The Company will amortize the revenue from its Millionaire's Club card based on the usage of the card over the 12-month life. Such revenue has previously been recorded when received. While the estimated impact of the change in accounting treatment is immaterial to the Company's financial condition and liquidity, the Company, with the concurrence of its new independent auditors, Deloitte & Touche LLP, has decided to restate fiscal 2001 and fiscal 2002 results to adjust for the change in accounting treatment as of the beginning of fiscal 2001. The cumulative after-tax reduction for all periods from 1991 to the beginning of fiscal 2001 will be reflected as an adjustment of approximately $885,000 to retained earnings on the balance sheet at the beginning of fiscal 2001. The after-tax reduction to earnings for fiscal 2001 and fiscal 2002 operating results is expected to be $44,000 and $60,000, respectively. The after-tax reduction to earnings for fiscal 2003 is expected to be $35,000 and has been reflected in the preliminary results for fiscal 2003 stated above.
In addition, results for fiscal 2003 may be affected by the adoption of Emerging Issues Task Force ("EITF") No. 02-16, Accounting by a Customer (including a reseller) for Certain Consideration Received from a Vendor. The EITF is a body of the Financial Accounting Standards Board (FASB). In its March 20, 2003 meeting, the EITF provided companies the option of adopting certain provisions of EITF No. 02-16 as a cumulative effect of a change in accounting principle or applying EITF 02-16 prospectively to applicable new vendor arrangements entered into or modified after January 1, 2003. If the Company chooses to adopt EITF No. 02-16 as a cumulative effect of a change in accounting principle, the after-tax reduction to earnings for fiscal 2003 is expected to be in the range of $900,000 to $1.3 million, or $0.05 to $0.08 per diluted share.
Commenting on the quarterly results, Clyde B. Anderson, Chairman and Chief Executive Officer, said, "Sales in the book categories were impacted by several factors, including a weakened economy, difficult sales in our children's categories and the poor performance of some best selling authors. Categories that performed well during the quarter were Diet and Health, Entertainment and the Collectors category, led by strong sales of Yu-Gi-Oh trading cards."
Anderson continued, "We are disappointed with our earnings results. During the quarter, however, we were able to counter the weaker-than-expected sales with strong expense control measures. In addition, our balance sheet continues to reflect the long-term strength of the Company."
The Company anticipates it will release audited financial results in May and will host a conference call at that time to discuss the results. While the Company believes there will be no further material impact on the financial results for the past three years, the re-audit of fiscal 2001 and fiscal 2002 may result in additional changes that may have a material effect on its fiscal 2001 and 2002 financial statements, as well as its fiscal 2003 financial results.
BOOKS-A-MILLION, INC.
Unaudited Consolidated Financial Highlights
(In thousands, except per share data)
13 Weeks
Ended
February 1,
2003
----------
Net sales $139,615
Earnings before interest, taxes and depreciation 15,097
Operating income 10,850
Net income $ 6,130
========
Earnings per share - basic $ 0.38
========
Earnings per share - diluted $ 0.37
========
Weighted average number of shares outstanding:
Basic 16,201
========
Diluted 16,432
========
52 Weeks
Ended
February 1,
2003
----------
Net sales $442,654
Earnings before interest, taxes and depreciation 24,815
Operating income 8,484
Net income $ 2,674
========
Earnings per share - basic $ 0.17
========
Earnings per share - diluted $ 0.16
========
Weighted average number of shares outstanding:
Basic 16,191
========
Diluted 16,566
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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, changes to the Company's fiscal 2001, 2002 and 2003 financial
statements as a result of the re-audit in addition to those currently
contemplated with respect to the Millionaires Club Card, which
additional changes could be material to the Company's financial
condition, results of operations or liquidity for annual and quarterly
periods; unexpected effects of the re-audit on the Company's financial
position, results of operations or liquidity; [negative reactions in
the marketplace [and from our lenders and creditors] from the delay in
issuing our financial statements as a result of the re-audit]; the
competitive environment in the book retail industry in general and in
the Company's specific market area; 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. 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.
-END-