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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(mark one)

|       |  |                                                                                           
|------ |  | ------------------------------------------------------------------------------------------
|x      |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.  
|      
|       |  | For the quarterly period ended:
May 4,
2002                                               
|      
| OR 
|      
|o      |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934.
|      
|       |  | For the transaction period from
 to                                                       

COMMISSION FILE NUMBER 0-20664

BOOKS-A-MILLION, INC.




(Exact name of registrant as specified in its charter)


|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|DELAWARE                                                       |  | 63-0798460                       
|                                                               |  |                                  
|(State or other jurisdiction of
incorporation or organization) |  | (IRS Employer Identification No.)
|                                                              
|402 Industrial Lane, Birmingham, Alabama                       |  | 35211                            
|                                                               |  |                                  
|(Address of principal executive offices)                       |  | (Zip Code)                       

(205) 942-3737




(Registrants phone number including area code)


NONE




(Former name, former address and former fiscal year, if changed since last period)


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   o

Indicate the number of shares outstanding of each of the issuers common stock,
as of the latest practicable date: Shares of common stock, par value $.01 per
share, outstanding as of June 6, 2002 were 18,208,043 shares.





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TABLE OF CONTENTS



|                                                                                      |                                                           |  |  |  |  |  |  | 
|------------------------------------------------------------------------------------- | --------------------------------------------------------- |  |  |  |  |  |  | 
|PART 1. FINANCIAL INFORMATION                                                        
|ITEM 1. FINANCIAL STATEMENTS                                                         
|                                                                                      | CONDENSED CONSOLIDATED BALANCE SHEETS                    
|                                                                                      | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS          
|                                                                                      | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS          
|NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                                 
|MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|II  OTHER INFORMATION                                                               
|                                                                                      | ITEM 1: Legal Proceedings                                
|                                                                                      | ITEM 2: Changes in Securities                            
|                                                                                      | ITEM 3: Defaults Upon Senior Securities                  
|                                                                                      | ITEM 4: Submission of Matters of Vote of Security-Holders
|                                                                                      | ITEM 5: Other Information                                
|                                                                                      | ITEM 6: Exhibits and Reports on Form 8-K                 
|SIGNATURES                                                                           



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BOOKS-A-MILLION, INC. AND SUBSIDIARIES

INDEX

|                                                                                                |                                                      |  |          |   | 
|----------------------------------------------------------------------------------------------- | ---------------------------------------------------- |  | -------- | - | 
|                                                                                                |                                                      |  | Page No.
|                                                                                                |                                                      |  |         
|PART I.
   FINANCIAL INFORMATION                                                                |                                                      |  |          |  
|Item 1.
   Financial Statements (unaudited)                                                     |                                                      |  |          |  
|                                                                                                | Condensed Consolidated Balance Sheets                |  |          | 3 | 
|                                                                                                | Condensed Consolidated Statements of Operations      |  |          | 4 | 
|                                                                                                | Condensed Consolidated Statements of Cash Flows      |  |          | 5 | 
|                                                                                                | Notes to Condensed Consolidated Financial Statements |  |          | 6 | 
|Item 2.   Managements Discussion and Analysis of Financial Condition
and Results of Operations |                                                      |  | 9        |  
|PART 
II.   OTHER INFORMATION                                                                   |                                                      |  |          |  
|Item 1.   Legal Proceedings                                                                     |                                                      |  | 13       |  
|Item 2.   Changes in Securities                                                                 |                                                      |  | 13       |  
|Item 3.   Defaults Upon Senior Securities                                                       |                                                      |  | 13       |  
|Item 4.   Submission of Matters of Vote of Security-Holders                                     |                                                      |  | 13       |  
|Item 5.   Other Information                                                                     |                                                      |  | 13       |  
|Item 6.   Exhibits and Reports on Form 8-K                                                      |                                                      |  | 14       |  

2



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##### Table of Contents






PART 1.   FINANCIAL INFORMATION




ITEM 1.   FINANCIAL STATEMENTS


BOOKS-A-MILLION, INC. & SUBSIDIARIES





CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands)
(unaudited)


|                                         |                           |                                                |                                                                                                                                                                       |                                                |         |             |         |                  |         |        |         | 
|---------------------------------------- | ------------------------- | ---------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------- | ------- | ----------- | ------- | ---------------- | ------- | ------ | ------- | 
|                                         |                           |                                                |                                                                                                                                                                       |                                                |         | May 4, 2002 |         | February 2, 2002
|                                         |                           |                                                |                                                                                                                                                                       |                                                |         |             |         |                 
|ASSETS                                   |                           |                                                |                                                                                                                                                                       |                                                |         |             |         |                 
|Current Assets:                          |                           |                                                |                                                                                                                                                                       |                                                |         |             |         |                 
|                                         | Cash and cash equivalents |                                                | $                                                                                                                                                                     | 5,621                                          |         |             | $       | 5,539            |        
|                                         |                           | Accounts receivable, net                       |                                                                                                                                                                       |                                                | 8,948   |             |         |                  | 9,904   |       
|                                         |                           | Inventories                                    |                                                                                                                                                                       |                                                | 228,164 |             |         |                  | 210,853 |       
|                                         |                           | Prepayments and other                          |                                                                                                                                                                       |                                                | 5,003   |             |         |                  | 5,680   |       
|                                         |                           | Deferred income taxes                          |                                                                                                                                                                       |                                                | 5,171   |             |         |                  | 5,093   |       
|                                         |                           |                                                |                                                                                                                                                                       |                                                |         |             |         |                 
|                                         |                           |                                                |                                                                                                                                                                       | Total Current Assets                           |         |             | 252,907 |                  |         |        | 237,069 | 
|                                         |                           |                                                |                                                                                                                                                                       |                                                |         |             |         |                 
|Property and Equipment:                  |                           |                                                |                                                                                                                                                                       |                                                |         |             |         |                 
|                                         |                           | Gross property and equipment                   |                                                                                                                                                                       |                                                | 146,481 |             |         |                  | 145,428 |       
|                                         |                           | Less accumulated depreciation and amortization |                                                                                                                                                                       |                                                | 92,580  |             |         |                  | 88,712  |       
|                                         |                           |                                                |                                                                                                                                                                       |                                                |         |             |         |                 
|                                         |                           |                                                |                                                                                                                                                                       | Net Property and Equipment                     |         |             | 53,901  |                  |         |        | 56,716  | 
|                                         |                           |                                                |                                                                                                                                                                       |                                                |         |             |         |                 
|Other Assets:                            |                           |                                                |                                                                                                                                                                       |                                                |         |             |         |                 
|                                         |                           | Goodwill, net                                  |                                                                                                                                                                       |                                                | 1,368   |             |         |                  | 1,368   |       
|                                         |                           | Other                                          |                                                                                                                                                                       |                                                | 434     |             |         |                  | 492     |       
|                                         |                           |                                                |                                                                                                                                                                       |                                                |         |             |         |                 
|                                         |                           |                                                |                                                                                                                                                                       | Total Other Assets                             |         |             | 1,802   |                  |         |        | 1,860   | 
|                                         |                           |                                                |                                                                                                                                                                       |                                                |         |             |         |                 
|                                         |                           |                                                |                                                                                                                                                                       | Total Assets                                   |         | $           | 308,610 |                  |         | $      | 295,645 | 
|                                         |                           |                                                |                                                                                                                                                                       |                                                |         |             |         |                 
|LIABILITIES AND STOCKHOLDERS INVESTMENT |                           |                                                |                                                                                                                                                                       |                                                |         |             |         |                 
|Current Liabilities:                     |                           |                                                |                                                                                                                                                                       |                                                |         |             |         |                 
|                                         |                           | Accounts payable                               |                                                                                                                                                                       | $                                              | 99,481  |             |         | $                | 104,408 |       
|                                         |                           | Accrued expenses                               |                                                                                                                                                                       |                                                | 20,716  |             |         |                  | 24,801  |       
|                                         |                           | Accrued income taxes                           |                                                                                                                                                                       |                                                | 544     |             |         |                  | 2,674   |       
|                                         |                           | Current portion of long-term debt              |                                                                                                                                                                       |                                                | 24,207  |             |         |                  | 499     |       
|                                         |                           |                                                |                                                                                                                                                                       |                                                |         |             |         |                 
|                                         |                           |                                                |                                                                                                                                                                       | Total Current Liabilities                      |         |             | 144,948 |                  |         |        | 132,382 | 
|                                         |                           |                                                |                                                                                                                                                                       |                                                |         |             |         |                 
|Long Term Debt                           |                           |                                                | 39,485                                                                                                                                                                |                                                |         |             | 38,846  |                 
|                                         |                           |                                                |                                                                                                                                                                       |                                                |         |             |         |                 
|Deferred Income Taxes                    |                           |                                                | 1,922                                                                                                                                                                 |                                                |         |             | 2,042   |                 
|                                         |                           |                                                |                                                                                                                                                                       |                                                |         |             |         |                 
|Stockholders Investment:                |                           |                                                |                                                                                                                                                                       |                                                |         |             |         |                 
|                                         |                           |                                                | Preferred stock, $.01 par value, 1,000,000 shares
authorized, no shares outstanding                                                                                   |                                                |         |            |         |                  |         |       |        
|                                         |                           |                                                | Common stock, $.01 par value, 30,000,000 shares authorized,
18,208,543 and 18,138,963 shares issued and outstanding at
May 4, 2002 and February 2, 2002, respectively |                                                |         | 182         |         |                  |         | 181    |        
|                                         |                           |                                                | Additional paid-in capital                                                                                                                                            |                                                |         | 70,844      |         |                  |         | 70,719 |        
|                                         |                           |                                                | Less treasury stock at cost 2,010,050 shares at May 4,
2002 and February 2, 2002                                                                                      |                                                |         | (5,271      | )       |                  |         | (5,271 | )      
|                                         |                           |                                                | Accumulated other comprehensive (loss)                                                                                                                                |                                                |         | (1,097      | )       |                  |         | (1,217 | )      
|                                         |                           |                                                | Retained earnings                                                                                                                                                     |                                                |         | 57,597      |         |                  |         | 57,963 |        
|                                         |                           |                                                |                                                                                                                                                                       |                                                |         |             |         |                 
|                                         |                           |                                                |                                                                                                                                                                       | Total Stockholders Investment                 |         |             | 122,255 |                  |         |        | 122,375 | 
|                                         |                           |                                                |                                                                                                                                                                       |                                                |         |             |         |                 
|                                         |                           |                                                |                                                                                                                                                                       | Total Liabilities and Stockholders Investment |         | $           | 308,610 |                  |         | $      | 295,645 | 
|                                         |                           |                                                |                                                                                                                                                                       |                                                |         |             |         |                 

See accompanying notes

3



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BOOKS-A-MILLION, INC. & SUBSIDIARIES




CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except per share amounts)
(unaudited)


|                                                        |                                                                                       |   |                      |        |             |   |        |        |  
|------------------------------------------------------- | ------------------------------------------------------------------------------------- | - | -------------------- | ------ | ----------- | - | ------ | ------ | -
|                                                        |                                                                                       |   | Thirteen Weeks Ended
|                                                        |                                                                                       |   |                     
|                                                        |                                                                                       |   | May 4, 2002          |        | May 5, 2001
|                                                        |                                                                                       |   |                      |        |            
|Net Sales                                               |                                                                                       | $ | 101,176              |        |             | $ | 97,490 |       
|                                                        | Cost of products sold (including warehouse
distribution and store occupancy costs)(1) |   |                      | 75,007 |             |   |        | 72,004 |  
|                                                        |                                                                                       |   |                      |        |             |   |        |       
|Gross Profit                                            |                                                                                       |   | 26,169               |        |             |   | 25,486 |       
|                                                        | Operating, selling and administrative expenses                                        |   |                      | 21,827 |             |   |        | 21,011 |  
|                                                        | Depreciation and amortization                                                         |   |                      | 3,998  |             |   |        | 3,877  |  
|                                                        |                                                                                       |   |                      |        |             |   |        |       
|Operating Income                                        |                                                                                       |   | 344                  |        |             |   | 598    |       
|                                                        | Interest expense, net                                                                 |   |                      | 934    |             |   |        | 1,267  |  
|                                                        |                                                                                       |   |                      |        |             |   |        |       
|Income (Loss) Before Income Taxes                       |                                                                                       |   | (590                 | )      |             |   | (669   | )     
|                                                        | Income taxes provision (benefit)                                                      |   |                      | (224   | )           |   |        | (254   | )
|                                                        |                                                                                       |   |                      |        |             |   |        |       
|Net Income (Loss)                                       |                                                                                       | $ | (366                 | )      |             | $ | (415   | )     
|                                                        |                                                                                       |   |                      |        |             |   |        |       
|Weighted Average Number of
Shares Outstanding  Basic   |                                                                                       |   | 16,162               |        |             |   | 17,321 |       
|                                                        |                                                                                       |   |                      |        |             |   |        |       
|Net Income (Loss) Per Share  Basic                     |                                                                                       | $ | (0.02                | )      |             | $ | (0.02  | )     
|                                                        |                                                                                       |   |                      |        |             |   |        |       
|Weighted Average Number of
Shares Outstanding  Diluted |                                                                                       |   | 16,162               |        |             |   | 17,321 |       
|                                                        |                                                                                       |   |                      |        |             |   |        |       
|Net Income (Loss) Per Share  Diluted                   |                                                                                       | $ | (0.02                | )      |             | $ | (0.02  | )     
|                                                        |                                                                                       |   |                      |        |             |   |        |       



|(1) |  | Inventory purchases from related parties were $10,525 and $12,326,
respectively, for each of the periods presented above.
|--- |  | -------------------------------------------------------------------------------------------------------------------------

See accompanying notes

4



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BOOKS-A-MILLION, INC. & SUBSIDIARIES




CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(dollars in thousands)
(unaudited)


|                                                   |                                         |                                                                                      |                                            |                                           |                                                                               |         |                      |         |             |         |         |     | 
|-------------------------------------------------- | --------------------------------------- | ------------------------------------------------------------------------------------ | ------------------------------------------ | ----------------------------------------- | ----------------------------------------------------------------------------- | ------- | -------------------- | ------- | ----------- | ------- | ------- | --- | 
|                                                   |                                         |                                                                                      |                                            |                                           |                                                                               |         | Thirteen Weeks Ended
|                                                   |                                         |                                                                                      |                                            |                                           |                                                                               |         |                     
|                                                   |                                         |                                                                                      |                                            |                                           |                                                                               |         | May 4, 2002          |         | May 5, 2001
|                                                   |                                         |                                                                                      |                                            |                                           |                                                                               |         |                      |         |            
|Cash Flows from Operating Activities:              |                                         |                                                                                      |                                            |                                           |                                                                               |         |                      |        
|                                                   | Net income (loss)                       |                                                                                      | $                                          | (366                                      | )                                                                             |         | $                    | (415    | )          
|                                                   |                                         |                                                                                      |                                            |                                           |                                                                               |         |                      |        
|                                                   |                                         | Adjustments to reconcile net income (loss) to net cash used in
operating activities: |                                            |                                           |                                                                               |         |                      |         |             |        
|                                                   |                                         |                                                                                      | Depreciation and amortization              |                                           |                                                                               | 3,998   |                      |         |             | 3,877   |        
|                                                   |                                         |                                                                                      | Loss on disposal of property and equipment |                                           |                                                                               | 0       |                      |         |             | 34      |        
|                                                   |                                         |                                                                                      | Change in deferred income taxes            |                                           |                                                                               | (272    | )                    |         |             | (305    | )      
|                                                   |                                         |                                                                                      | Changes in certain assets and liabilities  |                                           |                                                                               | (26,685 | )                    |         |             | (19,165 | )      
|                                                   |                                         |                                                                                      |                                            |                                           |                                                                               |         |                      |        
|                                                   |                                         |                                                                                      |                                            | Total adjustments                         |                                                                               |         | (22,959              | )       |             |         | (15,559 | )  
|                                                   |                                         |                                                                                      |                                            |                                           |                                                                               |         |                      |        
|                                                   |                                         |                                                                                      |                                            | Net cash used in operating activities     |                                                                               |         | (23,325              | )       |             |         | (15,974 | )  
|                                                   |                                         |                                                                                      |                                            |                                           |                                                                               |         |                      |        
|Cash Flows from Investing Activities:              |                                         |                                                                                      |                                            |                                           |                                                                               |         |                      |        
|                                                   | Capital expenditures                    |                                                                                      |                                            | (1,067                                    | )                                                                             |         |                      | (1,194  | )          
|                                                   | Acquisition of certain assets           |                                                                                      |                                            |                                          |                                                                               |         |                      | (6,532  | )          
|                                                   | Proceeds from sale of equipment         |                                                                                      |                                            | 1                                         |                                                                               |         |                      | 10      |            
|                                                   |                                         |                                                                                      |                                            |                                           |                                                                               |         |                      |        
|                                                   |                                         |                                                                                      |                                            | Net cash used in investing activities     |                                                                               |         | (1,066               | )       |             |         | (7,716  | )  
|                                                   |                                         |                                                                                      |                                            |                                           |                                                                               |         |                      |        
|Cash Flows from Financing Activities:              |                                         |                                                                                      |                                            |                                           |                                                                               |         |                      |        
|                                                   | Borrowings under credit facilities      |                                                                                      |                                            | 60,879                                    |                                                                               |         |                      | 58,717  |            
|                                                   | Repayments under credit facilities      |                                                                                      |                                            | (36,532                                   | )                                                                             |         |                      | (33,759 | )          
|                                                   | Proceeds from sale of common stock, net |                                                                                      |                                            | 126                                       |                                                                               |         |                      | 84      |            
|                                                   | Purchase of treasury stock              |                                                                                      |                                            |                                          |                                                                               |         |                      | (1,267  | )          
|                                                   |                                         |                                                                                      |                                            |                                           |                                                                               |         |                      |        
|                                                   |                                         |                                                                                      |                                            | Net cash provided by financing activities |                                                                               |         | 24,473               |         |             |         | 23,775  |    
|                                                   |                                         |                                                                                      |                                            |                                           |                                                                               |         |                      |        
|Net increase in cash and cash equivalents          |                                         |                                                                                      | 82                                         |                                           |                                                                               |         | 85                   |        
|Cash and cash equivalents at beginning of period   |                                         |                                                                                      | 5,539                                      |                                           |                                                                               |         | 5,282                |        
|                                                   |                                         |                                                                                      |                                            |                                           |                                                                               |         |                      |        
|Cash and cash equivalents at end of period         |                                         | $                                                                                    | 5,621                                      |                                           |                                                                               | $       | 5,367                |        
|                                                   |                                         |                                                                                      |                                            |                                           |                                                                               |         |                      |        
|Supplemental Disclosures of Cash Flow Information: |                                         |                                                                                      |                                            |                                           |                                                                               |         |                      |        
|                                                   |                                         | Cash paid during the quarter for:                                                    |                                            |                                           |                                                                               |         |                      |         |             |        
|                                                   |                                         |                                                                                      |                                            | Interest                                  |                                                                               | $       | 860                  |         |             | $       | 692     |    
|                                                   |                                         |                                                                                      |                                            | Income taxes, net of refunds              |                                                                               | $       | 1,884                |         |             | $       | 1,173   |    
|                                                   |                                         |                                                                                      |                                            | Non-cash transactions:                    |                                                                               |         |                      |         |             |         |         |    
|                                                   |                                         |                                                                                      |                                            |                                           | Cumulative effect of hedging activities, net of tax
benefit of $(73) and $466 |         | $                    | (120    | )           |         | $       | 761 | 

See accompanying notes

5



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BOOKS-A-MILLION, INC. AND SUBSIDIARIES




NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(unaudited)


1.   Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of
Books-A-Million, Inc. and its Subsidiaries (the Company) for the thirteen
week periods ended May 4, 2002 and May 5, 2001, have been prepared in
accordance with accounting principles generally accepted in the United States
(GAAP) for interim financial information and are presented in accordance with
the requirements of Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by GAAP for
complete financial statements. These financial statements should be read in
conjunction with the consolidated financial statements and notes thereto for
the fiscal year ended February 2, 2002, included in the Companys 2002 Annual
Report on Form 10-K. In the opinion of management, the financial statements
included herein contain all adjustments (consisting only of normal recurring
adjustments) considered necessary for a fair presentation of the Companys
financial position as of May 4, 2002, and the results of its operations and
cash flows for the thirteen week periods ended May 4, 2002 and May 5, 2001.
Certain prior year amounts have been reclassified to conform to current year
presentation.

The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities at the date of the financial statements and reported
amounts of revenues and expenses during the reporting period. Actual amounts
could differ from those estimates and assumptions.

The Company has also experienced, and expects to continue to experience,
significant variability in sales and net income from quarter to quarter.
Therefore, the results of the interim periods presented herein are not
necessarily indicative of the results to be expected for any other interim
period or the full year.

2.   Net Income Per Share

Basic net income (loss) per share (EPS) excludes dilution and is
computed by dividing income (loss) 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 securities or other
contracts to issue common stock are exercised or converted into common stock or
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 thirteen week period. A reconciliation of the
weighted average shares for basic and diluted EPS is as follows:

|                                             |  |                              |        |             |  |  |        | 
|-------------------------------------------- |  | ---------------------------- | ------ | ----------- |  |  | ------ | 
|                                             |  | For the Thirteen Weeks Ended
|                                             |  | (in thousands)              
|                                             |  | May 4, 2002                  |        | May 5, 2001
|                                             |  |                             
|Weighted average shares outstanding:         |  |                              |        |             |  |  |        | 
|Basic                                        |  |                              | 16,162 |             |  |  | 17,321 | 
|Dilutive effect of stock options outstanding |  |                              | 0      |             |  |  | 0      | 
|                                             |  |                              |       
|Diluted                                      |  |                              | 16,162 |             |  |  | 17,321 | 
|                                             |  |                              |       

Options outstanding of 2,418,000 and 2,203,000 for the thirteen weeks
ended May 4, 2002 and May 5, 2001, respectively, were not included in the table
above as they were anti-dilutive.

6



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BOOKS-A-MILLION, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

3.   Derivative and Hedging Activities

The Company is subject to interest rate fluctuations involving its credit
facilities and debt related to an Industrial Development Revenue Bond (the
Bond). However, the Company uses both fixed and variable debt to manage this
exposure. On February 9, 1998, the company entered into an interest rate swap
agreement with a five-year term that carries a notional principal amount of
$30.0 million. The swap effectively fixes the interest rate on $30.0 million
of variable rate debt at 6.78%, and expires February 2003. In addition, the
Company entered into a $7.5 million interest swap in May 1996 that effectively
fixes the interest rate on the Bond at 7.98%, and expires in May 2006. The
counter party to the interest rate swaps is one of the Companys primary banks.
The Company believes the credit and liquidity risk of the counter party failing
to meet its obligation is remote as the Company settles its interest position
with the bank on a quarterly basis.

The Companys hedges are designated as cash flow hedges. Cash flow hedges
protect against the variability in future cash outflows of current or
forecasted debt. Interest rate swaps that convert variable payments to fixed
payments are cash flow hedges. The changes in the fair value of these hedges
are reported on the balance sheet with a corresponding adjustment to either
accumulated other comprehensive income (loss) or in earnings, depending on the
type of hedging relationship. Over time, the unrealized gains and losses held
in accumulated other comprehensive income (loss) may be realized and
reclassified to earnings.

The derivative instruments were reported as a liability classified in
Accrued Expenses in the accompanying condensed consolidated balance sheets at
their fair value of $1.8 million and $2.0 million as of May 4, 2002 and
February 2, 2002, respectively. For the quarter, adjustments of $0.1 million
(net of tax of $73,000) were recorded as unrealized gains in accumulated other
comprehensive income (loss) and are detailed in note 4 below.

4. Comprehensive Income (Loss)

Comprehensive income (loss) is net income or loss, plus certain other items
that are recorded directly to stockholders investment. The only such items
currently applicable to the Company are the unrealized gains (losses) on the
derivative instruments explained in Note 3, as follows:

|                                                                                                               |  |                      |      |             |  |   |        |  
|-------------------------------------------------------------------------------------------------------------- |  | -------------------- | ---- | ----------- |  | - | ------ | -
|                                                                                                               |  | Thirteen Weeks Ended
|                                                                                                               |  |                     
|                                                                                                               |  | (in thousands)      
|Comprehensive Income (Loss)                                                                                    |  | May 4, 2002          |      | May 5, 2001
|                                                                                                               |  |                      |      |            
|Net income (loss)                                                                                              |  | $                    | (366 | )           |  | $ | (415   | )
|Cumulative effect of accounting change for
derivatives instruments, net of deferred tax
benefit of $0 and $283 |  |                      |     |             |  |   | (465   | )
|Unrealized gains (losses) on derivative
instruments, net of deferred tax provision
(benefit) of $73 and ($180) |  |                      | 120  |             |  |   | (296   | )
|                                                                                                               |  |                      |      |            
|Total comprehensive income (loss)                                                                              |  | $                    | (246 | )           |  | $ | (1,176 | )
|                                                                                                               |  |                      |      |            

7



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BOOKS-A-MILLION, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

5.   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, results of
operations or cash flows of the Company.

6.   Goodwill

During the first quarter of fiscal 2002, goodwill was amortized on a
straight-line basis over its estimated periods to be benefited. On February 3,
2002, the Company adopted Statement of Financial Accounting Standards (SFAS)
No. 142, Goodwill and Other Intangible Assets, in its entirety. Pursuant to
such adoption, the Company did not amortize any goodwill during the first
quarter of fiscal 2003. The Company has recorded amortization expense on
goodwill of approximately $43,000 for fiscal 2000, 2001 and 2002. The amount
of amortization expense that would have been recorded in future years if SFAS
No. 142 was not adopted on February 3, 2002 would be approximately $43,000 per
year through fiscal 2034.

The Company is required to assess goodwill for impairment annually, or
more frequently if circumstances indicate impairment may have occurred. The
Company reviewed the carrying value of its goodwill by comparing such amount to
its fair value utilizing a discounted cash flow model and determined that the
carrying amount of such asset did not exceed its fair value. Accordingly, the
initial implementation of this statement did not result in a charge and, as
such, did not impact the Companys results of operations for the first quarter
of fiscal 2003.

7.   Recent Accounting Pronouncements

During 2001, the Financial Accounting Standards Board (FASB) issued
Statements of Financial Accounting Standards (SFAS) No. 143, Accounting for
Asset Retirement Obligations and SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets. SFAS No. 143 related to obligations which
generally are incurred in connection with the ownership of real property. The
Company currently leases the substantial majority of our real property and,
therefore, the provisions of SFAS No. 143 do not apply to our current
operations.

SFAS No. 144 superseded SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, and the
accounting and reporting provisions of Accounting Principles Board Opinion No.
30, Reporting the Results of Operations and Transactions"Reporting the
Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual
and Infrequently Occurring Events and Transactions for the disposal of a
segment of a business. SFAS No. 144 also amended Accounting Research Bulletin
No. 51, Consolidated Financial Statements, to eliminate the exception to
consolidation for a subsidiary for which control is likely to be temporary.
The Company adopted SFAS No. 143 and SFAS No. 144 on February 3, 2002, which
did not have a material impact on financial condition, results of operations or
cash flows.

8.   Acquisition of Certain Assets

During March 2001, the Company acquired inventory and lease-rights of
eighteen 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.

8



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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

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 initiatives; and other factors referenced herein. In
addition, such forward-looking statements are necessarily dependent upon the
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.

General

The Company was founded in 1917 and currently operates 204 retail
bookstores, including 158 superstores, concentrated in the southeastern United
States.

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.

Critical Accounting Policies

Inventories

Cost is assigned to store and warehouse inventories using the retail
inventory method. The valuation of store and warehouse inventories is
determined 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. Such valuations require certain significant
management estimates and judgments involving markdowns and shrinkage of
inventories. These practices affect ending inventories at cost as well as the
resulting gross margins and inventory turnover ratios.

Physical inventories are taken throughout the course of 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 taken and reconciled to the general ledger. The Companys accrual
for inventory shortages is based upon historical inventory shortage results
that are subject to certain estimates and averages.

Accrued Expenses

On a monthly basis, certain material expenses are estimated and accrued to
properly record those expenses in the period incurred. Such estimates are made
for payroll and employee benefits costs, occupancy costs and advertising
expenses among other items. These estimates are made based upon current and
historical results.

Differences in managements estimates and assumptions could result in
accruals that are materially different from the actual result.

9



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##### Table of Contents



Results of Operations

Net sales increased 3.8 % to $101.2 million in the thirteen weeks ended
May 4, 2002, from $97.5 million in the thirteen weeks ended May 5, 2001. The
increase in net sales resulted from two superstores and four newsstands opened
after the first quarter of fiscal 2002 combined with one superstore opened in
the first quarter of fiscal 2003. In addition, the Company opened eighteen new
stores, acquired from Crown Books Company, that started operations in the
middle part of the first quarter of fiscal 2002.

Comparable store sales in the first quarter decreased 0.7 % when compared
with the 13-week period for the prior year. Comparable store sales for all
book categories increased 3.1 % for the quarter. The decrease in non-book
sales, driven by the decision to discontinue the sale of music in all stores
and by the strong sales in the collectors category in the prior year,
contributed to the overall decrease in total comparable store sales for the
quarter.

Gross profit increased $0.7 million or 2.7 % to $26.2 million in the
thirteen weeks ended May 4, 2002 from $25.5 million in the thirteen weeks ended
May 5, 2001. Gross profit as a percentage of net sales for the thirteen weeks
ended May 4, 2002 was 25.9 % versus 26.1% in the same period last year. The
decrease in gross profit stated as a percent to sales was primarily due to
higher occupancy costs as a percentage of sales.

Operating, selling and administrative expenses increased $0.8 million or
3.9 % to $21.8 million in the thirteen weeks ended May 4, 2002, from $21.0
million in the thirteen weeks ended May 5, 2001. Operating,
selling and administrative expenses as a percentage of net sales for the
thirteen weeks ended May 4, 2002, was even with last year at 21.6%.

Depreciation and amortization increased $0.1 million or 3.1 % to $4.0
million in the thirteen weeks ended May 4, 2002, from $3.9 million in the
thirteen weeks ended May 5, 2001. The increase in depreciation and
amortization is primarily the result of the increased number of superstores
operated by the Company.

Interest expense was $0.9 million in the thirteen weeks ended May 4, 2002
versus $1.3 million at May 5, 2001. The decrease is due to lower average
borrowings and lower interest rates versus last year.

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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Liquidity and Capital Resources

During the first thirteen weeks of fiscal 2003, the Companys cash
requirements have been funded with net cash from operations and with borrowings
under the Companys credit facilities. Similar to many retailers, the
Companys business is seasonal, with its highest retail sales, gross profits
and net income traditionally occurring during the fourth fiscal quarter,
reflecting 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 has a revolving credit facility that allows borrowings up to
$90.0 million, for which no principal repayments are due until the facility
expires on June 18, 2003, and an unsecured working capital line of credit for
$15.0 million, which is subject to annual renewal. The Company is currently
negotiating to renew its credit facilities until fiscal year 2006. The new
facility should be completed by the second quarter of fiscal 2003. As of May 4,
2002, $55.6 million was outstanding under these facilities combined.
Additionally, as of May 4, 2002, the Company has outstanding borrowings
associated with the issuance of an industrial revenue bond totaling $7.5
million.

The Companys capital expenditures totaled $1.1 million in the first 13
weeks of fiscal 2003. These expenditures were primarily used for new store
openings, renovation and improvements to existing stores and investment in
management information systems. Management estimates that capital expenditures
for the remainder of fiscal 2003 will be approximately $17.2 million and that
such amounts will be used primarily for new stores, renovation and improvements
to existing stores, and investments in management information systems.
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 the remainder of fiscal
2003.

When necessary, the Company establishes certain reserves for the closing
of under-performing stores. Management feels that this years activity will
not significantly vary from the number of closings in the prior year.

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 May 4, 2002:

Payments Due Under Contractual Obligations

(in thousands)

|                                                |  |       |         |         |  |         |        |         |  |         |        |         |  |   |        |  |  |   |        |  |  |   |        | 
|----------------------------------------------- |  | ----- | ------- | ------- |  | ------- | ------ | ------- |  | ------- | ------ | ------- |  | - | ------ |  |  | - | ------ |  |  | - | ------ | 
|                                                |  | Total |         | FY 2003 |  | FY 2004 |        | FY 2005 |  | FY 2006 |        | FY 2007
|                                                |  |      
|Notes payable                                   |  | $     | 607     |         |  | $       | 407    |         |  | $       | 200    |         |  | $ | 0      |  |  | $ | 0      |  |  | $ | 0      | 
|Long-term debt -
working
capital line of credit |  |       | 3,585   |         |  |         |       |         |  |         | 3,585  |         |  |   |       |  |  |   |       |  |  |   |       | 
|Long-term debt -
revolving
credit facility      |  |       | 52,000  |         |  |         |       |         |  |         | 52,000 |         |  |   |       |  |  |   |       |  |  |   |       | 
|Long-term debt 
industrial
revenue bond        |  |       | 7,500   |         |  |         |       |         |  |         |       |         |  |   | 7,500  |  |  |   |       |  |  |   |       | 
|                                                |  |      
|Subtotal of debt                                |  |       | 63,692  |         |  |         | 407    |         |  |         | 55,785 |         |  |   | 7,500  |  |  |   | 0      |  |  |   | 0      | 
|Operating leases                                |  |       | 111,502 |         |  |         | 22,181 |         |  |         | 26,868 |         |  |   | 24,525 |  |  |   | 21,594 |  |  |   | 16,334 | 
|                                                |  |      
|Total of obligations                            |  | $     | 175,194 |         |  | $       | 22,588 |         |  | $       | 82,653 |         |  | $ | 32,025 |  |  | $ | 21,594 |  |  | $ | 16,334 | 
|                                                |  |      

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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Related Party Activities

Certain principal stockholders of the Company have controlling ownership
interests in other entities with which the Company conducts business.
Significant transactions between the Company and these various other entities
(related parties) are summarized in the following paragraph.

The Company purchases a portion of its inventories for resale from related
parties; such purchases were $10.5 million in the thirteen weeks ended May 4,
2002, versus $12.3 million in the thirteen weeks ended May 5, 2001. The
decrease in related party purchases is primarily due to lower purchases of
music merchandise. The Company sells a portion of its inventories to related
parties; such sales amounted to $0.1 million and $0.5 million in the thirteen
weeks ended May 4, 2002 and May 5, 2001, respectively. This decrease in
related party sales is primarily due to lower sales of bargain books. The
Company also purchases logistics services from a related party; such services
amounted to $7,000 and $58,000 in the thirteen weeks ended May 4, 2002 and May
5, 2001, respectively. Management believes the terms of these related party
transactions are substantially equivalent to those available from unrelated
parties and, therefore, have no significant impact on gross profit.

Financial Position

During the thirteen weeks ended May 4, 2002, the Company opened one
superstore and closed one Bookland store. Inventory and debt balances at May
4, 2002 increased as compared to February 2, 2002 due to seasonal fluctuations
in inventory levels.

Market Risk

The Company is subject to interest rate fluctuations involving its credit
facilities. The average amount of debt outstanding under the Companys credit
facilities was $63.4 million during fiscal 2002. However, the Company utilizes
both fixed and variable debt to manage this exposure. On February 9, 1998, the
Company entered into an interest rate swap agreement, with a five-year term,
which carries a notional principal amount of $30.0 million. The swap
effectively fixes the interest rate on $30.0 million of variable rate debt at
6.78%. The swap agreement expires on February 11, 2003. Also, on May 14,
1996, the Company entered into an interest rate swap agreement, with a ten-
year term, which carries a notional principal amount of $7.5 million. The swap
effectively fixes the interest rate on $7.5 million of variable rate debt at
7.98%. The swap agreement expires on June 7, 2006. The counter party to the
interest rate swaps is one of the Companys primary banks. The Company
believes the credit and liquidity risk of the counter party failing to meet its
obligation is remote as the Company settles its interest position with the bank
on a quarterly basis.

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##### Table of Contents






II  OTHER INFORMATION




ITEM 1:   Legal Proceedings



| |                                                                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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, results of operations or cash flows of the
Company.




ITEM 2:   Changes in Securities



| |     
| | ----
| | None




ITEM 3:   Defaults Upon Senior Securities



| |     
| | ----
| | None




ITEM 4:   Submission of Matters of Vote of Security-Holders



| |  |  | Date of Meeting   June 6, 2002                                                                                 
| | - |  | ----------------------------------------------------------------------------------------------------------------
|
| |  |  | Annual Meeting                                                                                                  
|
| |  |  | Name of each director elected at meeting:
Terry C. Anderson                                                     
|
| |  |  | Name of each director whose term of office as director continued after the meeting:                             
|
| |   |  | Charles C. Anderson
     Clyde B. Anderson
     Ronald G. Bruno
     J. Barry Mason
     William H. Rodgers, Jr.
|
| |  |  | Other matters voted on at Annual Meeting                                                                        



| |  |    |  |                                                                                                                                                                                                   
| |  | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | i) |  | To approve the First Amendment to the Amended and
Restated Employee Stock Purchase Plan increasing the number of
shares authorized for purchase by employees from 200,000 to a
maximum of 400,000.



| |  |  | Results of votes:
| | - |  | -----------------

|                  |  |                 |            |                 |  |                 |         |  |  |  |        | 
|----------------- |  | --------------- | ---------- | --------------- |  | --------------- | ------- |  |  |  | ------ | 
|                  |  | Number of Votes |            | Number of Votes |  | Number of Votes
|Election of       |  | Cast For        |            | Cast Against    |  | Abstaining     
|                  |  |                 |            |                 |  |                
|Terry C. Anderson |  |                 | 15,331,773 |                 |  |                 | 239,985 |  |  |  | 0      | 
|Item i.) above    |  |                 | 15,257,467 |                 |  |                 | 284,466 |  |  |  | 29,825 | 




ITEM 5:   Other Information



| |     
| | ----
| | None

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##### Table of Contents






ITEM 6:   Exhibits and Reports on Form 8-K



| |             
| | ------------
| | (A) Exhibits



| |                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Exhibit 3i Certificate of Incorporation of Books-A-Million, Inc.
(incorporated herein by reference to Exhibit 3.1 in the Companys
Registration Statement on Form S-1 (Capital Registration No.
33-52256))



| |                                                                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Exhibit 3ii By-Laws of Books-A-Million, Inc. (incorporated herein
by reference to Exhibit 3.2 in the Companys Registration Statement
on Form S-1 (Capital Registration No. 33-52256))



| |                        
| | -----------------------
| | (B) Reports on Form 8-K



| |                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company filed two current reports on
Form 8-K during the first quarter of fiscal 2003 as follows:                                                                                            
|
| | Current report on 8-K, filed with the
Securities and Exchange Commission on June 6, 2002, with respect
to the engagement of Deloitte & Touche LLP as its independent
accountants for fiscal 2003.
|
| | Current report on Form 8-K, filed with the
Securities and Exchange Commission on May 3, 2002, with respect
to the dismissal of Arthur Andersen LLP as its independent
accountants.               

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##### Table of Contents






SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned duly authorized.

|                    |  |                      |  |                                              
|------------------- |  | -------------------- |  | ---------------------------------------------
|                    |  | BOOKS-A-MILLION, INC
|                   
|Date: June 18, 2002 |  | by:                  |  | /s/ Clyde B. Anderson                        
|                    |  |                      |  |                                              
|                    |  |                      |  | Clyde B. Anderson
Chief Executive Officer    
|                   
|Date: June 18, 2002 |  | by:                  |  | /s/ Richard S. Wallington                    
|                    |  |                      |  |                                              
|                    |  |                      |  | Richard S. Wallington
Chief Financial Officer