MAIN NEWS HEADLINES
March 15-31, 2005 Edition
Posts 3.1% Increase
in Fiscal ’05 Sales
BIRMINGHAM, ALA/03/10/2005Books-A-Million,Inc. has announced that sales for the 13-week period ended January 29, 2005, increased 2.9% to $149.4 million from sales of $145.2 million for the 13-week period ended January 31, 2004. Comparable store sales for the quarter increased 2.7%. Net income for the quarter was $9.2 million, or $0.54 per diluted share, compared with net income of $7.6 million, or $0.44 per diluted share, in the year-earlier period.
In the Company’s January 2005 holiday sales press release it was stated that the fourth quarter would include a gain on insurance recoveries related to stores damaged by hurricanes. Due to the timing of the completion of rebuilding those stores and the related collection of the proceeds, the insurance gain will not be recorded until fiscal 2006. The Company expects to report a gain of $0.03 to $0.05 per diluted share at that time.
For the 52-week period ended January 29, 2005, net sales increased 3.7% to $475.2 million, compared with $458.3 million in the prior year. Comparable store sales increased 2.5% when compared with the same 52-week period of the prior year. For fiscal 2005, the Company reported net income of $10.2 million, or $0.59 per diluted share, compared to $7.1 million, or $0.42 per diluted share, for fiscal 2004.
Commenting on the results, Sandra B. Cochran, Chief Executive Officer and President, said, “We are pleased with the positive trends from the holiday season, which, combined with solid execution in the stores, gave us momentum going into January and delivered a strong finish to the fiscal year. Our balance sheet reflects the continued progress we are making in inventory management, margin improvement and debt reduction. Sales in several categories helped drive the business in the fourth quarter: Jon Stewart’s America: The Book fueled growth in the humor category, and we saw gains in children’s books due to the success of the Series Of Unfortunate Events and Polar Express movies. Joel Osteen’s Your Best Life Now was a huge bestseller in the inspirational book category, and Michael Crichton, John Grisham, Jimmy Buffett and James Patterson contributed bestsellers in fiction.”
Books-A-Million has evaluated its lease accounting practices as a result of a clarification issued by the Securities and Exchange Commission (SEC) on February 7, 2005, in a letter to the American Institute of Certified Public Accountants (AICPA) and has corrected its accounting for leases. Specifically, the Company has corrected its computation of depreciation for leasehold improvements, the accounting for rent holidays and the classification of landlord allowances related to leasehold improvements. The Company will provide comparable historical results by restating its prior financial statements. The financial results released today include the impact of these lease accounting adjustments.
For the first nine months of fiscal 2005, the impact of the adjustments on net income after taxes was an additional expense of $55,000. The impact on net income after taxes for the five fiscal years from fiscal 2000 through fiscal 2004 was additional (income) or expense of $22,000, ($32,000), ($25,000), $48,000 and $74,000, respectively. As of year-end fiscal 2005, property and equipment on the balance sheet will increase by approximately $9.5 million and other long-term liabilities will increase by approximately the same dollar amount. This restatement will not have an impact on historical or future net cash flows.
In previous periods, the Company had depreciated leasehold improvements over a period of 10 years, regardless of the term of the lease for the store. The Company has changed its depreciable life for leasehold improvements to the lesser of the economic useful life of the asset or the term of the lease. Also, when calculating the straight-line rent expense per store, the Company had previously used the store opening date as the starting date for the rent expense calculation. The Company has changed this calculation to start straight-line rent expense on the date the Company takes possession of the building for initial set-up of fixtures and merchandise.
The Company also corrected its method of classification of landlord allowances. For certain new stores, the Company receives funding from landlords for the construction of leasehold improvements. Historically, landlord allowances have been classified on the Company’s balance sheets as reductions of property and equipment and as a reduction in capital expenditures in the Company’s statements of cash flows. However, the Company will now classify landlord allowances as a deferred rent liability in the balance sheets and as an operating activity in the statements of cash flows.
Excluding the gain from insurance recoveries that will be recorded in fiscal 2006, the Company is projecting net income for fiscal 2006 in the range of $0.67 to $0.69 per diluted share versus the fiscal 2005 net income of $0.59 per diluted share. Projected net income for the year, including the one-time insurance gain, is $0.70 to $0.74 per diluted share. Net income for the first quarter of fiscal 2006 is expected to be in the range of $0.03 to $0.05 per diluted share versus last year’s net income of $0.07 per diluted share. The lower projected first quarter net income for fiscal 2006 is partially due to increased new store opening costs during the first quarter. Also, there will be a shift of inventory counting costs to the first quarter from later quarters for the current year.
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 207 stores in 19 states and the District of Columbia. The Company operates four 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.