------------
1/31/04 2/1/03 2/2/02
------- ------ ------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Gross profit 27.3% 26.8% 27.9%
Operating, selling, and administrative expenses 20.6% 21.0% 21.9%
Depreciation and amortization 3.4% 3.7% 3.5%
Operating profit 3.3% 2.1% 2.5%
Interest expense, net 0.6% 0.9% 1.0%
Income from continuing operations before income taxes and cumulative effect of change in
accounting principle 2.7% 1.2% 1.5%
Provision for income taxes 1.0% 0.5% 0.6%
Income from continuing operations before cumulative effect of change in accounting principle 1.7% 0.7% 0.9%
Loss from discontinued operations (including impairment charges), net of tax -0.1% -0.1% 0.0%
Income before cumulative effect of change in accounting principle 1.6% 0.6% 0.9%
Cumulative effect of a change in accounting principle 0.0% -0.3% 0.0%
Net income 1.6% 0.3% 0.9%
</TABLE>
FISCAL 2004 COMPARED TO FISCAL 2003
Consolidated net sales increased $22.0 million to $460.2 million in
fiscal 2004 from $438.2 million in fiscal 2003. Comparable store sales increased
3.3% when compared to the same 52-week period last year. The increase in
comparable store sales was due to an improving economy, as well as strong sales
in categories such as Children's, Fiction and Diet & Health. The Company opened
four new stores during fiscal 2004 and closed nine underperforming stores.
Net sales for the retail trade segment increased $21.1 million, or
4.9%, to $454.0 million in fiscal 2004 from $432.9 million in fiscal 2003. The
increase in sales was due to an improving economy, as well as strong sales in
categories such as Children's, Fiction and Diet & Health. Net sales for the
electronic commerce segment increased $2.2 million, or 9.3%, to $25.5 million in
fiscal 2004 from $23.3 million in fiscal 2003. This increase was primarily due
to growth in business-to-business sales volume during fiscal 2004.
6
<PAGE>
BOOKS-A-MILLION
2004 Annual Report
The factors affecting the future trend of comparable store sales
include, among others, overall demand for products the Company sells, the
Company's marketing programs, pricing strategies, store operations and
competition.
Gross profit, which includes cost of sales, distribution costs and
occupancy costs (including rent, common area maintenance, property taxes,
utilities and merchant association dues), increased $8.0 million, or 6.8%, to
$125.5 million in fiscal 2004 from $117.5 million in fiscal 2003. Gross profit
as a percentage of net sales increased to 27.3% in fiscal 2004 from 26.8% in
fiscal 2003, primarily due to improved sales mix, less promotional discounting
and lower occupancy costs as a percentage of net sales.
Operating, selling and administrative expenses increased $2.3 million,
or 2.6%, to $94.5 million in fiscal 2004 from $92.2 million in fiscal 2003.
Operating, selling and administrative expenses as a percentage of net sales
decreased to 20.6% in fiscal 2004 from 21.0% in fiscal 2003, primarily due to
the impact of higher comparable store sales as well as strong expense controls.
Depreciation and amortization decreased $0.3 million, or 2.1% to $15.7
million in fiscal 2004 from $16.0 million in fiscal 2003. Depreciation and
amortization as a percentage of net sales decreased to 3.4% in fiscal 2004 from
3.7% in fiscal 2003, due to lower capital expenditures in fiscal 2004.
Consolidated operating profit was $15.2 million for fiscal 2004
compared to $9.3 million in fiscal 2003. Operating profit for the retail trade
segment was $14.3 million in fiscal 2004 versus $8.8 million in fiscal 2003.
This increase was primarily attributable to the higher comparable store sales
during fiscal 2004. The operating profit for the electronic commerce segment was
$0.3 million compared to the fiscal 2003 operating loss of $0.5 million. The
improvement in operating results was due to improved gross margin as a result of
increased sales, as well as lower operating costs as a percent to sales.
Net interest expense decreased $1.3 million, or 30.3%, to $2.9 million
in fiscal 2004 from $4.2 million in fiscal 2003, primarily due to lower average
debt levels and lower average interest rates during fiscal 2004.
Income taxes were calculated at an effective rate of 38.0% for both
fiscal 2004 and 2003.
Loss from discontinued operations was $0.7 million in fiscal 2004
compared to $0.9 million in fiscal 2003. The income tax benefit on the loss from
discontinued operations was $0.3 million in fiscal 2004 and in fiscal 2003. Loss
from discontinued operations, net of tax, was $0.4 million in fiscal 2004
compared to $0.6 million in fiscal 2003. These losses represent the results of
four stores that were closed in fiscal 2004 in markets where the Company does
not expect to retain the closed stores' customers at another store.
FISCAL 2003 COMPARED TO FISCAL 2002
Consolidated net sales increased $0.6 million to $438.2 million in
fiscal 2003 from $437.6 million in fiscal 2002. Comparable store sales decreased
2.6% when compared to the same 52-week period last year. The primary reasons for
the decrease were weak comparable store sales in book categories and lower music
sales (a discontinued line of merchandise). The Company opened six new stores
during fiscal 2003 and closed three underperforming stores (these stores were
not discontinued operations).
Net sales for the retail trade segment increased $2.2 million, or 0.5%,
to $432.9 million in fiscal 2003 from $430.7 million in fiscal 2002. The slight
increase in sales was due to the six new stores opened during fiscal year 2003.
Net sales for the electronic commerce segment increased $1.1 million, or 4.6%,
to $23.3 million in fiscal 2003 from $22.2 million in fiscal 2002. This increase
was primarily due to growth in business-to-business sales volume during fiscal
2003.
The factors affecting the future trend of comparable store sales
include, among others, overall demand for products the Company sells, the
Company's marketing programs, pricing strategies, store operations and
competition.
Gross profit decreased $4.5 million, or 3.7%, to $117.5 million in
fiscal 2003 from $122.0 million in fiscal 2002. Gross profit as a percentage of
net sales decreased to 26.8% in fiscal 2003 from 27.9% in fiscal 2002, primarily
due to higher occupancy costs as a percentage of sales combined with more
promotional discount activity during fiscal 2003. Gross profit includes cost of
sales, distribution costs and occupancy costs (including rent, common area
maintenance, property taxes, utilities and merchant association dues).
Operating, selling and administrative expenses decreased $3.7 million,
or 3.9%, to $92.2 million in fiscal 2003, from $95.9 million in fiscal 2002.
Operating, selling and administrative expenses as a percentage of net sales
decreased to 21.0% in fiscal 2003 from 21.9% in fiscal 2002, primarily due to
lower corporate expenses.
Depreciation and amortization increased $0.7 million, or 4.9% to $16.0
million in fiscal 2003 from $15.3 million in fiscal 2002. Depreciation and
amortization as a percentage of net sales increased to 3.7% in fiscal 2003 from
3.5% in fiscal 2002, due to the increased number of superstores operated by the
Company combined with capital improvements made to existing stores during fiscal
2003.
Consolidated operating profit was $9.3 million for fiscal 2003 compared
to $10.9 million in fiscal 2002. Operating profit for the retail trade segment
was $8.8 million in fiscal 2003 versus $11.2 million in fiscal 2002. This
decrease was primarily attributable to the lower comparable store sales during
fiscal 2003. The operating loss for the electronic commerce segment was $0.5
million compared to the fiscal 2002 loss of $1.7 million. The improvement in
operating results was due to improved gross margin as a percent of sales, as
well as lower operating costs as a percent to sales.
7
<PAGE>
BOOKS-A-MILLION
2004 Annual Report
Net interest expense decreased $0.2 million, or 5.8%, to $4.2 million
in fiscal 2003 from $4.4 million in fiscal 2002, primarily due to lower average
interest rates during fiscal 2003.
Income taxes were calculated at an effective rate of 38.0% for both
fiscal 2003 and 2002.
Loss from discontinued operations was $0.9 million in fiscal 2003
compared to $0.1 million in fiscal 2002. The income tax benefit on the loss from
discontinued operations was $0.3 million in fiscal 2003 compared to $42,000 in
fiscal 2002. Loss from discontinued operations, net of tax, was $0.6 million in
fiscal 2003 compared to $69,000 in fiscal 2002. These losses represent the
results of four stores that were closed in fiscal 2004 in markets where the
Company does not expect to retain the closed stores' customers at another store.
Effective February 3, 2002, the Company adopted Emerging Issues Task
Force ("EITF") No. 02-16, Accounting by a Customer (Including a Reseller) for
Certain Consideration Received from a Vendor, which addresses the accounting for
vendor allowances. The adoption of this accounting principle resulted in a
cumulative after-tax reduction to net income of $1.2 million, or $0.08 per
diluted share. Additional information is included in Note 1 to the consolidated
financial statements.
SEASONALITY AND QUARTERLY RESULTS
Similar to many retailers, the Company's business is seasonal, with its
highest retail sales, gross profit and net income historically occurring in the
fourth fiscal quarter. This seasonal pattern reflects the increased demand for
books and gifts during the year-end holiday selling season. Working capital
requirements are generally highest during the third fiscal quarter and the early
part of the fourth fiscal quarter due to the seasonality of the Company's
business. The Company's results of operations depend significantly upon net
sales generated during the fourth fiscal quarter, and any significant adverse
trend in the net sales of such period would have a material adverse impact on
the Company's results of operations for the full year.
In addition, the Company's results of operations may fluctuate from
quarter to quarter as a result of the amount and timing of sales and profits
contributed by new stores as well as other factors. New stores require the
Company to incur pre-opening expenses and often require several months of
operation before generating acceptable sales volumes. Accordingly, the addition
of a large number of new stores in a particular quarter could adversely affect
the Company's results of operations for that quarter.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are cash flows from
operations, including credit terms from vendors, and borrowings under its credit
facilities. The Company has an unsecured revolving credit facility that allows
borrowings up to $100.0 million, for which no principal repayments are due until
the facility expires in July 2005. 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 January 31, 2004 and February 1,
2003, $13.1 and $37.4 million, respectively, was outstanding under this credit
facility. The maximum and average outstanding balances during fiscal 2004 were
$77.6 million and $57.5 million, respectively. Outstanding borrowings as of
January 31, 2004 had annual interest rates of 2.75%. Additionally, as of January
31, 2004 and February 1, 2003, the Company had outstanding borrowings under an
industrial revenue bond totaling $7.5 million, which is secured by certain
property.
The Company's capital expenditures totaled $9.0 million in fiscal 2004.
These expenditures were primarily used for new store openings, renovation and
improvements to existing stores, upgrades and expansion of warehouse
distribution facilities and investment in management information systems.
Management estimates that capital expenditures for fiscal 2005 will be
approximately $14.7 million and that such amounts will be used for purposes
similar to fiscal 2004. Management believes that existing cash balances and net
cash from operating activities, together with borrowings under the Company's
credit facilities, will be adequate to finance the Company's planned capital
expenditures and to meet the Company's working capital requirements for fiscal
2005.
Financial Position
During fiscal 2004, the Company opened four new stores and closed nine
stores. The store closings, combined with strong inventory management, resulted
in decreased inventory and accounts payable balances at January 31, 2004, as
compared to February 1, 2003. Net property and equipment decreased due to lower
capital expenditures in fiscal 2004. Additionally, long-term debt balances
decreased as of January 31, 2004 compared to February 1, 2003 due to improved
earnings, lower inventory balances and lower capital expenditures.
8
<PAGE>
BOOKS-A-MILLION
2004 Annual Report
Future Commitments
The following table lists the aggregate maturities of various classes
of obligations and expiration amounts of various classes of commitments related
to Books-A-Million, Inc. at January 31, 2004:
<TABLE>
<CAPTION>
Payments Due Under Contractual Obligations
------------------------------------------
(in thousands) Total FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 Thereafter
-------------- ----- ------- ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Long-term debt - revolving credit facility $ 13,140 $ $ 13,140 $ -- $ -- $ -- $ --
Long-term debt - industrial revenue bond 7,500 -- 7,500 -- -- -- --
Operating leases 116,533 27,561 24,834 19,429 15,910 11,426 17,373
--------- -------- -------- -------- -------- ------- --------
Total of obligations $ 137,173 $ 27,561 $ 45,474 $ 19,429 $ 15,910 $11,426 $ 17,373
========= ======== ======== ======== ======== ======= ========
</TABLE>
Guarantees
From time to time, the Company enters into certain types of agreements
that require the Company to indemnify parties against third party claims.
Generally, these agreements relate to: (a) agreements with vendors and
suppliers, under which the Company may provide customary indemnification to its
vendors and suppliers in respect of actions they take at the Company's request
or otherwise on its behalf, (b) agreements with vendors who publish books or
manufacture merchandise specifically for the Company to indemnify the vendors
against trademark and copyright infringement claims concerning the books
published or merchandise manufactured on behalf of the Company, (c) real estate
leases, under which the Company may agree to indemnify the lessors for claims
arising from the Company's use of the property, and (d) agreements with the
Company's directors, officers and employees, under which the Company may agree
to indemnify such persons for liabilities arising out of their relationship with
the Company. The Company has Directors and Officers Liability Insurance, which,
subject to the policy's conditions, provides coverage for indemnification
amounts payable by the Company with respect to its 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 the Company to perform under these indemnities
are transaction and circumstance specific. The overall maximum amount of the
obligations cannot be reasonably estimated. Historically, the Company has not
incurred significant costs related to performance under these types of
indemnities. No liabilities have been recorded for these obligations on the
Company's balance sheet at January 31, 2004, as such liabilities are considered
de minimus.
Cash Flows
Operating activities provided cash of $33,284,000, $10,850,000 and
$24,559,000 in fiscal 2004, 2003 and 2002, respectively, and included the
following effects:
- - Cash provided by inventories in fiscal 2004 of $12,428,000 was primarily
the result of increased sales and improved inventory management during the
year. Cash used by inventories in fiscal 2003 of $15,103,000 was primarily
the result of expanding the store title base in existing stores. Cash
provided by inventories in fiscal 2002 was $1,047,000.
- - Cash used by accounts payable in fiscal 2004 of $11,895,000 was a result of
lower inventory levels for fiscal 2004. Cash provided by accounts payable
in fiscal 2003 was $5,472,000 due to higher inventory levels. Accounts
payable cash flow changes were an insignificant amount in fiscal 2002.
- - Depreciation and amortization expenses were $15,880,000, $16,331,000 and
$15,575,000 in fiscal 2004, 2003 and 2002, respectively. The decrease in
fiscal 2004 was due to decreased capital expenditures during fiscal 2004,
while the increases in fiscal 2003 and 2002 were due to increased capital
expenditures in each of the fiscal years.
- - Cash provided by accrued expenses was $5,074,000, $348,000 and $319,000 in
fiscal 2004, 2003 and 2002, respectively. The increase in fiscal 2004 was
primarily due to increases in deferred revenue related to the Company's
discount card and higher bonus accruals due to the Company's improved
earnings performance in fiscal 2004.
Cash used in investing activities in fiscal 2004, 2003 and 2002
reflected a net use of cash of $8,969,000, $16,982,000 and $18,206,000,
respectively. Cash was used primarily to fund capital expenditures for new store
openings, acquisitions of stores, renovation and improvements to existing
stores, warehouse distribution purposes and investments in management
information systems.
Financing activities used cash of $23,944,000 in fiscal 2004 to repay
debt under the credit facility. Financing activities in fiscal 2003 provided
cash of $5,897,000 from borrowings under the credit facility. In fiscal 2002,
cash used in financing activities was $6,265,000, which was used to repurchase
1,412,000 shares of the Company's common stock and to repay debt under the
credit facility.
9
<PAGE>
BOOKS-A-MILLION
2004 Annual Report
Outlook
For fiscal 2005, the Company currently expects to open approximately
six to eight new superstores, relocate or remodel approximately 20 to 25 stores
and close approximately two to four stores. Management estimates that capital
expenditures for fiscal 2005 will be approximately $14.7 million and that such
amounts will be used primarily for new store openings, renovations and
improvements to existing stores, upgrades and expansion of warehouse
distribution facilities and investment in management information systems.
NEW ACCOUNTING STANDARDS
In December 2002, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 148 ("SFAS 148"),
"Accounting for Stock-Based Compensation - Transition and Disclosure - an
Amendment of FASB No. 123." 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. The Company has 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 that would become effective in fiscal 2005. The
Company will continue to monitor communications on this subject from the FASB in
order to determine the impact on the Company's 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. The Company is now required to
adopt the provisions of FIN 46R no later than the first quarter of fiscal 2005.
The adoption of this interpretation is not expected to have a material effect on
the Company's financial position, results of operations or cash flows.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement
133 on Derivative Instruments and Hedging Activities" ("SFAS 149"). This
statement amends and clarifies financial accounting and reporting for derivative
instruments, including certain derivative instruments embedded in other
contracts. The provisions of SFAS 149 require that contracts with comparable
characteristics be accounted for similarly. The provisions of SFAS No. 149 are
effective for contracts entered into or modified after June 30, 2003, and for
hedging relationships designated after June 30, 2003. The requirements of SFAS
No. 149 did not have a material impact on the Company's financial position,
results of operations or cash flows.
RELATED PARTY ACTIVITIES
As discussed in Note 6 of Notes to Consolidated Financial Statements,
the Company conducts business with other entities in which certain officers,
directors and principal stockholders of the Company have controlling ownership
interests. The most significant related party transactions include inventory
purchases from, and sales to, related parties. Related party inventory purchases
were essentially flat in fiscal 2004 when compared to fiscal 2003. Related party
sales transactions increased in fiscal 2004 due to higher sales of book product.
The Company leases certain office, retail and warehouse space from related
parties of which the rents have remained relatively unchanged. Management
believes the terms of these related party transactions are substantially
equivalent to those available from unrelated parties.
10
<PAGE>
BOOKS-A-MILLION
2004 Annual Report
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
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
operations; and other factors referenced herein. In addition, such
forward-looking statements are necessarily dependent upon assumptions, estimates
and dates that may be incorrect or imprecise and involve known and unknown
risks, uncertainties and other factors. Accordingly, any forward-looking
statements included herein do not purport to be predictions of future events or
circumstances and may not be realized. Given these uncertainties, stockholders
and prospective investors are cautioned not to place undue reliance on such
forward-looking statements. The Company disclaims any obligation to update any
such factors or to publicly announce the results of any of the forward-looking
statements contained herein to reflect future events or developments.
11
<PAGE>
BOOKS-A-MILLION
2004 Annual Report
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
As Of
-----
(Dollars in thousands, except per share amounts) 1/31/04 2/1/03
------------------------------------------------ ------- ------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 5,348 $ 4,977
Accounts receivable, net of allowance for doubtful accounts of $545 and $712,
respectively 7,271 7,799
Related party receivables 351 437
Inventories 211,591 224,019
Prepayments and other 5,890 5,380
Deferred income taxes 4,446 6,130
-------- ---------
Total Current Assets 234,897 248,742
-------- ---------
PROPERTY AND EQUIPMENT:
Land 628 628
Buildings 6,130 6,118
Equipment 67,418 62,193
Furniture and fixtures 44,815 44,260
Leasehold improvements 47,282 45,899
Construction in process 193 270
-------- ---------
Gross Property and Equipment 166,466 159,368
Less accumulated depreciation and amortization 117,289 102,222
-------- ---------
Net Property and Equipment 49,177 57,146
-------- ---------
OTHER ASSETS:
Goodwill, net 1,368 1,368
Other 237 462
-------- ---------
Total Other Assets 1,605 1,830
-------- ---------
Total Assets $285,679 $ 307,718
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable:
Trade $ 87,984 $ 99,585
Related party 8,777 9,071
Accrued expenses 30,189 24,790
Accrued income taxes 3,527 2,530
Current portion of long-term debt -- 170
-------- ---------
Total Current Liabilities 130,477 136,146
-------- ---------
LONG-TERM DEBT 20,640 44,942
DEFERRED INCOME TAXES 1,805 1,703
OTHER LONG-TERM LIABILITIES 1,507 2,059
COMMITMENTS AND CONTINGENCIES
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, 18,465,387 and
18,211,706 shares issued at January 31, 2004 and February 1, 2003,
respectively 185 182
Additional paid-in capital 71,799 70,849
Treasury stock at cost (2,010,050 shares at January 31, 2004 and February
1, 2003) (5,271) (5,271)
Deferred compensation (284) --
Accumulated other comprehensive loss, net of tax (707) (1,219)
Retained earnings 65,528 58,327
-------- ---------
Total Stockholders' Equity 131,250 122,868
-------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $285,679 $ 307,718
======== =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
12
<PAGE>
BOOKS-A-MILLION
2004 Annual Report
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------
(In thousands, except per share data) 1/31/04 2/1/03 2/2/02
------------------------------------- ------- ------ ------
52 WEEKS 52 weeks 52 weeks
<S> <C> <C> <C>
Net sales $ 460,159 $ 438,215 $ 437,583
Cost of products sold, including warehouse distribution and store
occupancy costs(1) 334,697 320,704 315,556
--------- --------- ---------
GROSS PROFIT 125,462 117,511 122,027
Operating, selling and administrative expenses 94,530 92,178 95,870
Depreciation and amortization 15,712 16,048 15,296
--------- --------- ---------
OPERATING PROFIT 15,220 9,285 10,861
Interest expense, net 2,909 4,171 4,429
--------- --------- ---------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE 12,311 5,114 6,432
Provision for income taxes 4,678 1,943 2,444
--------- --------- ---------
INCOME FROM CONTINUING OPERATIONS BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 7,633 3,171 3,988
Discontinued operations:
Loss from discontinued operations (including impairment charges) (696) (917) (111)
Income tax benefit 264 348 42
--------- --------- ---------
Loss from discontinued operations (432) (569) (69)
--------- --------- ---------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 7,201 2,602 3,919
Cumulative effect of change in accounting principle, net of deferred
income tax benefit of $ 736 -- (1,201) --
--------- --------- ---------
NET INCOME $ 7,201 $ 1,401 $ 3,919
========= ========= =========
Net income per common share:
BASIC:
Income from continuing operations before cumulative effect of change in
accounting principle $ 0.47 $ 0.20 $ 0.24
Loss from discontinued operations (0.03) (0.04) --
--------- --------- ---------
Income before cumulative effect of change in accounting principle 0.44 0.16 0.24
Cumulative effect of change in accounting principle -- (0.07) --
--------- --------- ---------
Net income per share $ 0.44 $ 0.09 $ 0.24
========= ========= =========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING -- BASIC 16,279 16,190 16,667
========= ========= =========
DILUTED:
Income from continuing operations before cumulative effect of change in
accounting principle $ 0.45 $ 0.19 $ 0.24
Loss from discontinued operations (0.02) (0.03) (0.01)
--------- --------- ---------
Income before cumulative effect of change in accounting principle 0.43 0.16 0.23
Cumulative effect of change in accounting principle -- (0.08) --
--------- --------- ---------
Net income per share $ 0.43 $ 0.08 $ 0.23
========= ========= =========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING -- DILUTED 16,789 16,566 16,945
========= ========= =========
Pro forma amounts assuming the change in accounting principle was applied
retroactively:
NET INCOME N/A N/A $ 3,866
NET INCOME PER SHARE - BASIC N/A N/A $ 0.23
NET INCOME PER SHARE - DILUTED N/A N/A $ 0.23
</TABLE>
(1) Inventory purchases from related parties were $30,380, $30,212 and $29,679,
respectively, for the years presented above.
The accompanying notes are an integral part of these consolidated statements.
13
<PAGE>
BOOKS-A-MILLION
2004 Annual Report
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Accumulated
Common Stock Additional Treasury Stock Other Total
-------------- Paid-In ---------------- Deferred Retained Comprehensive Stockholders
(In thousands) Shares Amount Capital Shares Amount Compensation Earnings Income (Loss) Equity
-------------- ------ ------ ------- ------ ------ ------------ -------- ------------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, FEBRUARY 3, 2001 18,092 $ 181 $ 70,634 598 $ (1,563) $ -- $ 53,007 $ -- $ 122,259
Net income 3,919 3,919
Cumulative effect of
accounting change for
derivative instruments,
net of tax benefit of $285 (465) (465)
Unrealized loss on
accounting for
derivative instruments,
net of tax benefit
of $461 (752) (752)
------------
Subtotal of comprehensive
income 2,702
------------
Purchase of treasury
stock 1,412 (3,708) (3,708)
Issuance of stock for
employee stock
purchase plan 46 -- 83 83
Exercise of stock
options 1 2 2
------ ------ ---------- ------ -------- ------------ -------- ------------- ------------
BALANCE, FEBRUARY 2,2002 18,139 181 70,719 2,010 (5,271) -- 56,926 (1,217) 121,338
====== ====== ========== ====== ======== ============ ======== ============= ============
Net income 1,401 1,401
Unrealized loss on
accounting for
derivative instruments (2) (2)
------------
Subtotal comprehensive
income 1,399
------------
Issuance of stock for
employee stock purchase
plan 47 1 85 86
Exercise of stock options 26 45 45
------ ------ ---------- ------ -------- ------------ -------- ------------- ------------
BALANCE, FEBRUARY 1, 2003 18,212 182 70,849 2,010 (5,271) -- 58,327 (1,219) 122,868
====== ====== ========== ====== ======== ============ ======== ============= ============
Net income 7,201 7,201
Unrealized gain on
accounting for
derivative instruments,
net of tax provision
of $139 228 228
Reclassification of
unrealized loss
related to
de-designation of cash
flow hedge, net of tax
benefit of $ 174 284 284
------------
Subtotal comprehensive
income 7,713
------------
Issuance of restricted
stock 34 284 (284) --
Issuance of stock for
employee stock purchase
plan 42 83 83
Exercise of stock
options 177 3 442 445
Tax benefit from exercise
of stock options 141 141
------ ------ ---------- ------ -------- ------------ -------- ------------- ------------
BALANCE, JANUARY 31, 2004 18,465 $ 185 $ 71,799 2,010 $ (5,271) $ (284) $ 65,528 $ (707) $ 131,250
====== ====== ========== ====== ======== ============ ======== ============= ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
14
<PAGE>
BOOKS-A-MILLION
2004 Annual Report
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------
(In thousands) 1/31/04 2/1/03 2/2/02
-------------- ------- ------ ------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7,201 $ 1,401 $ 3,919
Adjustments to reconcile net income to net cash provided by operating
activities:
Cumulative effect of change in accounting principle, net of tax -- 1,201 --
Depreciation and amortization 15,880 16,331 15,575
Loss on impairment of assets 1,211 382 232
Loss on sale of property 73 136 110
Deferred income tax provision (benefit) 1,786 (4) (134)
Tax benefit of exercise of stock options 141 -- --
Reclassification of unrealized loss from de-designation of cash flow hedge 284 -- --
(Increase) decrease in assets, net of effect of acquisition in fiscal 2002:
Accounts receivable 528 241 (402)
Related party receivables 86 530 1,391
Inventories 12,428 (15,103) 1,047
Prepayments and other (510) 59 (1,173)
Increase (decrease) in liabilities:
Accounts payable (11,601) 2,062 3,454
Related party payables (294) 3,410 (1,843)
Accrued income taxes 997 (144) 2,064
Accrued expenses 5,074 348 319
--------- -------- --------
Total adjustments 26,083 9,449 20,640
--------- -------- --------
Net cash provided by operating activities 33,284 10,850 24,559
--------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (9,008) (17,042) (11,709)
Acquisition of stores -- -- (6,532)
Proceeds from sale of property and equipment 39 60 35
--------- -------- --------
Net cash used in investing activities (8,969) (16,982) (18,206)
--------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under credit facilities 192,490 203,378 186,004
Repayments under credit facilities (216,790) (197,283) (188,197)
Proceeds from exercise of stock options and issuance of common stock under
employee stock purchase plan 528 131 85
Purchase of treasury stock -- -- (3,708)
Repayments of other debt (172) (329) (449)
--------- -------- --------
Net cash provided by (used in) financing activities (23,944) 5,897 (6,265)
--------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 371 (235) 88
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 4,977 5,212 5,124
--------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 5,348 $ 4,977 $ 5,212
========= ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 3,133 $ 4,084 $ 4,128
========= ======== ========
Income taxes, net of refunds $ 1,694 $ 1,388 $ 955
========= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
15
<PAGE>
BOOKS-A-MILLION
2004 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Books-A-Million, Inc. and its subsidiaries (the "Company") are
principally engaged in the sale of books, magazines and related items through a
chain of retail bookstores. The Company presently operates 202 bookstores in 18
states and the District of Columbia, which are predominantly located in the
southeastern United States. The Company also operates a retail Internet website.
The Company presently consists of Books-A-Million, Inc., and its two wholly
owned subsidiaries, American Wholesale Book Company, Inc. ("American Wholesale")
and American Internet Service, Inc. ("AIS"). All significant inter-company
balances and transactions have been eliminated in consolidation. For a
discussion of the Company's business segments, see Note 9.
Fiscal Year
The Company operates on a 52-53 week year, with the fiscal year ending
on the Saturday closest to January 31. Fiscal years 2004, 2003 and 2002 were all
52-week periods.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Revenue Recognition
The Company recognizes revenue from the sale of merchandise at the time
the merchandise is sold and the customer takes delivery. Returns are recognized
at the time the merchandise is returned and processed. At each period end, an
estimate of sales returns is recorded.
The Company sells its Millionaire's Club Card, which entitles the
customer to receive a ten percent discount on all purchases made during the
twelve-month membership period, for a non-refundable fee. The Company recognizes
this revenue over the twelve-month membership period based upon historical
customer usage patterns. Related deferred revenue is included in accrued
expenses.
Vendor Allowances
The Company receives allowances from its vendors from a variety of
programs and arrangements, including placement and co-operative advertising
programs. Effective February 3, 2002, the Company adopted the provisions of
Emerging Issues Task Force ("EITF") No. 02-16, Accounting by a Customer
(Including a Reseller) for Certain Consideration Received from a Vendor, which
addresses the accounting for vendor allowances. As a result of the adoption of
this statement, vendor allowances in excess of incremental direct costs are
reflected as a reduction of inventory costs and recognized in costs of goods
sold upon the sale of the related inventory. The charge for the adoption of EITF
No. 02-16 at the beginning of fiscal 2003 is reflected as a cumulative effect of
a change in accounting principle of approximately $1.2 million (net of income
tax benefit of $736,000), or $0.08 per diluted share. Prior to fiscal 2003, the
Company recognized these vendor allowances over the period covered by the vendor
arrangement.
Inventories
Inventories are valued at the lower of cost or market, using the retail
method. Market is determined based on the lower of replacement cost or estimated
realizable value. Using the retail method, store and warehouse inventories are
valued by applying a calculated cost to retail ratio to the retail value of
inventories.
Effective February 2, 2003, the Company changed from the first-in,
first-out (FIFO) method of accounting for inventories to the last-in, first-out
(LIFO) method. Management believes this change was preferable in that it
achieves a more appropriate matching of revenues and expenses. The impact of
this accounting change was to increase "Costs of Products Sold" in the
consolidated statements of operations by $0.7 million for the fiscal year ended
January 31, 2004. This resulted in an after-tax decrease to fiscal 2004 net
income of $0.4 million or a decrease in net income per diluted share of $0.02.
The cumulative effect of a change in accounting principle from the FIFO method
to LIFO method is not determinable. Accordingly, such change has been accounted
for prospectively. In addition, pro forma amounts from retroactively applying
the change cannot be reasonably estimated and have not been disclosed.
16
<PAGE>
BOOKS-A-MILLION
2004 Annual Report
Physical inventory counts are taken throughout the course of the fiscal
period and reconciled to the Company's records. Accruals for inventory shortages
are estimated based upon historical shortage results.
Inventories were:
<TABLE>
<CAPTION>
Fiscal Year Ended
------------------------------
January 31, February 1,
(In thousands) 2004 2003
------------- ----------- --------------
<S> <C> <C>
Inventories (at FIFO) $ 212,251 $ 224,019
LIFO reserve (660) --
----------- --------------
Net inventories $ 211,591 $ 224,019
=========== ==============
</TABLE>
Property and Equipment
Property and equipment are recorded at cost. Depreciation on equipment
and furniture and fixtures is provided on the straight-line method over the
estimated service lives, which range from three to seven years. Depreciation of
buildings and amortization of leasehold improvements is provided on the
straight-line basis over the lesser of the assets estimated useful lives
(ranging from 10 to 40 years) or, if applicable, the periods of the leases.
Maintenance and repairs are charged to expense as incurred. Improvement costs
are capitalized to property accounts and depreciated using applicable annual
rates. The cost and accumulated depreciation of assets sold, retired or
otherwise disposed of are removed from the accounts, and the related gain or
loss is credited or charged to income.
Impairment of Long-Lived Assets
The Company reviews property and equipment and intangibles periodically
to determine whether events or changes in circumstances indicate that their
carrying amounts may not be recoverable or their depreciation or amortization
periods should be accelerated. The Company's long-lived assets are retail store
leasehold improvements, lease-rights intangibles and goodwill. The Company
assesses recoverability based upon several factors, including management's
intention with respect to its stores and those stores' projected undiscounted
cash flows. If impairment is indicated, an impairment loss is generally
recognized for the amount by which the carrying amount of the assets exceeds the
present value of their projected cash flows. Impairment losses from continuing
operations are included in selling, general and administrative costs. For fiscal
2004, 2003 and 2002, impairment losses of $983,000, $241,000 and $232,000,
respectively, were recorded in selling, general and administrative costs (also
see Note 8 for impairment losses included in discontinued operations). For all
years presented, the impairment losses related to the retail trade business
segment.
Loss from Discontinued Operations
The Company periodically closes under-performing stores. The Company
believes that a store is a component under Statement of Financial Accounting
Standards ("SFAS") No. 144. Therefore, each store closure would result in the
reporting of a discontinued operation unless the operations and cash flows from
the closed store could be absorbed in some part by a surrounding Company
store(s) within the same market area. Management evaluates certain factors in
determining whether a closed store's operations could be absorbed by a
surrounding store(s); the primary factor considered is the distance to the next
closest Books-A-Million store. When a closed store results in a discontinued
operation, the results of operations of the closed store include store closing
costs and any related asset impairments. See Note 8 for discontinued operations
disclosures.
Store Opening Costs
Non-capital expenditures incurred in preparation for opening new retail
stores are expensed as incurred.
Store Closing Costs
The Company continually evaluates the profitability of its stores. When
the Company closes or relocates a store, the Company incurs unrecoverable costs,
including lease termination payments, costs to transfer inventory and usable
fixtures and other costs of vacating the leased location. Such costs are
primarily expensed as incurred and are included in selling, general and
administrative costs. During fiscal 2004, 2003 and 2002, the Company recognized
store closing costs of $219,000, $22,000 and $119,000, respectively.
Advertising Costs
The costs of advertising are expensed as incurred. Advertising costs,
net of applicable vendor reimbursements, are charged to operating, selling and
administrative expenses, and totaled $2,995,000, $4,204,000 and $7,192,000 for
fiscal years 2004, 2003 and 2002, respectively.
17
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BOOKS-A-MILLION
2004 Annual Report
Insurance Accruals
The Company is subject to large deductibles under its workers'
compensation and health insurance policies. Amounts are accrued currently for
the estimated cost of claims incurred, both reported and unreported.
Income Taxes
The Company recognizes deferred tax assets and liabilities for the
expected future tax consequences of events that result in temporary differences
between the amounts recorded in its financial statements and tax returns. Under
this method, deferred tax assets and liabilities are determined based on the
differences between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
Receivables
Receivables represent customer (both wholesale and retail), landlord
and other receivables due within one year and are net of any allowance for
doubtful accounts. Net receivables were $7,622,000 and $8,236,000 at January 31,
2004 and February 1, 2003, respectively.
Statements of Cash Flows
For purposes of the consolidated statements of cash flows, the Company
considers all short-term, highly liquid investments with original maturities of
90 days or less to be cash equivalents.
Earnings Per Share
Basic net income per share ("EPS") is computed by dividing income
available to common shareholders by the weighted-average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if stock options granted to employees are exercised and resulted in
the issuance of common stock that then shared in the earnings of the Company.
Diluted EPS has been computed based on the average number of shares outstanding
including the effect of outstanding stock options, if dilutive, in each
respective year. A reconciliation of the weighted average shares for basic and
diluted EPS is as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------
(In thousands) 1/31/04 2/1/03 2/2/02
- ------------------------------------------------ ------- ------ ------
<S> <C> <C> <C>
Weighted average shares outstanding:
Basic 16,279 16,190 16,667
Dilutive effect of stock options outstanding 510 376 278
------- ------ ------
Diluted 16,789 16,566 16,945
======= ====== ======
</TABLE>
Weighted options outstanding of 801,000, 1,577,000 and 1,368,000 for
the years ended January 31, 2004, February 1, 2003 and February 2, 2002,
respectively, were not included in the table above as they were anti-dilutive in
those periods.
Disclosure of Fair Value of Financial Instruments
Based upon the Company's variable rate debt and the short-term nature
of its other financial instruments, the estimated fair values of the Company's
financial instruments recognized on the balance sheet at January 31, 2004 and
February 1, 2003 approximate their carrying values at those dates.
Stock-Based Compensation
At January 31, 2004 and February 1, 2003, the Company had one stock
option plan that is described more fully in Note 5. The Company accounts 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 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. The following table illustrates the effect on net income and net
income per common share if the Company had applied the fair value recognition
provisions of Statement of Financial Accounting Standards No. 148 ("SFAS 148"),
"Accounting for Stock-Based Compensation - Transaction and Disclosure - An
Amendment of FASB Statement No. 123," to stock-based employee compensation:
18
<PAGE>
BOOKS-A-MILLION
2004 Annual Report
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------
(In thousands, except per share amounts) 1/31/04 2/1/03 2/2/02
---------------------------------------- ------- -------- --------
<S> <C> <C> <C>
Net income, as reported $ 7,201 $ 1,401 $ 3,919
Deduct: Total stock-based employee compensation expense
determined under fair value based method for all awards,
net of tax effects 1,362 1,315 1,133
------- -------- --------
Pro forma net income $ 5,839 $ 86 $ 2,786
======= ======== ========
Net income per common share:
Basic - as reported $ 0.44 $ 0.09 $ 0.24
Basic - pro forma $ 0.36 $ 0.01 $ 0.17
Diluted - as reported $ 0.43 $ 0.08 $ 0.23
Diluted - pro forma $ 0.35 $ 0.01 $ 0.16
</TABLE>
The fair value of the options granted under the Company's stock option
plan during fiscal 2004, 2003 and 2002 was estimated on their date of grant
using the Black-Scholes option-pricing model with the following weighted average
assumptions: no dividend yield; expected volatility of 1.06%, 1.01% and 1.21%,
respectively; risk free interest rates of 3.87% to 4.90%, 3.63% to 5.10% and
3.76% to 5.71%, respectively; and expected lives of six or ten years.
Accounting for Derivative Instruments and Hedging Activities
In June 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities,"
amended by SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133," and SFAS
No. 138, "Accounting for Certain Derivatives and Certain Hedging Activities,"
and SFAS No. 149, "Amendment of SFAS No. 133 on Derivative and Hedging
Activities." SFAS No. 133 established accounting and reporting standards
requiring that every derivative instrument (including certain derivative
instruments embedded in other contracts) be recorded in the balance sheet as
either an asset or liability measured at its fair value. SFAS No. 133 requires
that changes in the derivative's fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. Special accounting for
qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement, and requires that a company
must formally document, designate, and assess the effectiveness of transactions
that receive hedge accounting. The adoption of hedge accounting provided for in
these statements, on February 4, 2001, resulted in a cumulative after-tax
increase to other comprehensive loss, pertaining to years prior to fiscal 2002,
of $465,000. At January 31, 2004 and February 1, 2003, liabilities related to
derivatives are classified as other long-term liabilities totaling $1,507,000
and $2,059,000, respectively.
Shareholders' Equity
In fiscal 2000, the Board of Directors authorized a common stock
repurchase program for up to $6.0 million of the Company's outstanding shares.
At January 31, 2003 and February 1, 2002, the Company had repurchased 2,010,050
shares for a cost of $5,271,000. Those shares are held in treasury. This
repurchase program was discontinued in March 2004.
In March 2004, the Board of Directors authorized a new common stock
repurchase program for up to an additional 1.6 million shares, or 10% of the
outstanding stock.
Comprehensive Income (Loss)
Comprehensive income (loss) is net income or loss, plus certain other
items that are recorded directly to stockholders' equity. The only such items
currently applicable to the Company are the unrealized gains (losses) on the
derivative instruments as explained in Note 3.
Recent Accounting Pronouncements
In December 2002, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 148 ("SFAS 148"),
"Accounting for Stock-Based Compensation - Transition and Disclosure - an
Amendment of FASB No. 123." 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. The Company has 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 that would become effective in fiscal 2005. The
Company will continue to monitor communications on this subject from the FASB in
order to determine the impact on the Company's financial position, results of
operations or cash flows.
19
<PAGE>
BOOKS-A-MILLION
2004 Annual Report
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. The Company is now required to
adopt the provisions of FIN 46R no later than the first quarter of fiscal 2005.
The adoption of this interpretation is not expected to have a material effect on
the Company's financial position, results of operations or cash flows.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement
133 on Derivative Instruments and Hedging Activities," ("SFAS 149"). This
statement amends and clarifies financial accounting and reporting for derivative
instruments, including certain derivative instruments embedded in other
contracts. The provisions of SFAS 149 require that contracts with comparable
characteristics be accounted for similarly. The provisions of SFAS No. 149 are
effective for contracts entered into or modified after June 30, 2003, and for
hedging relationships designated after June 30, 2003. The requirements of SFAS
No. 149 did not have a material impact on the Company's financial position,
results of operations or cash flows.
Prior Year Reclassifications
Certain prior year amounts have been reclassified to conform to the
current year presentation.
2. INCOME TAXES
A summary of the components of the income tax provision is as follows
(in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended
------------------------------------
1/31/04 2/1/03 2/2/02
--------- ---------- ---------
<S> <C> <C> <C>
Current:
Federal $ 2,916 $ 1,567 $ 2,450
State 25 32 86
--------- ---------- ---------
$ 2,941 $ 1,599 $ 2,536
--------- ---------- ---------
Deferred:
Federal 1,609 $ (3) $ (132)
State (136) (1) (2)
--------- ---------- ---------
1,473 (4) (134)
--------- ---------- ---------
Provision for income taxes $ 4,414 $ 1,595 $ 2,402
========= ========== =========
</TABLE>
A reconciliation of the federal statutory income tax rate to the
effective income tax rate is as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
----------------------------------
1/31/04 2/1/03 2/2/02
------- ------ ------
<S> <C> <C> <C>
Federal statutory income tax rate 34.0% 34.0% 34.0%
State income tax provision 0.2% 1.0% 1.3%
Nondeductible meals and entertainment expense 0.6% 2.7% 1.0%
Other 3.2% 0.3% 1.7%
---- ---- ----
Effective income tax rate 38.0% 38.0% 38.0%
==== ==== ====
</TABLE>
Temporary differences (in thousands) which created deferred tax assets
(liabilities) at January 31, 2004 and February 1, 2003, are as follows:
<TABLE>
<CAPTION>
As of 1/31/04 As of 2/1/03
--------------------------- -------------------------
CURRENT NONCURRENT Current Noncurrent
---------- ------------ -------- ------------
<S> <C> <C> <C> <C>
Depreciation $ -- $ (2,521) $ $ (2,082)
Accruals 3,172 -- 2,736 --
Interest rate swap 434 -- 747 --
Inventory 637 -- 2,318 --
State net operating loss carryforwards -- 831 -- 441
Other 203 (115) 329 (62)
---------- ------------ -------- ------------
Deferred tax asset (liability) $ 4,446 $ (1,805) $ 6,130 $ (1,703)
========== ============ ======== ============
</TABLE>
20
<PAGE>
BOOKS-A-MILLION
2004 Annual Report
At January 31, 2004, the Company had state net operating loss
carryforwards of approximately $20,308,000 that expire beginning in 2006 through
2024.
No valuation allowance for net deferred income tax assets is deemed
necessary, as the realization of recorded deferred tax assets is considered more
likely than not.
3. DEBT AND LINES OF CREDIT
The Company refinanced its credit facility during fiscal 2003. The new
facility allows for unsecured borrowings up to $100 million for which no
principal payments are due until the facility expires in July 2005. Interest on
borrowing is determined based upon applicable LIBOR rates and the Company's rate
spread, which varies depending on the maintenance of certain covenants. The
credit facility has certain financial and non-financial covenants. The most
restrictive financial covenant is the maintenance of a minimum fixed charge
coverage ratio. As of January 31, 2004 and February 1, 2003, $13.1 million and
$37.4 million, respectively, were outstanding under this credit facility. The
maximum and average outstanding balances during fiscal 2004 were $77.6 million
and $57.5 million, respectively. The outstanding borrowings as of January 31,
2004, had annual interest rates of 2.75%.
The Company is subject to interest rate fluctuations involving its
credit facility. To manage this exposure, the Company utilizes interest rate
swaps to fix the interest rate on variable debt. The Company entered into two
separate $10.0 million interest rate swaps on July 24, 2002. Both swaps expire
in August 2005 and effectively fix the interest rate on $20.0 million of
variable debt at 5.13%, except during the fourth quarter of fiscal 2003, during
which neither swap was in effect. The counter parties to the interest rate swaps
are two of the Company's primary banks. The Company believes the credit and
liquidity risk of the counter parties failing to meet their obligation is remote
as the Company settles its interest position with the banks on a quarterly
basis.
During fiscal 1996 and fiscal 1995, the Company acquired and
constructed certain warehouse and distribution facilities with the proceeds of
loans made pursuant to an industrial development revenue bond (the "Bond"),
which are secured by a mortgage interest in these facilities. As of January 31,
2004 and February 1, 2003, there were $7.5 million of borrowings outstanding
under these arrangements, which bear interest at variable rates. The net book
value of the collateral property securing the Bond was $5,179,000 as of January
31, 2004. The Bond has a maturity date of December 1, 2019, with a purchase
provision obligating the Company to repurchase the Bond on May 11, 2005, unless
extended by the bondholder. Such an extension may be renewed annually by the
bondholder, at the Company's request, to a date no more than five years from the
renewal date. The Company maintains a $7.5 million interest rate swap that
effectively fixes the interest rate on the Bond at 7.98%. The swap was entered
into in May 1996 and has a term of ten years.
The Company's 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 (loss) or in
earnings, depending on the type of hedging relationship. Over time, amounts held
in accumulated other comprehensive income (loss) will be reclassified to
earnings when the hedge transaction affects earnings.
The Company's interest rate swaps were reported as a liability
classified in other long-term liabilities in the accompanying consolidated
balance sheets at their fair value of $1.5 million and $2.1 million as of
January 31, 2004 and February 1, 2003, respectively. For the fiscal years ended
January 31, 2004, February 1, 2003 and February 2, 2002, adjustments of
$228,000, $(2,000) and $(752,000) were recorded as unrealized gains (losses) in
accumulated other comprehensive income (loss), after-tax. During the fourth
quarter of fiscal 2004, one interest rate swap no longer qualified for hedge
accounting under SFAS No. 133. Therefore, the Company de-designated the hedge
resulting in an expense of approximately $284,000.
4. LEASES
The Company leases the premises for its retail bookstores under
operating leases, which expire in various years through the year 2014. Many of
these leases contain renewal options and require the Company to pay executory
costs (such as property taxes, maintenance, and insurance). In addition to fixed
minimum rentals, some of the Company's leases require contingent rentals based
on a percentage of sales.
21
<PAGE>
BOOKS-A-MILLION
2004 Annual Report
Minimum future rental payments under non-cancelable operating leases
having remaining terms in excess of one year as of January 31, 2004 are as
follows (in thousands):
<TABLE>
<CAPTION>
Future Minimum
Fiscal Year Rent
----------- --------------
<S> <C>
2005 $ 27,561
2006 24,834
2007 19,429
2008 15,910
2009 11,426
Subsequent years 17,373
--------------
Total $ 116,533
==============
</TABLE>
Rental expense for all operating leases consisted of the following (in
thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------
1/31/04 2/1/03 2/2/02
---------- ------------ -------------
<S> <C> <C> <C>
Minimum rentals $ 30,519 $ 30,157 $ 28,880
Contingent rentals 684 552 595
---------- ------------ -------------
Total $ 31,203 $ 30,709 $ 29,475
========== ============ =============
</TABLE>
5. EMPLOYEE BENEFIT PLANS
401(k) Profit-Sharing Plan
The Company and its subsidiaries maintain a 401(k) plan covering all
employees who have completed 6 months of service and who are at least 21 years
of age, and permit participants to contribute from 2% to 15% of compensation to
the plan. Company matching and supplemental contributions are made at
management's discretion. The expense under this plan was $467,000, $437,000 and
$417,000 in fiscal 2004, 2003 and 2002, respectively.
Stock Option Plan
The Company maintains a stock option plan reserving 3,800,000 shares of
the Company's common stock for grants to executive officers, directors, and key
employees. Prior to January 9, 2001, all options granted to employees become
exercisable in equal annual increments over a five-year period and expire on the
sixth anniversary of the date of grant. On January 9, 2001, the Compensation
Committee of the Board of Directors approved an amendment to the Stock Option
Plan that allows all options granted on or after that date to vest in equal
annual increments over a three-year period and expire on the tenth anniversary
of the date of the grant. All stock options have exercise prices equal to the
fair market value of the common stock on the date of grant. A summary of the
status of the Company's stock option plan is as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------------------------------------------
JANUARY 31, 2004 February 1, 2003 February 2, 2002
------------------- ------------------- --------------------
WEIGHTED Weighted Weighted
AVERAGE Average Average
EXERCISE Exercise Exercise
(Shares in thousands) SHARES PRICE Shares Price Shares Price
--------------------- ------ ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 2,576 $ 4.90 2,469 $ 5.30 2,210 $ 5.76
Granted 278 6.45 386 2.41 410 3.03
Exercised (177) 2.51 (26) 1.74 (1) 1.69
Forfeited (369) 5.24 (253) 5.30 (150) 5.89
------ ---------- ------ ---------- ------ ----------
Outstanding at end of year 2,308 $ 5.22 2,576 $ 4.90 2,469 $ 5.30
------ ---------- ------ ---------- ------ ----------
Exercisable at end of year 1,525 $ 5.52 1,468 $ 5.60 1,108 $ 6.14
------ ---------- ------ ---------- ------ ----------
Weighted average fair value of options granted $ 5.97 $ 2.20 $ 2.90
====== ========== ====== ========== ====== ==========
</TABLE>
During fiscal years 2004, 2003 and 2002, the Company recognized tax
benefits related to the exercise of stock options in the amount of $141,000,
$6,000 and $0, respectively. The tax benefits were credited to paid-in capital
in the respective years.
22
<PAGE>
BOOKS-A-MILLION
2004 Annual Report
The following table summarizes information about stock options
outstanding at January 31, 2004 (shares in thousands):
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------------------- -------------------------------
Weighted
Number Average Number
Outstanding at Remaining Weighted Exercisable at Weighted
Range of January 31, Contractual Average January 31, Average
Exercise Price 2004 Life (Years) Exercise Price 2004 Exercise Price
- -------------- -------------- ------------ -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
$1.38 - $ 2.37 817 7.63 $ 1.95 603 $ 1.80
$2.39 - $ 7.69 1,055 6.30 $ 5.57 517 $ 5.91
$8.19 - $13.00 436 1.23 $ 10.50 405 $ 10.58
----- -----
Totals 2,308 5.81 $ 5.22 1,525 $ 5.52
===== ==== ============== ===== ==============
</TABLE>
The Company also maintains separate option plans for its subsidiaries.
A total of 40,000 shares of common stock is authorized under these plans and all
40,000 shares were available for issuance as of January 31, 2004.
Employee Stock Purchase Plan
The Company maintains an employee stock purchase plan under which
400,000 shares of the Company's common stock are reserved for purchase by
employees at 85% of the fair market value of the common stock at the lower of
the market value for the Company's stock as of the beginning of the fiscal year
or the end of the fiscal year. Of the total reserved shares, 224,305 shares have
been purchased as of January 31, 2004.
Executive Incentive Plan
The Company maintains an Executive Incentive Plan (the "Incentive
Plan"). The Incentive Plan provides for awards to certain executive officers of
both cash and shares of restricted stock. Issuance of awards under the Incentive
Plan is based on the Company achieving pre-established performance goals during
a three consecutive fiscal year performance period. Awards issued under the
Incentive Plan vest based on the grantee's employment at the end of a three year
restriction period which commences at the end of the performance period for
which the awards were issued. Awards under the Incentive Plan are expensed
ratably over the period from the date that the issuance of such awards becomes
probable through the end of the restriction period. Awards granted under the
Incentive Plan for the three year performance period ended January 31, 2004
totaled $284,000. No awards were issued under the Incentive Plan for the three
year performance periods ended February 1, 2003 and February 2, 2002.
6. RELATED PARTY TRANSACTIONS
Certain stockholders and directors (including certain officers) of the
Company have controlling ownership interests in other entities with which the
Company conducts business. Transactions between the Company and these various
other entities ("related parties") are summarized in the following paragraphs.
The Company purchases a substantial portion of its magazines as well as
certain of their seasonal music and newspapers from Anderson Media Corporation
("Anderson Media"), an affiliate through common ownership. During fiscal 2004,
2003 and 2002, purchases of these items from Anderson Media totaled $28,160,000,
$27,736,000 and $27,934,000, respectively. The Company purchases certain of its
collectibles and books from Anderson Press, Inc. ("Anderson Press"), an
affiliate through common ownership. During fiscal 2004, 2003 and 2002, such
purchases from Anderson Press totaled $853,000, $1,153,000 and $440,000,
respectively. The Company purchases certain of its greeting cards and gift
products from C.R. Gibson, Inc., an affiliate through common ownership. The
purchases of these items in fiscal 2004, 2003 and 2002 were $265,000, $460,000
and $368,000, respectively. The Company purchases certain magazine subscriptions
from Magazines.com, an affiliate through common ownership. During fiscal 2004,
2003 and 2002, purchases of these items were $89,000, $59,000 and $58,000,
respectively. The Company purchases content for publication from Publication
Marketing Corporation, an affiliate through common ownership. During fiscal
2004, 2003 and 2002, purchases of these items were $72,000, $56,000 and $38,000,
respectively. The Company purchases various gift products from American
Promotional Events, Inc. ("American Promotional Events"), an affiliate through
common ownership. These items totaled $29,000, $18,000 and $80,000 during fiscal
2004, 2003 and 2002, respectively. The Company utilizes 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
$910,000, $729,000 and $761,000 for fiscal 2004, 2003 and 2002, respectively.
These amounts paid to Anco Far East primarily included the actual cost of
the product, as well as duty, freight and fees for consolidation and sourcing.
All costs other than the sourcing & consolidation service fees were passed
through from other vendors. Anco Far East fees, net of the pass through, were
$77,000, $73,000 and $76,000, respectively.
23
<PAGE>
BOOKS-A-MILLION
2004 Annual Report
The Company sold books to (received returns from) Anderson Media in the
amounts of $443,000, $(116,000) and $(31,000) in fiscal 2004, 2003 and 2002,
respectively. The Company's sales to Anderson Media significantly decreased in
fiscal 2003 and 2002; however, returns were still being processed from previous
years, and as a result, net returns were recorded for those years. During fiscal
2004, 2003 and 2002, the Company provided $226,000, $131,000 and $128,000,
respectively, of internet services to Magazines.com. The Company provided
internet services to American Promotional Events of $50,000, $55,000 and $73,000
in fiscal 2004, 2003 and 2002, respectively.
The Company leases its 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 fiscal 2004, 2003 and 2002, the Company paid rent of $137,000 in each
year to the trust under this lease. Anderson & Anderson LLC ("A&A"), which is an
affiliate through common ownership, also leases three buildings to the Company.
During fiscal 2004, 2003 and 2002, the Company paid A&A a total of $447,000,
$455,000 and $515,000, respectively, in connection with such leases. Total
minimum future rental payments under all four of these leases are $275,000 at
January 31, 2004. The Company subleases certain property to Hibbett Sporting
Goods, Inc. ("Hibbett"), a sporting goods retailer in the southeastern United
States. The Company's Executive Chairman, Clyde B. Anderson, is a member of
Hibbett's board of directors. During fiscal 2004, 2003 and 2002, the Company
received $191,000, $161,000 and $161,000, respectively, in rent payments from
Hibbett.
The Company also purchased logistics services from Clark Distribution,
a distribution company affiliated through common ownership, which amounted to
$0, $0 and $64,000 in fiscal 2004, 2003 and 2002, respectively. The Company
incurred expenses related to professional services from A&A and Charles C.
Anderson, a member of the Board of Directors, which amounted to $0 in fiscal
2004 and $144,000 in each of fiscal 2003 and 2002. 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 the
approximate cost of usage. The total amounts received from affiliated companies
for use of the plane in fiscal 2004, 2003 and 2002 were $275,000, $269,000 and
$198,000, respectively. The cost of operating the plane during these years was
approximately the same as the revenue received. Likewise, the Company
occasionally rents a plane from A&A at prices that approximate the cost of
usage. The amounts paid to A&A for plane rental were $44,000, $48,000 and
$84,000 for fiscal 2004, 2003 and 2002, respectively.
7. ACQUISITION OF STORES
During March 2001, the Company acquired inventory and lease-rights of
18 stores from Crown Books Corporation for $6.5 million (which was allocated
predominantly to inventories). The stores are located in the Chicago and
Washington, D.C. metropolitan areas. The results of operations for these stores
are reflected in the consolidated financial statements beginning in the first
quarter of fiscal 2002.
8. LOSS FROM DISCONTINUED OPERATIONS
Discontinued operations represent the fiscal 2004 closure of four
retail stores in markets located in Georgia (two stores), Louisiana and North
Carolina where the Company does not expect another of its existing stores to
absorb the closed store's customers. These stores had sales of $2,457,000,
$4,445,000 and $5,172,000 and pretax operating losses of $696,000, $917,000 and
$111,000 for fiscal 2004, 2003 and 2002, respectively. Included in the loss on
discontinued operations are impairment losses of $228,000, $141,000 and $0 for
fiscal 2004, 2003 and 2002, respectively. Also included in the loss on
discontinued operations are store closing costs of $64,000, $178,000, and $0 for
fiscal 2004, 2003 and 2002, respectively.
24
<PAGE>
BOOKS-A-MILLION
2004 Annual Report
9. BUSINESS SEGMENTS
The Company has 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 the
Company's distribution center operations, which predominantly supplies
merchandise to the Company's 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 Company evaluates 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.
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------------
Segment information (in thousands) 1/31/04 2/1/03 2/2/02
---------------------------------- ----------- ---------- -----------
<S> <C> <C> <C>
NET SALES
Retail / Wholesale Trade $ 454,000 $ 432,865 $ 430,742
Electronic Commerce Trade 25,451 23,277 22,247
Intersegment Sales Elimination (19,292) (17,927) (15,406)
----------- ---------- -----------
Net Sales $ 460,159 $ 438,215 $ 437,583
=========== ========== ===========
OPERATING PROFIT
Retail / Wholesale Trade $ 14,346 $ 8,787 $ 11,199
Electronic Commerce Trade 332 (490) (1,718)
Intersegment Elimination of Certain Costs 542 988 1,380
----------- ---------- -----------
Total Operating Profit $ 15,220 $ 9,285 $ 10,861
=========== ========== ===========
ASSETS
Retail / Wholesale Trade $ 284,718 $ 306,542
Electronic Commerce Trade 1,527 1,752
Intersegment Sales Elimination (566) (576)
----------- ----------
Total Assets $ 285,679 $ 307,718
=========== ==========
</TABLE>
10. COMMITMENTS AND CONTINGENCIES
The Company is a party to various legal proceedings incidental to its
business. In the opinion of management, after consultation with legal counsel,
the ultimate liability, if any, with respect to those proceedings is not
presently expected to materially affect the financial position or results of
operations or cash flows of the Company.
From time to time, the Company enters into certain types of agreements
that require the Company to indemnify parties against third party claims.
Generally, these agreements relate to: (a) agreements with vendors and
suppliers, under which the Company may provide customary indemnification to its
vendors and suppliers in respect of actions they take at the Company's request
or otherwise on its behalf, (b) agreements with vendors who publish books or
manufacture merchandise specifically for the Company to indemnify the vendors
against trademark and copyright infringement claims concerning the books
published or merchandise manufactured on behalf of the Company, (c) real estate
leases, under which the Company may agree to indemnify the lessors for claims
arising from the Company's use of the property, and (d) agreements with the
Company's directors, officers and employees, under which the Company may agree
to indemnify such persons for liabilities arising out of their relationship with
the Company. The Company has Directors and Officers Liability Insurance, which,
subject to the policy's conditions, provides coverage for indemnification
amounts payable by the Company with respect to its 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 the Company to perform under these indemnities
are transaction and circumstance specific. The overall maximum amount of the
obligations cannot be reasonably estimated. Historically, the Company has not
incurred significant costs related to performance under these types of
indemnities. No liabilities have been recorded for these obligations on the
Company's balance sheet at January 31, 2004, as such liabilities are considered
de minimus.
25
<PAGE>
BOOKS-A-MILLION
2004 Annual Report
INDEPENDENT AUDITORS' REPORT
To Books-A-Million, Inc.:
We have audited the accompanying consolidated balance sheets of Books-A-Million,
Inc. (a Delaware corporation) (the "Company"), and its subsidiaries as of
January 31, 2004 and February 1, 2003 and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the three fiscal
years in the period ended January 31, 2004. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Books-A-Million,
Inc. and its subsidiaries as of January 31, 2004 and February 1, 2003 and the
results of their operations and their cash flows for each of the three fiscal
years in the period ended January 31, 2004 in conformity with accounting
principles generally accepted in the United States of America.
As discussed in Note 1 to the Consolidated Financial Statements, effective
February 3, 2002, the Company changed its method of accounting for vendor
allowances and, effective February 2, 2003, the Company changed its method of
accounting for inventories.
DELOITTE & TOUCHE LLP
Birmingham, Alabama
April 19, 2004
26
<PAGE>
BOOKS-A-MILLION
2004 Annual Report
SUMMARY OF QUARTERLY RESULTS (Unaudited)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JANUARY 31, 2004
--------------------------------------------------------------
FIRST SECOND THIRD FOURTH TOTAL
(In thousands, except per share amounts) QUARTER QUARTER QUARTER QUARTER YEAR
---------------------------------------- ---------- ---------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Net sales $ 98,505 $ 113,081 $ 102,724 $ 145,849 $ 460,159
Gross profit 24,937 30,815 26,412 43,298 125,462
Operating profit (loss) (674) 3,238 (232) 12,888 15,220
Net income (loss) (1,042) 1,361 (755) 7,637 7,201
Net income (loss) per share - basic (0.06) 0.08 (0.05) 0.47 0.44
Net income (loss) per share - diluted (1) (0.06) 0.08 (0.05) 0.45 0.43
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year Ended February 1, 2003 (2)
--------------------------------------------------------------
FIRST SECOND THIRD FOURTH TOTAL
(In thousands, except per share amounts) QUARTER QUARTER QUARTER QUARTER YEAR
---------------------------------------- ---------- ---------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Net sales $ 100,273 $ 103,550 $ 96,280 $ 138,112 $ 438,215
Gross profit 27,380 27,989 22,718 39,424 117,511
Operating profit (loss) 871 470 (2,965) 10,909 9,285
Income (loss) before cumulative effect of change in
accounting principle (111) (425) (2,755) 5,893 2,602
Income (loss) per share - basic before cumulative effect of
change in accounting principle (1) (0.01) (0.03) (0.17) 0.36 0.16
Income (loss) per share - diluted before cumulative effect
of change in accounting principle (1) (0.01) (0.03) (0.17) 0.36 0.16
Net income (loss) (1,312) (425) (2,755) 5,893 1,401
Net income (loss) per share - basic (1) (0.08) (0.03) (0.17) 0.36 0.09
Net income (loss) per share - diluted (0.08) (0.03) (0.17) 0.36 0.08
</TABLE>
(1) The sum of quarterly per share amounts are different from the annual
per share amounts because of differences in the weighted average number
of common and common equivalent shares used in the quarterly and annual
computations.
(2) Certain reclassifications were made to the quarterly amounts for fiscal
2003 to appropriately reflect discontinued operations.
27
<PAGE>
BOOKS-A-MILLION
2004 Annual Report
DIRECTORS AND CORPORATE OFFICERS
BOARD OF DIRECTORS
CLYDE B. ANDERSON
Executive Chairman of the Board
CHARLES C. ANDERSON
Retired Chairman
TERRY C. ANDERSON
Chief Executive Officer and President, American Promotional
Events, Inc.
RONALD G. BRUNO
President,
Bruno Capital Management Corporation
DR. J. BARRY MASON
Dean, Culverhouse College of Commerce The University of Alabama
WILLIAM H. ROGERS, JR.
Executive Vice President, SunTrust Banks, Inc.
CORPORATE OFFICERS
CLYDE B. ANDERSON
Executive Chairman of the Board
SANDRA B. COCHRAN
President, Chief Executive Officer and Secretary
TERRANCE G. FINLEY
Executive Vice President of Books-A-Million, Inc.
and President, American Internet Service, Inc.
RICHARD S. WALLINGTON
Chief Financial Officer
28
<PAGE>
BOOKS-A-MILLION
2004 Annual Report
CORPORATE INFORMATION
CORPORATE OFFICE
Books-A-Million, Inc.
402 Industrial Lane
Birmingham, Alabama 35211
(205) 942-3737
TRANSFER AGENT
Bank of New York
(800) 524-4458
STOCKHOLDER INQUIRIES:
Stockholder Relations Department - 11E
P.O. Box 11258, Church Street Station
New York, New York 10286
E-Mail address: shareowner-svcs@bankofny.com
Bank of New York's Stock Transfer Website: http://stock.bankofny.com
CERTIFICATES FOR TRANSFER AND ADDRESS CHANGES TO:
Receive and Deliver Department - 11W
P.O. Box 11002, Church Street Station
New York, New York 10286
INDEPENDENT PUBLIC ACCOUNTANTS
Deloitte & Touche LLP
Birmingham, Alabama
FORM 10-K AND INVESTOR CONTACT
A copy of the Company's Annual Report on Form 10-K for the fiscal year
ended January 31, 2004, as filed with the Securities and Exchange Commission, as
well as key committee charters, corporate governance guidelines and code of
conduct, are available without charge to stockholders upon written request. Such
requests and other investor inquiries should be directed to Richard S.
Wallington, the Company's Chief Financial Officer, or you can view the those
items at www.booksamillioninc.com.
MARKET AND DIVIDEND INFORMATION
Common Stock
The Common Stock of Books-A-Million, Inc., is traded in the Nasdaq
National Market under the symbol BAMM. The chart below sets forth the high and
low stock prices for each quarter of the fiscal years ending January 31, 2004
and February 1, 2003.
<TABLE>
<CAPTION>
Quarter Ended High Low
- ------------- ----- -----
<S> <C> <C>
JANUARY 2004 $7.02 $4.41
OCTOBER 2003 5.00 2.80
JULY 2003 3.34 2.07
APRIL 2003 2.45 2.05
January 2003 2.77 2.27
October 2002 3.70 2.53
July 2002 4.26 3.22
April 2002 5.12 3.02
</TABLE>
The closing price on April 5, 2004, was $6.68. No cash dividends have
been declared since completion of the Company's initial public offering in 1992.
As of April 5, 2004, Books-A-Million, Inc., had approximately 10,500
stockholders based on the number of individual participants represented by
security position listings.
ANNUAL MEETING OF STOCKHOLDERS
The annual meeting of stockholders will be held on June 3, 2004, at
10:00 a.m. central time at The Harbert Center, 2019 Fourth Avenue North,
Birmingham, Alabama 35203. Stockholders of record as of April 5, 2004, are
invited to attend this meeting.
29
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>4
<FILENAME>g88566exv23.txt
<DESCRIPTION>EX-23 CONSENT OF DELOITTE & TOUCHE LLP
<TEXT>
<PAGE>
Exhibit 23
Consent of Deloitte & Touche LLP, independent public accountants
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements No.
33-71812 and 33-86980 of Books-A-Million, Inc. (the "Company") on Form S-8 of
our report dated April 19, 2004 (which report expresses an unqualified opinion
and includes an explanatory paragraph relating to the adoption of new accounting
principles as described in Note 1 to the consolidated financial statements),
incorporated by reference in this Annual Report on Form 10-K for the year ended
January 31, 2004, and of our report on the financial statement schedule, dated
April 19, 2004, appearing in this Annual Report on Form 10-K for the year ended
January 31, 2004.
DELOITTE & TOUCHE LLP
Birmingham, Alabama
April 19, 2004
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>5
<FILENAME>g88566exv31w1.txt
<DESCRIPTION>EX-31.1 SECTION 302 CERTIFICATION OF THE CHAIRMAN
<TEXT>
<PAGE>
Exhibit 31.1
CERTIFICATIONS
I, Clyde B. Anderson, certify that:
1. I have reviewed this annual report on Form 10-K of Books-A-Million,
Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the periods presented in this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this annual report.
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal year that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design
or operation of internal controls over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal control
over financial reporting.
Date: April 27, 2004
/s/ Clyde B. Anderson
------------------------
Clyde B. Anderson
Executive Chairman of the Board
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>6
<FILENAME>g88566exv31w2.txt
<DESCRIPTION>EX-31.2 SECTION 302 CERTIFICATION OF THE CFO
<TEXT>
<PAGE>
Exhibit 31.2
CERTIFICATIONS
I, Richard S. Wallington, certify that:
1. I have reviewed this annual report on Form 10-K of Books-A-Million,
Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the periods presented in this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this annual report.
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal year that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design
or operation of internal controls over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal control
over financial reporting.
Date: April 27, 2004
/s/ Richard S. Wallington
---------------------------
Richard S. Wallington
Chief Financial Officer
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.3
<SEQUENCE>7
<FILENAME>g88566exv31w3.txt
<DESCRIPTION>EX-31.3 SECTION 302 CERTIFICATION OF THE CEO
<TEXT>
<PAGE>
EXHIBIT 31.3
CERTIFICATIONS
I, Sandra B. Cochran, certify that:
1. I have reviewed this annual report on Form 10-K of Books-A-Million,
Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the periods presented in this report.
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this annual report.
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal year that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design
or operation of internal controls over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
control over financial reporting.
Date: April 27, 2004
/s/ Sandra B. Cochran
---------------------
Sandra B. Cochran
President and Chief Executive Officer
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>8
<FILENAME>g88566exv32w1.txt
<DESCRIPTION>EX-32.1 SECTION 906 CERTIFICATION OF THE CHAIRMAN
<TEXT>
<PAGE>
Exhibit 32.1
CERTIFICATION OF EXECUTIVE CHAIRMAN OF THE BOARD
Pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the
Sarbanes-Oxley Act of 2002, the undersigned officer of Books-A-Million, Inc.
(the "Company") hereby certifies, to the best of such officer's knowledge, that:
(i) the accompanying Annual Report on Form 10-K of the Company for
the fiscal year ended January 31, 2004 (the "Report") fully complies with
the requirements of Section 13(a) or Section 15(d), as applicable, of the
Securities Exchange Act of 1934, as amended; and
(ii) the information contained in the Report fairly presents, in
all material respects, the financial condition and results of operations of
the Company.
Dated: April 27, 2004 /s/ Clyde B. Anderson
-------------------------------
Clyde B. Anderson
Executive Chairman of the Board
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.2
<SEQUENCE>9
<FILENAME>g88566exv32w2.txt
<DESCRIPTION>EX-32.2 SECTION 906 CERTIFICATION OF THE CFO
<TEXT>
<PAGE>
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
Pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the
Sarbanes-Oxley Act of 2002, the undersigned officer of Books-A-Million, Inc.
(the "Company") hereby certifies, to the best of such officer's knowledge, that:
(i) the accompanying Annual Report on Form 10-K of the Company for
the fiscal year ended January 31, 2004 (the "Report") fully complies with
the requirements of Section 13(a) or Section 15(d), as applicable, of the
Securities Exchange Act of 1934, as amended; and
(ii) the information contained in the Report fairly presents, in
all material respects, the financial condition and results of operations of
the Company.
Dated: April 27, 2004 /s/ Richard S. Wallington
----------------------------------
Richard S. Wallington
Chief Financial Officer
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.3
<SEQUENCE>10
<FILENAME>g88566exv32w3.txt
<DESCRIPTION>EX-32.3 SECTION 906 CERTIFICATION OF THE CEO
<TEXT>
<PAGE>
EXHIBIT 32.3
CERTIFICATION OF PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the
Sarbanes-Oxley Act of 2002, the undersigned officer of Books-A-Million, Inc.
(the "Company") hereby certifies, to the best of such officer's knowledge, that:
(i) the accompanying Annual Report on Form 10-K of the Company
for the fiscal year ended January 31, 2004 (the "Report") fully complies with
the requirements of Section 13(a) or Section(d), as applicable, of the
Securities Exchange Act of 1934, as amended; and
(ii) the information contained in the Report fairly presents, in
all material respects, the financial condition and results of operations of the
Company.
Dated: April 27, 2004 /s/ Sandra B. Cochran
---------------------
Sandra B. Cochran
President and Chief Executive Officer
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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