BooksAMillion Inc. Reports Operating Results (10-Q)

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Jun 10, 2010
BooksAMillion Inc. (BAMM, Financial) filed Quarterly Report for the period ended 2010-05-01.

Booksamillion Inc. has a market cap of $103.2 million; its shares were traded at around $6.51 with a P/E ratio of 7.3 and P/S ratio of 0.2. The dividend yield of Booksamillion Inc. stocks is 3.1%. Booksamillion Inc. had an annual average earning growth of 6.9% over the past 10 years.BAMM is in the portfolios of Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

Gross profit decreased $0.1 million, or 0.3%, to $35.2 million in the thirteen weeks ended May 1, 2010, when compared with $35.3 million in the same thirteen week period for the prior year. Gross profit as a percentage of net sales for the thirteen weeks ended May 1, 2010 and May 2, 2009 was 30.1% and 30.0%, respectively. The slight increase in gross profit as a percentage of net sales for the thirteen week period ended May 1, 2010 was due to sales of higher margin items and lower occupancy costs, partially offset by higher inventory shrinkage in our stores.

Operating, selling and administrative expenses were $28.3 million in the thirteen weeks ended May 1, 2010, compared to $28.2 million in the same period last year. Operating, selling and administrative expenses as a percentage of net sales for the thirteen weeks ended May 1, 2010 increased to 24.2% from 23.8% in the same period last year. The increase in operating, selling and administrative expenses as a percentage of net sales for the thirteen week period ended May 1, 2010 was due to an expense reduction of $0.7 million ($0.5 million net of tax) for forfeitures of stock grants and other compensation for an employee who resigned in the first quarter of last year.

Our primary sources of liquidity are cash flows from operations, including credit terms from vendors, and borrowings under our credit facility. We have an unsecured revolving credit facility (the "Facility") that allows borrowings of up to $100.0 million, for which no principal repayments are due until the Facility expires in July 2011. Availability under the Facility is reduced by outstanding letters of credit issued thereunder. The Facility has certain financial and non-financial covenants, the most restrictive of which is the maintenance of a minimum fixed charge coverage ratio. We were in compliance with all of the covenants, including the minimum fixed charge coverage ratio, as of May 1, 2010. As of May 1, 2010, there were outstanding borrowings under the Facility of $16.3 million. The Company had no borrowings outstanding under the Facility as of January 30, 2010. The face amount of letters of credit issued under the Facility as of May 1, 2010 and January 30, 2010 were $2.1 million. The maximum and average outstanding balances under the Facility (including letters of credit issued thereunder) during the thirteen weeks ended May 1, 2010 were $27.7 million and $13.2 million, respectively, compared to $29.6 million and $20.3 million, respectively, for the same period in the prior year. The decrease in the maximum and average outstanding balances from the prior year was due to timing of our payments associated with accounts payable and accounts receivable.

Inventory balances were $210.3 million as of May 1, 2010, compared to $201.5 million as of January 30, 2010. The inventory increase was primarily due to seasonal fluctuations in inventory, an increase in the number of stores and added assortments. Inventory levels are generally the lowest at the end of the fiscal year due to holiday sales and large post holiday returns to vendors. Trade accounts payable balances and related party accounts payable were $91.6 million in the aggregate as of May 1, 2010, compared to $90.7 million as of January 30, 2010. The increase in accounts payable was due to the increase in inventory. Accrued expenses were $32.6 million as of May 1, 2010, compared to $36.6 million as of January 30, 2010. The decrease in accrued expenses was due to a reduction in gift card liability and employee bonus accrual. Both traditionally decrease in the first quarter due to usage of gift cards and payments of bonuses.

Financing activities provided cash of $13.1 million in the thirteen week period ended May 1, 2010 and used cash of $3.8 million in the thirteen week period ended May 2, 2009. Financing activities provided cash in the thirteen week period ended May 1, 2010 primarily from $16.3 million of net borrowings under our credit facility, offset by dividend payments of $2.4 million and the purchase of treasury stock of $1.0 million.

We are subject to interest rate fluctuations involving our Facility and debt related to the Bond. To illustrate the sensitivity of our results of operations to changes in interest rates on our debt, we estimate that a 1,052% increase or decrease in LIBOR rates would have changed interest expense by $0.5 million for the thirteen weeks ended May 1, 2010 due to average debt of $19.6 million. The average debt under the Facility (including letters of credit) and the Bond was $13.2 million and $6.4 million, respectively, for the thirteen weeks ended May 1, 2010. The LIBOR fluctuation rate of 1,052% represents the maximum fluctuation of LIBOR in the last three years, which occurred during fiscal 2009.

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