**UNITED            STATES**              

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, DC 20549**

 

 

 

 

**FORM 10-K**

 

**(Mark One)**

 

| **x** | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE                            SECURITIES EXCHANGE ACT OF 1934 |
|-------|-----------------------------------------------------------------------------------------------------------------|

             

| For the fiscal year ended February 2, 2008 |
|--------------------------------------------|

             

**OR**

             

| **[** | **]**     TRANSITION                            REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT                            OF 1934 [NO FEE REQUIRED] |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

| For the transition period from | to |
|--------------------------------|----|

 

Commission File No.**0-20664**

 

**BOOKS-A-MILLION, INC.**

(Exact name of Registrant as specified in its charter)

 

|   | **DELAWARE** | **63-0798460** |
|--------|--------------|----------------|

|   | (State or other jurisdiction of | (IRS Employer |
|--------|---------------------------------|---------------|

|   | incorporation or organization) | Identification No.) |
|--------|--------------------------------|---------------------|

 

|   | **402 Industrial Lane** |
|--------|-------------------------|

|   | **Birmingham, Alabama** | **35211** |
|--------|-------------------------|-----------|

|   | (Address of principal executive offices) | (Zip Code) |
|--------|------------------------------------------|------------|

 

| Registrant's telephone number, including area                            code: | **(205) 942-3737** |
|--------------------------------------------------------------------------------|--------------------|

 

| Securities registered pursuant to Section 12(b) of the                            Act: | **None** |
|----------------------------------------------------------------------------------------|----------|

 

Securities registered pursuant to Section 12(g) of the Act:

 

**Common Stock, par value $.01 per share**

(Title of Class)

 

Indicate by check mark if the registrant is a well-known seasoned            issuer, as defined in Rule 405 of the Securities Act.

| Yeso | Nox |
|------|-----|

 

Indicate by check mark if the registrant is not required to file reports            pursuant to Section 13 or Section 15(d) of the Act.

| Yeso | Nox |
|------|-----|

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.

| Yesx | Noo |
|------|-----|

 

Indicate by check mark if disclosure of delinquent filers pursuant to            Item 405 of Regulation S-K is not contained herein,and will not            be contained, to the best of the Registrant's knowledge, in definitive proxy or            information statements incorporated by reference in Part III of this Form 10-K or any            amendment to this Form 10-Kx.

 

Indicate by check mark whether the registrant is a large accelerated            filer, an accelerated filer,  a non-accelerated filer, or a smaller reporting            company.  See the definitions of "large accelerated filer" and "smaller reporting            company" in Rule 12b-2 of the Exchange Act.  (Check One):

 

                                                    Large Accelerated Filero                                        Accelerated Filerx

 

                                                    Non-Accelerated Filero                  Smaller reporting companyo

                                         (Do not check if a smaller reporting company)

 

Indicate by check mark whether the registrant is a shell company (as            defined in Rule 12b-2 of the Exchange Act).

YesoNox

 

The aggregate market value of the voting stock held by non-affiliates of            the Registrant (assuming for these purposes, but without conceding, that all executive            officers and directors are "affiliates" of the Registrant) as of

August            3, 2007 (based on the closing sale price as reported on the NASDAQ National Market on            such date), was $205,491,377.

 

|   | The number of shares outstanding of the Registrant's                            Common Stock as of March 28, 2008 was 15,809,683. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------|

 

**DOCUMENTS INCORPORATED BY REFERENCE**

 

Portions of the Annual Report to Stockholders for the fiscal year ended            February 2, 2008 are incorporated by reference into Parts I and II of this            report.

 

Portions of the Proxy Statement for the Annual Meeting of Stockholders            to be held on May 29, 2008 are incorporated by reference into Part III of this            report.

 

2

**BOOKS-A-MILLION, INC. AND SUBSIDIARIES**

**10-K INDEX**

 

 

| PART I           |                                                                                                                                                                        |   |
|------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Item I.          | Business                                                                                                                                                                    | 4      |
| Item IA.         | Risk Factors                                                                                                                                                                | 7      |
| Item IB.         | Unresolved Staff Comments                                                                                                                                                   | 11     |
| Item 2.          | Properties                                                                                                                                                                  | 11     |
| Item 3.          | Legal Proceedings                                                                                                                                                           | 11     |
| Item 4.          | Submission of Matters To A Vote of Security                            Holders                                                                                              | 11     |
|  

PART II  |                                                                                                                                                                        |   |
| Item 5.          | Market For Registrant’s Common Equity and Related                            Stockholder Matters and Issuer Purchases of Equity                            Securities | 12     |
| Item 6.          | Selected Financial Data                                                                                                                                                     | 12     |
| Item 7.          | Management’s Discussion and Analysis of Financial                            Condition and Results of Operations                                                      | 12     |
| Item 7A.         | Quantitative and Qualitative Disclosures About Market                            Risk                                                                                       | 12     |
| Item 8.          | Financial Statements and Supplementary Data                                                                                                                                 | 13     |
| Item 9.          | Changes In and Disagreements With Accountants on                            Accounting and Financial Disclosure                                                             | 13     |
| Item 9A.         | Controls and Procedures                                                                                                                                                     | 13     |
| Item 9B.         | Other Information                                                                                                                                                           | 14     |
|  

PART III |                                                                                                                                                                        |   |
| Item 10.         | Directors, Executive Officers and Corporate                            Governance                                                                                           | 14     |
| Item 11.         | Executive Compensation                                                                                                                                                      | 15     |
| Item 12.         | Security Ownership of Certain Beneficial Owners and                            Management and Related Stockholder Matters                                                   | 16     |
| Item 13.         | Certain Relationships and Related Transactions, and                            Director Independence                                                                        | 16     |
| Item 14.         | Principal Accountant Fees and Services                                                                                                                                      | 16     |
|  

PART IV  |                                                                                                                                                                        |   |
| Item 15.         | Exhibits and Financial Statement Schedules                                                                                                                                  | 16     |

 

|   | Signatures     |
|--------|----------------|
|   | Certifications |

 

3

 

**PART I**

             

***Safe Harbor Statement under the Private Securities Litigation            Reform Act of 1995***

 

*This document contains certain forward-looking statements within the            meaning of the Private Securities Litigation Reform Act of 1995, that involve a number            of risks and uncertainties. A number of factors could cause the actual results,            performance or, achievements of Books-A-Million, Inc. (the “Company,”) or            the results of its industry to be materially different from any future results,            performance or achievements expressed or implied by such forward-looking statements.            These factors include, but are not limited to, the competitive environment in the book            retail industry in general and in the Company’s specific market areas; inflation;            economic conditions in general and in the Company’s specific market areas; the            number of store openings and closings; the profitability of certain product lines,            capital expenditures and future liquidity; liability and other claims asserted against            the Company; uncertainties related to the Internet and the Company’s Internet            initiative; the factors described in ITEM 1A. RISK FACTORS herein; and other factors            referenced herein. In addition, such forward-looking statements are necessarily            dependent upon assumptions, estimates and dates that may be incorrect or imprecise and            involve known and unknown risks, uncertainties and other factors. Accordingly, any            forward-looking statements included herein do not purport to be predictions of future            events or circumstances and may not be realized. Given these uncertainties,            stockholders and prospective investors are cautioned not to place undue reliance on            such forward-looking statements. The Company disclaims any obligations to update any            such factors or to publicly announce the results of any revisions to any of the            forward-looking statements contained herein to reflect future events or            developments.*

             

**ITEM 1. BUSINESS**

             

**General**

             

Books-A-Million, Inc. is a leading book retailer in the southeastern            United States. The Company was founded in 1917 and operates both superstores and            traditional bookstores. Superstores, the first of which was opened in 1987, range in            size from 8,000 to 36,000 square feet and operate under the names "Books-A-Million" and            “Books and Co.” Traditional bookstores are smaller stores operated under            the names “Bookland,” and “Books-A-Million”. These stores range            in size from 2,000 to 7,000 square feet and are located primarily in enclosed malls.            All store formats generally offer an extensive selection of best sellers and other            hardcover and paperback books, magazines, and newspapers. In addition to the retail            store formats, we offer our products over the Internet at*Booksamillion.com*.

             

We were founded in 1917, originally incorporated under the laws of the            State of Alabama in 1964 and reincorporated in Delaware in September 1992. Our            principal executive offices are located at 402 Industrial Lane, Birmingham, Alabama            35211, and our telephone number is (205) 942-3737. Unless the context otherwise            requires, references to “we,” “our” or “the            Company” include our wholly owned subsidiaries, American Wholesale Book Company,            Inc. ("American Wholesale"), American Internet Service, Inc. (“AIS”) and            Books-A-Million Card Services, Inc. (“Card Services”).

             

Our periodic and current reports filed with the SEC are made available            on our website at*www.booksamillioninc.com*as soon as reasonably practicable. Our code of conduct and key committee            charters are also available on our website. These reports are available free of charge            to stockholders upon written request. Such requests should be directed to Douglas G.            Markham, our Chief Financial Officer. You may read and copy any materials we file with            the SEC at the SEC’s Public Reference Room at 100 F Street N.E, Room 1850,            Washington, DC 20549. You may obtain information on the operation of the Public            Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains a website that            contains reports, proxy and information statements, and other information regarding            issuers that file electronically with the SEC, including us, at*http: //www.sec.gov*.

             

**Business Segments**

 

We have two reportable segments: retail trade and electronic commerce            trade. In the retail trade segment we are engaged in the retail trade of primarily book            merchandise. The retail trade segment includes our distribution center operations which            predominantly supplies merchandise to our retail stores. In the electronic commerce            trade segment we transact business over the Internet primarily. This segment is managed            separately due to divergent technology and marketing requirements. For additional            information on our reportable business segments, see Note 8 “Business            Segments” in the Notes to Consolidated Financial Statements in the Annual Report            to Stockholders for the fiscal year ended February 2, 2008 incorporated herein by            reference.     

 

4

             

**Retail Stores**

             

We opened our first Books-A-Million superstore in 1987. We developed            superstores to capitalize on the growing consumer demand for the convenience, selection            and value associated with the superstore retailing format. Each superstore is designed            to be a receptive and open environment conducive to browsing and reading and includes            ample space for promotional events open to the public, including book autograph            sessions and children's storytelling. We operated 184 superstores as of February 2,            2008.

             

Our superstores emphasize selection, value and customer service. Each of            our superstores offers an extensive selection of best sellers and other hardcover and            paperback books, magazines and gifts and dedicates space to bargain books that are sold            at a discount from publishers' originally suggested retail prices. Each superstore has            a service center staffed with associates who are knowledgeable about the store's            merchandise and who are trained to answer customers' questions, assist customers in            locating books within the store and place special orders. The majority of our            superstores also include a Joe Muggs café, serving Joe Muggs coffee and assorted            pastries. Our superstores are conveniently located on major, high-traffic roads and in            enclosed malls or strip shopping centers with adequate parking, and generally operate            for extended hours up to 11:00 pm local time.

             

Our traditional stores are tailored to the size, demographics and            competitive conditions of the particular market area. Traditional stores are located            primarily in enclosed malls and generally feature a wide selection of books, magazines            and gift items. We had 24 traditional stores as of February 2, 2008.

             

**Merchandising**

             

We employ several value-oriented merchandising strategies. Books on our            best-seller list, which is developed by us based on the sales and customer demand in            our stores, are generally sold in the Company's superstores below publishers' suggested            retail prices. In addition, customers can join the Millionaire's Club and save 10% on            all purchases in any of our stores, including already discounted best-sellers. Our            point-of-sale computer system provides data designed to enable us to anticipate            consumer demand and customize store inventory selection to reflect local customer            interest.

             

**Marketing**

             

We promote our bookstores principally through the use of traditional and            electronic direct mail advertising, as well as point-of-sale materials posted and            distributed in the stores. In certain markets, television and newspaper advertising is            also used on a selective basis. We also arrange for special appearances and book            autograph sessions with recognized authors to attract customers and to build and            reinforce customer awareness of our stores. A substantial portion of our advertising            expenses are reimbursed from publishers through their cooperative advertising            programs.

             

**Store Operations and Site Selection**

             

|   | In choosing specific store sites within a market area,                            we apply standardized site selection criteria that |
|--------|--------------------------------------------------------------------------------------------------------------------------------------|

takes into account numerous factors, including the local demographics,            desirability of available leasing arrangements, proximity to our existing operations            and overall level of retail activity. In general, stores are located on major            high-traffic roads convenient to customers and have adequate parking. We generally            negotiate short-term leases with renewal options. We also periodically review the            profitability trends and prospects of each of our stores and evaluate whether or not            any underperforming stores should be closed, converted to a different format or            relocated to more desirable locations.

 

5

|   | **I.** | **Internet Operations** |
|--------|--------|-------------------------|

             

Through our wholly owned subsidiary, AIS, we sell a broad range of            products over the Internet under the names*Booksamillion.com*and*Joemuggs.com*. On*Booksamillion.com*we sell a wide selection            of books, magazines and gift items similar to those sold in our Books-A-Million            superstores. We also operate an online café under the name*Joemuggs.com*where we offer a wide            selection of whole bean coffee, confections and related gift items for purchase over            the Internet.

             

Internet development efforts are assisted through a wholly owned            subsidiary of AIS, NetCentral, Inc., which is based in Nashville, Tennessee. Net            Central provides all web development and maintenance for all of our internet sites and            networking initiatives.

             

**Purchasing**

             

Our purchasing decisions are made by our merchandising department on a            centralized basis. Our buyers negotiate terms, discounts and cooperative advertising            allowances for all of our bookstores and decide which books to purchase, in what            quantity and for which stores. The buyers use current inventory and sales information            provided by our in-store point-of-sale computer system to make reorder            decisions.

             

We purchase merchandise from over 1,500 vendors. We purchase the            majority of our collectors' supplies from Anderson Press and substantially all of our            magazines from Anderson Media, each of which is a related party (see            “Transactions with Related Persons” on page20 of the Proxy Statement for            the Annual Meeting of Stockholders to be held on May 29, 2008). No one vendor accounted            for over 13.0% of our overall merchandise purchases in the fiscal year ended February            2, 2008. In general, in excess of 80% of our inventory may be returned for credit,            which substantially reduces our risk of inventory obsolescence.

             

**Distribution Capabilities**

             

American Wholesale receives a substantial portion of our inventory            shipments, including substantially all of our books, at its two facilities located in            Florence and Tuscumbia, Alabama. Orders from our bookstores are processed by computer            and assembled for delivery to the stores on pre-determined weekly schedules.            Substantially all deliveries of inventory from American Wholesale’s facilities            are made by their dedicated transportation fleet. At the time deliveries are made to            each of our stores, returns of slow moving or obsolete books are picked up and returned            to the American Wholesale returns processing center. American Wholesale then returns            these books to publishers for credit.

             

**Competition**

             

The retail bookstore industry is highly competitive and includes            competitors that have substantially greater financial and other resources than we have.            We compete directly with national bookstore chains, independent bookstores, booksellers            on the Internet and certain mass merchandisers. Our largest competitors are Barnes and            Noble, Inc., Borders Group, Inc. and Amazon.com Inc. We also compete indirectly with            retail specialty stores that offer books in a particular area of specialty as well as            mass merchants that primarily sell best sellers. We believe that the key competitive            factors in the retail book industry are convenience of location, selection, customer            service and price.

             

**Seasonality**

             

|   | Similar to many retailers, our business is seasonal,                            with the highest retail sales, gross profit and net income |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------|

historically occurring in our fourth fiscal quarter. This seasonal            pattern reflects the increased demand for books and gifts during the year-end holiday            selling season. Working capital requirements are generally at their highest during the            third fiscal quarter and the early part of the fourth fiscal quarter due to the            seasonality of our business. As a result, our results of operations depend            significantly upon net sales generated during the fourth fiscal quarter, and any            significant adverse trend in the net sales of such period would have a material adverse            effect on our results of operations for the full year. In addition to seasonality, our            results of operations may fluctuate from quarter to quarter as a result of the amount            and timing of sales and profits contributed by new stores as well as other factors.            Accordingly, the addition of a large number of new stores in a particular fiscal            quarter could adversely affect our results of operations for that quarter.

 

6

**Trademarks**

             

“Books-A-Million,” “BAM!,”            “Bookland,” “Books & Co.,” “Millionaire’s            Club,” “Sweet Water Press,” “Thanks-A-Million,”            “Big Fat Coloring Book,” “Up All Night Reader,” “Read            & Save Rebate,” “Readables Accessories for Readers,”            “Kids-A-Million,” “Teachers First,” “The            Write-Price,” “Bambeanos,” “Book$mart,”            “BAMM,” “BAMM.com,” “BOOKSAMILLION.com,”            “Chillatte,” “Joe Muggs Newsstand,” “Page Pets,”            “JOEMUGGS.com,” “Laser Line,” “FAITHPOINT.com,”            “Joe Muggs,” “Anderson’s Bookland,” “Snow            Joe,” “The Testaments Shoppe” and “NetCentral” are the            primary registered trademarks of the Company.

             

**Employees**

             

As of fiscal year end, we employed approximately 3,200 full-time            associates and 2,100 part-time associates. The number of part-time associates employed            fluctuates based upon seasonal needs. None of our associates are covered by a            collective bargaining agreement. We believe that relations with our associates are            good.

             

**ITEM 1A. RISK FACTORS**

The following risk factors and other information included in this Form            10-K should be carefully considered. The risks and uncertainties described below are            not the only ones we face. Additional risks and uncertainties not presently known to us            or that we currently deem immaterial also may impair our business operations. If any of            the following risks occur, our business, financial condition, operating results, and            cash flows could be materially adversely affected.

             

*Intense competition from traditional retail sources and the Internet            may adversely affect our business.*

             

The retail book business is highly competitive, and competition within            the industry is fragmented. We face direct competition from other superstores, such as            Barnes & Noble and Borders, and we also face competition from mass merchandisers,            such as Wal-Mart and Costco, and online retailers such as Amazon, Barnes and Noble,            Borders and Wal-Mart. Our bookstores also compete with specialty retail stores that            offer books in particular subject areas, independent single store operators, variety            discounters, drug stores, warehouse clubs, mail order clubs and other retailers            offering books. In addition, our bookstores may face additional competition from the            expanding market for electronic books and from other categories of retailers entering            the retail book market.

             

Many of our current and potential competitors have longer operating            histories, larger customer bases, greater brand recognition, and significantly greater            financial, marketing, and other resources than we have. They may be able to secure            merchandise from vendors on more favorable terms and may be able to adopt more            aggressive pricing policies. Competitors in both the retail and electronic commerce            trade also may be able to devote more resources to technology development, fulfillment,            and marketing than we are able to.

Competition in electronic commerce trade may intensify. The online            market is rapidly evolving and intensely competitive, with few barriers to entry.            Companies in the retail and electronic commerce trade may enter into business            combinations or alliances that strengthen their competitive positions. This increased            competition may reduce our sales, operating profits, or both.

*Our business is highly seasonal.*

             

Our business is highly seasonal with sales and earnings generally            highest in the fourth quarter and lowest in the first quarter. Our results of            operations depend significantly upon the holiday selling season in the fourth quarter.            During the fiscal year ended February 2, 2008, approximately 31% of our sales and            approximately 72% of our operating income were generated in the fourth quarter. If we            do not stock popular products in sufficient amounts or fail to have sources to timely            restock popular products during the busy holiday period such that we fail to meet            customer demand, it could significantly affect our revenue and earnings and our future            growth. In addition, if we experience less than satisfactory net sales during the            fourth quarter, we may not be able to sufficiently compensate for any losses which may            be incurred during the first three quarters of the year.

             

*Our business is dependent upon consumer spending            patterns.*

             

Sales of books may depend upon discretionary consumer spending, which            may be affected by general economic conditions, consumer confidence and other factors            beyond our control. Weather, among other things, can

             

7

affect comparable store sales, because inclement weather can require us            to close certain stores temporarily and thus reduce store traffic. Even if stores are            not closed, customers may decide to avoid going to stores in bad weather. In addition,            sales are dependent in part on the strength of new release titles offered by vendors. A            decline in consumer spending on books could have a material adverse effect on our            financial condition and results of operations.

             

*Our business may be affected by our relationships with suppliers and            delays in product shipments.*

             

We rely heavily upon our suppliers to provide us with new products as            quickly as possible. The loss of any of our suppliers could reduce our product            offerings, which could cause us to be at a competitive disadvantage. In addition, we            depend upon the business terms we can obtain from suppliers, including competitive            prices, unsold product return policies, new release title quantity allocations,            advertising and market development allowances, freight charges and payment terms. Our            failure to maintain favorable business terms with our suppliers could adversely affect            our ability to offer products to consumers at competitive prices. To the extent that            our suppliers rely on overseas sources for a large portion of their products, any event            causing a disruption of imports, including the imposition of import restrictions in the            form of tariffs or quotas and currency fluctuations, could hurt our            business.

             

*Our vendor relationships subject us to a number of risks, and we            heavily rely on one supplier for magazine purchases that is a related            party.*

Although we purchase merchandise from over 1,500 vendors and no one            vendor accounted for more than 13% of our inventory purchases in the fiscal year ended            February 2, 2008, we have significant vendors that are important to us. If our current            vendors were to stop selling merchandise to us on acceptable terms, we may not be able            to acquire merchandise from other suppliers in a timely and efficient manner and on            acceptable terms. We have entered into and may, in the future, enter into various            transactions and agreements with entities wholly or partially owned by certain            stockholders or directors (including certain officers) of the Company. We believe that            the transactions and agreements that we have entered into with related parties are on            terms that are at least as favorable to us as could reasonably have been obtained at            such time from third parties.

             

*If we do not successfully optimize inventory and manage our            distribution, our business could be harmed*

If we do not successfully optimize our inventory and operate our            distribution centers, it could significantly limit our ability to meet customer demand.            Because it is difficult to predict demand, we may not manage our facilities in an            optimal way, which may result in excess or insufficient inventory or warehousing,            fulfillment, or distribution capacity. Additionally, if we open new stores in new            geographic areas where we don’t currently have a presence, we may not be able to            provide those stores with efficient distribution and fulfillment services which may            impact our stores in those markets. We may be unable to adequately staff our            fulfillment and customer service centers to meet customer demand. There can be no            assurance that we will be able to operate our network effectively.

We rely heavily on the American Wholesale warehouse distribution            facilities for merchandise distribution functions and to maintain inventory stock for            our retail stores. Our ability to distribute merchandise to our stores and maintain            adequate inventory levels may be materially impacted by any material damage incurred at            our warehouse facilities caused by inclement weather, fire, flood, power loss,            earthquakes, acts of war or terrorism, acts of God and similar            factors.     

We also rely heavily on American Wholesale’s dedicated            transportation fleet for deliveries of inventory. As a result, our ability to receive            inbound inventory efficiently may be negatively affected by inclement weather, fire,            flood, power loss, earthquakes, labor disputes, acts of war or terrorism, acts of God            and similar factors.

Any of the inventory risk factors set forth above may adversely affect            our financial condition, operating results and cash flows.

*Failure to retain key personnel*

Our continued success depends to a significant extent upon the efforts            and abilities of our senior management. The failure to retain our senior managers could            have a material adverse effect on our business and our results of operations. We do not            maintain “key man” life insurance on any of our senior managers.

 

8

             

*Failure to attract and retain qualified associates and other labor            issues could adversely affect our financial performance.*

Our ability to continue to expand our operations depends on our ability            to attract and retain a large and growing number of qualified associates. Our ability            to meet our labor needs generally while controlling our associate wage and related            labor costs is subject to numerous external factors, including the availability of a            sufficient number of qualified persons in the work force, unemployment levels,            prevailing wage rates, changing demographics, health and other insurance costs and            changes in employment legislation. If we are unable to locate, attract and retain            qualified personnel or if our costs of labor or related costs increase significantly,            our financial performance could be affected adversely.

*We rely extensively on communication and computer systems to process            transactions, summarize results and manage our business. Disruptions in these systems            could harm our ability to run our business.*

Given the number of individual transactions we have each year, it is            critical that we maintain uninterrupted operation of our computer and communications            hardware and software systems. Our systems are subject to damage or interruption from            power outages, computer and telecommunications failures, computer viruses, security            breaches, catastrophic events such as acts of God, fires, tornadoes, hurricanes,            floods, earthquakes, power losses, telecommunications failures, acts of war or            terrorism, physical or electronic break-ins, and similar events or disruptions, and            usage errors by our employees. If our systems are damaged or cease to function            properly, we may have to make a significant investment to fix or replace them, and we            may suffer interruptions in our operations in the interim. Any material interruption in            our computer operations may have a material adverse effect on our business or results            of operations.

             

*Our electronic commerce trade faces business risks, which            include:*

             

|   | **•** | risks associated with a limited operating                            history; |
|--------|------------|-------------------------------------------------------------------------------|

             

|   | **•** | competition from other Internet-based companies and                            traditional retailers; |
|--------|------------|-------------------------------------------------------------------------------------------------------|

             

|   | **•** | risks associated with a failure to manage growth                            effectively; |
|--------|------------|------------------------------------------------------------------------------------------|

             

|   | **•** | risks of the Internet as a medium for commerce,                            including internet security risks; |
|--------|------------|---------------------------------------------------------------------------------------------------------------|

             

|   | **•** | risks associated with the need to keep pace with rapid                            technological change; |
|--------|------------|---------------------------------------------------------------------------------------------------------|

             

|   | **•** | risks of system failure or inadequacy; and |
|--------|------------|--------------------------------------------|

             

|   | **•** | risks associated with the maintenance of domain                            names. |
|--------|------------|-----------------------------------------------------------------------------------|

             

If any of these risks materializes, it could have an adverse effect on            our electronic commerce trade.

             

*Government regulation of the Internet and E-commerce is evolving and            unfavorable changes could harm our business.*

We are subject to general business regulations and laws, as well as            regulations and laws specifically governing the Internet and e-commerce. Such existing            and future laws and regulations may impede the growth of the Internet or other online            services. These regulations and laws may cover taxation, privacy, data protection,            pricing, content, copyrights, distribution, electronic contracts and other            communications, consumer protection, the provision of online payment services,            unencumbered Internet access to our services, and the characteristics and quality of            products and services. It is not clear how existing laws governing issues such as            property ownership, sales and other taxes, libel, and personal privacy apply to the            Internet and e-commerce. Unfavorable resolution of these issues may harm our            business.

 

9

*We could be liable for breaches of security on our            website.*

A fundamental requirement for e-commerce is the secure storage and            transmission of confidential information. Although we have developed systems and            processes that are designed to protect consumer information and prevent fraudulent            credit card transactions and other security breaches, failure to prevent or mitigate            such fraud or breaches may adversely affect our operating results.

*We are subject to a number of risks related to payments we            accept.*

We accept payments by a variety of methods, including credit card, debit            card, gift cards, direct debit from a customer’s bank account, physical bank            check and cash. For certain payment transactions, including credit and debit cards, we            pay interchange and other fees, which may increase over time and raise our operating            costs and lower our profit margins. We are also subject to payment card association            operating rules, certification requirements and rules governing electronic funds            transfers, which could change or be reinterpreted to make it difficult or impossible            for us to comply. If we fail to comply with these rules or requirements, we may be            subject to fines and higher transaction fees and lose our ability to accept credit and            debit card payments from our customers, process electronic funds transfers, or            facilitate other types of online payments, and our business and operating results could            be adversely affected. If one or more of these agreements are terminated and we are            unable to replace them on similar terms, or at all, it could adversely affect our            operating results. In addition, as we offer new payment options to our customers, we            may be subject to additional regulations and compliance requirements and a greater risk            of fraud.

             

*We may be unable to protect our intellectual property, which could            harm our brand and reputation.*

             

To protect our proprietary rights in our intellectually property, we            rely generally on copyright, trademark and trade secret laws. Although we do not            believe that our trademarks and other intellectual property are materially important to            the continuation of our operations, our failure or inability to maintain or protect our            proprietary rights could materially decrease their value, and our brand and reputation            could be impaired as a result.

             

*We are subject to certain legal proceedings that may affect our            financial condition and results of operation.*

We are involved in a number of legal proceedings. In the opinion of            management, after consultation with legal counsel, the ultimate liability, if any, with            respect to those proceedings is not presently expected to materially affect our            financial condition or results of operations. However, we can give no assurances that            certain lawsuits either now or in the future will not materially affect our financial            condition or results of operations.

             

|   | *Our stock price may be subject to                            volatility.*  |
|--------|----------------------------------------------------------------------------------|

The trading price of our common stock may fluctuate in response to a            number of events and factors, many of which are beyond our control, such as:             

|   | **•** | general economic conditions; |
|--------|------------|------------------------------|

|   | **•** | changes in interest rates; |
|--------|------------|----------------------------|

|   | **•** | conditions or trends in the retail book and electronic                            commerce trade industries; |
|--------|------------|--------------------------------------------------------------------------------------------------------------|

|   | **•** | fluctuations in the stock market in general; |
|--------|------------|----------------------------------------------|

|   | **•** | quarterly variations in operating results; |
|--------|------------|--------------------------------------------|

|   | **•** | new products, services, innovations, and strategic                            developments by our competitors or us, or business combinations and                            investments by our competitors or us; |
|--------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

10

|   | **•** | changes in financial estimates by us or securities                            analysts and recommendations by securities analysts; |
|--------|------------|------------------------------------------------------------------------------------------------------------------------------------|

|   | **•** | changes in regulation; |
|--------|------------|------------------------|

|   | **•** | changes in our capital structure, including issuance of                            additional debt or equity to the public; |
|--------|------------|-----------------------------------------------------------------------------------------------------------------------------|

|   | **•** | corporate restructurings, including layoffs or closures                            of facilities; |
|--------|------------|---------------------------------------------------------------------------------------------------|

|   | **•** | changes in the valuation methodology of, or                            performance by, others in the retail book and electronic trade                            industries; and |
|--------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **•** | transactions in our common stock by major investors, and                            analyst reports, news, and speculation. |
|--------|------------|-----------------------------------------------------------------------------------------------------------------------------|

Any of these events may cause our stock price to rise or fall and may            adversely affect our financial condition or results of operations.

             

 

**ITEM 1B. UNRESOLVED STAFF COMMENTS**

 

|   | None. |
|--------|-------|

             

             

**ITEM 2. PROPERTIES**

             

Our bookstores are generally located either in enclosed malls or strip            shopping centers. All of our stores are leased. Generally, these leases have terms            ranging from five to ten years and require that we pay a fixed minimum rental fee            and/or a rental fee based on a percentage of net sales together with certain customary            costs (such as property taxes, common area maintenance and insurance).

             

Our principal executive offices are located in a 20,550 square foot            leased building located in Birmingham, Alabama. We also lease a 37,000 square foot            building located in Irondale, Alabama for additional corporate office space. Both            leases involve related parties (see “Transactions with Related Persons” on            page 20 of the Proxy Statement for the Annual Meeting of Stockholders to be held on May            29, 2008). The Birmingham, Alabama office space is leased month-to-month. The Irondale,            Alabama office space is leased month-to-month. In addition, we lease approximately            4,025 square feet of office space in Nashville, Tennessee for the offices of            NetCentral. The NetCentral space is leased month-to-month. We believe that the loss of            any office space currently leased on a month-to-month basis would not have a material            adverse effect on our business, financial condition or results of            operations.

             

American Wholesale owns its wholesale distribution center located in an            approximately 290,000 square foot facility in Florence, Alabama. During fiscal 1995 and            1996, we financed the acquisition and construction of the wholesale distribution            facility through loans obtained from the proceeds of an industrial development revenue            bond (the “Bond”). We also lease on a month to month basis, from a related            party, a second 210,000 square foot warehouse facility located in Tuscumbia, Alabama.            We believe that the failure to extend the lease for this warehouse facility currently            leased on a month-to-month basis would not have a material adverse effect on our            business, financial condition or results of operations. In addition we lease all of the            tractors that pull the company-owned trailers, which comprise our transportation            fleet.

             

**ITEM 3. LEGAL PROCEEDINGS**

             

We are a party to various legal proceedings incidental to our business.            In the opinion of management, after consultation with legal counsel, the ultimate            liability, if any, with respect to those proceedings is not presently expected to            materially affect our financial condition or results of operations.

             

**ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY            HOLDERS**

             

|   | Not Applicable. |
|--------|-----------------|

             

 

11

**PART II**

             

**ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER            MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES**

             

The information under the heading “Market and Dividend            Information” on page 37 of the Annual Report to Stockholders for the year ended            February 2, 2008, is incorporated herein by reference.

             

The following table provides information with respect to purchases by            the Company of shares of its common stock during the fourth quarter of the fiscal year            ended February 2, 2008.

             

             

| **Period**                                                                     |    | **Total****Number** **of****Shares****Purchased** |    | **Average****Price** **Paid****per Share** |    | **Total** **Number****of Shares****Purchased as****Part of****Publicly****Announced****Plans** |    | **Maximum****Dollar Value of****Shares That****May Yet Be****Purchased****Under** **the** **Plans** |
|--------------------------------------------------------------------------------|--------------|--------------------------------------------------------|--------------|-------------------------------------------------|--------------|-----------------------------------------------------------------------------------------------------|--------------|---------------------------------------------------------------------------------------------------------------|
| November 4, 2007 – December 1,                            2007 |    | 196,733                                                |    | $                                               | 13.28        |                                                                                           | 196,733      |                                                                                                     | $ | 13,614,026 |
| December 2, 2007 – January 5,                            2008  |    | 78,303                                                 |    | $                                               | 11.15        |                                                                                           | 78,303       |                                                                                                     | $ | 12,741,161 |
| January 6, 2008 – February 2,                            2008  |    | 204,629                                                |    | $                                               | 10.73        |                                                                                           | 204,629      |                                                                                                     | $ | 10,545,898 |
|                                                                                |    |                                                   |    |                                            |         |                                                                                           |         |                                                                                                     |  |  |
| Total                                                                          |    | 479,665                                                |    | $                                               | 11.84        |                                                                                           | 479,665      |                                                                                                     |  |  |

             

             

**ITEM 6. SELECTED FINANCIAL DATA**

             

The information under the heading "Selected Consolidated Financial Data"            for the years ended January 31, 2004 through February 2, 2008 on page 3 of the Annual            Report to Stockholders for the year ended February 2, 2008, is incorporated herein by            reference.

             

**ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION            AND**

**                          RESULTS OF OPERATIONS**

             

The information under the heading "Management's Discussion &            Analysis of Financial Condition & Results of Operations" on pages 4 through 14 of            the Annual Report to Stockholders for the year ended February 2, 2008, is incorporated            herein by reference.

             

**ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET            RISK**

             

We are subject to interest rate fluctuations involving our credit            facilities. In prior periods, we used fixed interest rate hedges to manage this            exposure. We entered into a $7.5 million interest rate swap in May 1996 that expired on            June 7, 2006 and effectively fixed the interest rate on the Bond during that period at            8.73% (the “Bond Hedge”). We did not replace the Bond Hedge when it            expired.

             

To illustrate the sensitivity of our results of operations to changes in            interest rates on our debt, we estimate that a 66% increase in LIBOR rates would have            increased interest expense by approximately $577,000 for the fiscal year ended February            2, 2008 due to average debt of $27,807,000. The average debt under our credit agreement            and the Bond was $20.7 million and $7.1 million, respectively, for the fiscal year            ended February 2, 2008. Likewise, a 66% decrease in LIBOR rates would have decreased            interest expense by $577,000 for the fiscal year ended February 2, 2008. This            hypothetical change in LIBOR rates was calculated based on the fluctuation in LIBOR in            2002, which was the maximum LIBOR fluctuation in the last ten years.

             

The information in note 3 “Debt and Lines of Credit” in the            Notes to Consolidated Financial Statements on pages 28 and 29 of the Annual Report to            Stockholders for the fiscal year ended February 2, 2008 is incorporated herein by            reference.

             

12

             

**ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA**

             

The following financial statements of the Registrant and its            subsidiaries included in the Annual Report to Stockholders for the year ended February            2, 2008 are incorporated herein by reference:

             

Consolidated Balance Sheets as of February 2, 2008 and February 3,            2007.

             

Consolidated Statements of Income for the Fiscal Years Ended February 2,            2008, February 3, 2007, and January 28, 2006.

             

Consolidated Statements of Changes in Stockholders' Equity for the            Fiscal Years Ended February 2, 2008, February 3, 2007, and January 28, 2006.

             

Consolidated Statements of Cash Flows for the Fiscal Years Ended            February 2, 2008, February 3, 2007, and January 28, 2006.

             

Notes to Consolidated Financial Statements.

             

Reports of Independent Registered Public Accounting Firm

             

The information in footnote 13, Summary of Quarterly Results (Unaudited)            on page 35 of the Annual Report to Stockholders for the Fiscal Years Ended February 2,            2008 and February 3, 2007 is incorporated herein by reference.

             

**ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING            AND FINANCIAL DISCLOSURE**

             

None.

             

**ITEM 9A. CONTROLS AND PROCEDURES**

             

**(a) Evaluation of Disclosure Controls and Procedures**

We are committed to maintaining disclosure controls and procedures            designed to ensure that information required to be disclosed in our reports under the            Securities Exchange Act of 1934, as amended (the “Exchange Act”), is            recorded, processed, summarized and reported within the time periods specified in the            Commission’s rules and forms, and that such information is accumulated and            communicated to our management, including our Executive Chairman, Chief Executive            Officer, Chief Financial Officer and the Board of Directors, as appropriate, to allow            for timely decisions regarding required disclosure. In designing and evaluating            disclosure controls and procedures, management recognizes that any controls and            procedures, no matter how well designed and operated, can provide only reasonable            assurance of achieving the desired control objectives, and management necessarily is            required to apply its judgment in evaluating the cost-benefit relationship of possible            controls and procedures and implementing controls and procedures based on the            application of management’s judgment.

As required by Rules 13a-15 and 15d-15 under the Exchange Act,            management, with the participation of our Executive Chairman, Chief Executive Officer            and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls            and procedures as of the end of the period covered by this report. Based upon their            evaluation and subject to the foregoing, the Executive Chairman, the Chief Executive            Officer and the Chief Financial Officer concluded that, as of the end of the period            covered by this report, our disclosure controls and procedures were effective at the            reasonable assurance level.

 

13

**(b) Management’s Report on Internal Control over Financial            Reporting.**

Management is responsible for establishing and maintaining adequate            internal control over financial reporting. As defined in Exchange Act Rule 13a-15(f),            internal control over financial reporting is a process designed by, or under the            supervision of, the principal executive and principal financial officer and effected by            the board of directors, management and other personnel, to provide reasonable assurance            regarding the reliability of financial reporting and the preparation of financial            statements for external purposes in accordance with generally accepted accounting            principles and includes those policies and procedures that: (i) pertain to the            maintenance of records that in reasonable detail accurately and fairly reflect the            transactions and dispositions of the assets of the Company; (ii) provide reasonable            assurance that transactions are recorded as necessary to permit preparation of            financial statements in accordance with generally accepted accounting principles, and            that receipts and expenditures of the Company are being made only in accordance with            authorizations of management and directors of the Company; and (iii) provide reasonable            assurance regarding prevention or timely detection of unauthorized acquisition, use or            disposition of the Company’s assets that could have a material affect on the            financial statements.

Because of its inherent limitations, internal control over financial            reporting may not prevent or detect misstatements. Also, projections of any evaluation            of effectiveness to future periods are subject to the risk that controls may become            inadequate because of changes in conditions, or that the degree of compliance with the            policies or procedures may deteriorate.

Under the supervision and with the participation of management,            including the Executive Chairman , Chief Executive Officer and Chief Financial Officer,            we carried out an evaluation of the effectiveness of our internal control over            financial reporting as of the end of the period covered by this report based on the            “Internal Control – Integrated Framework” issued by the Committee of            Sponsoring Organizations of the Treadway Commission (COSO). Based upon this evaluation,            we concluded that our internal control over financial reporting was effective as of the            end of the period covered by this report.

The independent registered public accounting firm, Grant Thornton LLP            has audited the consolidated financial statements as of and for the year ended February            2, 2008 and has also issued their report on the effectiveness of the Company’s            internal control over financial reporting, as included in pages 15 and 16 of the Annual            Report to Stockholders for the fiscal year ended February 2, 2008 which is incorporated            herein by reference.

**(c) Changes in Internal Control over Financial            Reporting**

There have been no other changes in our disclosure controls and            procedures, or our internal control over financial reporting, during the fourth quarter            of the fiscal year ended February 2, 2008 that have materially affected, or are            reasonably likely to materially affect, our disclosure controls and procedures or our            internal control over financial reporting.

             

**ITEM 9B. OTHER INFORMATION**

             

None.

             

             

**PART III**

             

**ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE            GOVERNANCE**

             

**Directors**

             

The sections under the heading “Proposal I-Election of            Directors” titled “Nominees for Election - Term Expiring 2011,”            “Incumbent Directors - Term Expiring 2009,” and “Incumbent Directors            - Term Expiring 2010” on pages 2 and 3 of the Proxy Statement for the Annual            Meeting of Stockholders to be held May 29, 2008, are incorporated herein by reference            for information on the directors of the Registrant. The information under the heading            “Information Concerning the Board of Directors” on pages 8 through 10 of            the Proxy Statement for the Annual Meeting of Stockholders to be held May 29, 2008 is            incorporated herein by reference. The information under the heading “Beneficial            Ownership of Common Stock – Compliance with Section 16(a) of the Securities            Exchange Act of 1934” on page 14 of the Proxy Statement for the Annual Meeting of            Stockholders to be held May 29, 2008 is incorporated herein by reference.

             

14

**Executive Officers**

             

All of our executive officers are elected annually by and serve at the            discretion of the Board of Directors. Our current executive officers are listed            below:

             

      

| **Name**           | **Age** | **Position with the Company**                                                  |
|--------------------|---------|--------------------------------------------------------------------------------|
| Clyde B. Anderson  | 47      | Executive Chairman of the Board                                                |
| Sandra B. Cochran  | 49      | President, Chief Executive Officer                                             |
| Terrance G. Finley | 54      | President Books-A-Million, Inc. Merchandising                            Group |
| Douglas G. Markham | 52      | Chief Financial Officer and Secretary                                          |

             

             

Clyde B. Anderson has served as Executive Chairman of the Board since            February 2004 and has served as a director of the Company since August 1987.            Mr. Anderson served as the Chairman of the Board from January 2000 until February            2004 and also served as the Chief Executive Officer of the Company from July 1992 until            February 2004. Mr. Anderson also served as the President of the Company from November            1987 to August 1999. From November 1987 to March 1994, Mr. Anderson also served as the            Company’s Chief Operating Officer. Mr. Anderson serves on the Board of Directors            of Hibbett Sports, Inc., a sporting goods retailer. Mr. Anderson is the brother of            Terry C. Anderson, a member of the Company’s Board of Directors.

             

Sandra B. Cochran has served as Chief Executive Officer of the Company            since February 2004, and as President since August 1999. She served as Secretary from            June 1998 until March 2008. Ms. Cochran served as the Company’s Executive Vice            President from February 1996 to August 1999 and as its Chief Financial Officer from            September 1993 to August 1999. Ms. Cochran has served as a director of the Company            since June 2006. Ms. Cochran previously served as Vice President and Assistant            Secretary of the Company from August 1992 to September 1993. Prior to joining the            Company, Ms. Cochran served as a Vice President (as well as in other capacities) of            SunTrust Securities, Inc., a subsidiary of SunTrust Banks, Inc. for more than five            years. Sandra B. Cochran serves as an officer and a board member of certain affiliated            companies.

             

Terrance G. Finley has served as President Books-A-Million, Inc.            Merchandising Group of the Company since October 2001 and as the President of American            Internet Service, Inc. since December 1998. Mr. Finley served in various other            capacities in the merchandising department from April 1994 to December 1998. Mr. Finley            served as the General Manager of Book$mart from February 1992 to April 1994. Prior to            joining the Company, Mr. Finley served as the Vice President - Sales for Smithmark            Publishers. Mr. Finley was appointed to the Board of Directors of Hibbett Sports, Inc.,            a sporting goods retailer on March 14, 2008.

             

Douglas G. Markham has served as the Chief Financial Officer of the            Company since July 2006 and Secretary since March 2008. Prior to joining the Company,            Mr. Markham served as the Sr. Vice President – Controller (as well as other            capacities) for Saks Department Stores for more than ten years.

             

The section under the heading “Code of Business Conduct and            Ethics” on page 11 of the Proxy Statement for the Annual Meeting of Stockholders            to be held May 29, 2008 is incorporated herein by reference.

             

**ITEM 11. EXECUTIVE COMPENSATION**

             

The sections under the heading "Compensation Discussion and Analysis,"            other than those titled "Compensation Committee Report", "Compensation Committee            Interlocks and Insider Participation", and "Transactions with Related Persons", on            pages 15 through 19 of the Proxy Statement for the Annual Meeting of Stockholders to be            held May 29, 2008 are incorporated herein by reference.

             

 

15

**ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND            MANAGEMENT AND RELATED STOCKHOLDER MATTERS**

             

The sections under the heading "Information Concerning the Board of            Directors" titled "Beneficial Ownership of Common Stock", and under the heading            “Securities Authorized for Issuance Under Equity Compensation Plans” on            pages 12 through 14 and on page 8, respectively, of the Proxy Statement for the Annual            Meeting of Stockholders to be held May 29, 2008 is incorporated herein by            reference.

             

**ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR            INDEPENDENCE**

             

The sections under the heading "Compensation Discussion and Analysis"            titled "Compensation Committee Interlocks and Insider Participation" and "Transactions            with Related Persons" on pages 19 through 20 of the Proxy Statement for the Annual            Meeting of Stockholders to be held May 29, 2008 are incorporated herein by            reference.

             

**ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES**

             

The section under the heading “Proposal 3 – Ratification of            Appointment of Independent Registered Public Accounting Firm” titled            “Auditor Fees and Services” on page 25 of the Proxy Statement for the            Annual Meeting of Stockholders to be held May 29, 2008 is incorporated herein by            reference.     

             

**PART IV**

             

**ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES**

             

|   | (a) | 1. | Financial Statements: |
|--------|-----|----|-----------------------|

             

The following Consolidated Financial Statements of Books-A-Million, Inc.            and its subsidiaries, included in the Registrant's Annual Report to Stockholders for            the fiscal year ended February 2, 2008 are incorporated by reference in Part II, Item            8:

             

Consolidated Balance Sheets as of February 2, 2008 and February 3,            2007.

             

Consolidated Statements of Income for the Fiscal Years Ended February 2,            2008, February 3, 2007 and January 28, 2006.

             

Consolidated Statements of Changes in Stockholders' Equity for the            Fiscal Years Ended February 2, 2008, February 3, 2007 and January 28, 2006.

             

Consolidated Statements of Cash Flows for the Fiscal Years Ended            February 2, 2008, February 3, 2007 and January 28, 2006.

             

Notes to Consolidated Financial Statements.

             

Reports of Independent Registered Public Accounting Firm.

             

|   | 2. | Financial Statement Schedule: |
|--------|----|-------------------------------|

             

The following consolidated financial statement schedule of            Books-A-Million, Inc. is attached 

hereto: 

             

Report of Independent Registered Public Accounting Firm on Financial            Statement Schedule.

             

|   | Schedule II | Valuation and Qualifying Accounts |
|--------|-------------|-----------------------------------|

             

             

All other schedules for which provision is made in the applicable            accounting regulations of the Securities and Exchange Commission are not required under            the related instructions or are not applicable and, therefore, have

             

16

|   | been | omitted. |
|--------|------|----------|

             

|   | 3. | Exhibits |
|--------|----|----------|

             

|   | Exhibit Number |
|--------|----------------|

             

|   | 3.1   | -- | Certificate of Incorporation of the Company                            (incorporated by reference to Exhibit 3.1 to Registration Statement on                            Form S-1, File No. 33-52256, originally filed September 21,

1992 (the “S-1 Registration                            Statement”)).                                                                                                                                                                                      |  |
|--------|-------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|
|        |       |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |
|        |
|        | 3.2   | -- | Bylaws of the Company (incorporated by reference to                            Exhibit 3.2 to the S-1 Registration Statement).                                                                                                                                                                                                                                                                                                                                                                              |  |
|        |       |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |
|        | 4.1   | -- | See Exhibits 3.1 and 3.2 hereto incorporated herein by                            reference to the Exhibits of the

same number to the S-1 Registration                            Statement.                                                                                                                                                                                                                                                                                                               |  |
|        |       |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |
|        | 10.1  | -- | Lease Agreement between First National Bank of Florence,                            Alabama, as Trustee, and

 Bookland Stores, Inc. (which is a predecessor of                            the Registrant), an Alabama corporation, dated January 30, 1991                            (incorporated by reference to Exhibit 10.1 to the S-1 Registration                            Statement).                                                                                                        |  |
|        |       |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |
|        | 10.2  | -- | Amended and Restated Stock Option Plan (incorporated by                            reference to Exhibit 10.2 to

 Annual Report on Form 10-K for the fiscal year                            ended January 30, 1999, File No. 0-20664, filed on April 30,                            1999).******                                                                                                                                                                                                       |  |
|        |       |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |
|        | 10.3  | -- | Employee Stock Purchase Plan (incorporated by reference                            to Exhibit 10.7 to the S-1 Registration                            Statement).******                                                                                                                                                                                                                                                                                                                                     |  |
|        |       |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |
|        | 10.4  | -- | Amendment to Employee Stock Purchase Plan (incorporated                            by reference to Exhibit 10.6 to Annual Report on Form 10-K for the                            fiscal year ended January 29, 1994, File No. 0-20664, filed on April                            29, 1994).******                                                                                                                                                                                                           |  |
|        |       |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |
|        | 10.5  | -- | 1999 Amended and Restated Employee Stock Purchase Plan                            (incorporated by reference to Exhibit 10.5 to Annual Report on Form                            10-K for the fiscal year ended January 29, 2000, File No. 0-20664,                            filedon April 28,                            2000).******                                                                                                                                                                    |  |
|        |       |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |
|        | 10.6  | -- | 401 (k) Plan adopted September 15, 2003, with SunTrust                            Bank as Trustee (incorporated by reference to Exhibit 10.6 to Annual                            Report on Form 10-K for the fiscal year ended January 31, 2004,File No. 0-20664, filed April 27, 2004).**                                                                                                                                                                                                                 |  |
|        |       |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |
|        | 10.7  | -- | Shareholders Agreement dated as of September 1, 1992                            (incorporated by reference to Exhibit 10.9 to Annual Report on Form                            10-K for the fiscal year ended January 31, 1993,

File No. 0-20664, filedMay 3,                            1993).                                                                                                                                                                                                            |  |
|        |       |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |
|        | 10.8  | -- | Executive Incentive Plan (incorporated by reference to                            Exhibit 10.8 to Annual Report

on Form 10-K for the fiscal year ended January 28, 1995,                            File No. 0-20664, filed

April 28, 1995).                                                                                                                                                                                                                                                              |  |
|        |       |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |
|        | 10.20 | -- | Credit agreement dated as of July 1, 2002, between the                            Company and Bank of America, N.A., SunTrust Bank, N.A., Wells Fargo                            Bank, N.A., SouthTrust Bank, N.A. and

AmSouth Bank, N.A.(incorporated by reference to Exhibit                            10.20 to Form 10-Q for the

quarter ended August 3, 2002).                                                                                                                                       |  |
|        |       |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |
|        | 10.21 | -- | First Amendment to the Credit Agreement dated as of June                            14, 2004, between the Company and Bank of America, N.A., SunTrust Bank,                            N.A., Wells Fargo Bank, N.A., SouthTrust Bank, N.A., and AmSouth Bank,                            N.A. (incorporated by reference to Exhibit 10.21 to Annual Report on                            Form 10-K for the fiscal year ended January 29, 2005).                                                             |  |
|        |       |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |
|        | 10.22 | -- | Second Amendment to the Credit Agreement dated as                            of June 20, 2005 between the company and Bank of America, N. A.,                            SunTrust Bank, N.A., Wells Fargo Bank, N.A., SouthTrust Bank N.A., and                            AmSouth Bank, N.A. (incorporated by reference to Exhibit 99 (B)(3) to                            Tender Offer Statement by Issuer on Form SC TO-I for the Tender Offer                            closed on June 23, 2005). |  |
|        |       |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |

             

             

17

             

             

|   | 10.23 | -- | 2005 Incentive Award Plan (incorporated by reference to                            Exhibit 10.1 to form 8-K for adoption of the plan on June 1, 2005, File                            No. 333-126008, filed June 29,                            2005).******.                                                                                                                                                                 |
|--------|-------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |       |    |                                                                                                                                                                                                                                                                                                                                                                                                                          |
|        | 10.24 | -- | Lease Agreement between First National Bank of Florence,                            Alabama, as Trustee, and Bookland Stores, Inc. (which is a predecessor                            of the Registrant), an Alabama corporation, dated January 30, 1991                            (incorporated by reference to Exhibit 10.1 to the S-1 Registration                            Statement).                                 |
|        |       |    |                                                                                                                                                                                                                                                                                                                                                                                                                          |
|        | 10.25 | -- | Amended and Restated Stock Option Plan (incorporated by                            reference to Exhibit 10.2 to Annual Report on Form 10-K for the fiscal                            year ended January 30, 1999, File No. 0-20664, filed on April 30,                            1999).******                                                                                                                                |
|        |       |    |                                                                                                                                                                                                                                                                                                                                                                                                                          |
|        | 10.26 | -- | Employee Stock Purchase Plan (incorporated by reference                            to Exhibit 10.7 to the S-1

Registration                            Statement).******                                                                                                                                                                                                                                                      |
|        |       |    |                                                                                                                                                                                                                                                                                                                                                                                                                          |
|        | 10.27 | -- | Amendment to Employee Stock Purchase Plan (incorporated                            by reference to Exhibit 10.6 to Annual Report on Form 10-K for the                            fiscal year ended January 29, 1994, File No. 0-20664, filed on April                            29, 1994).******                                                                                                                             |
|        |       |    |                                                                                                                                                                                                                                                                                                                                                                                                                          |
|        | 10.28 | -- | 1999 Amended and Restated Employee Stock Purchase Plan                            (incorporated by reference to Exhibit 10.5 to Annual Report on Form                            10-K for the fiscal year ended January 29, 2000, File No. 0-20664,                            filed on April 28, 2000).******                                                                                                                |
|        |       |    |                                                                                                                                                                                                                                                                                                                                                                                                                          |
|        | 10.29 | -- | 401 (k) Plan adopted September 15, 2003, with SunTrust                            Bank as Trustee (incorporated by reference to Exhibit 10.6 to Annual                            Report on Form 10-K for the fiscal year ended January 31, 2004, File                            No. 0-20664, filed April 27, 2004).**                                                                                                       |
|        |       |    |                                                                                                                                                                                                                                                                                                                                                                                                                          |
|        | 10.30 | -- | Shareholders Agreement dated as of September 1, 1992                            (incorporated by reference to

Exhibit10.9 to Annual Report on Form 10-K for                            the fiscal year ended January 31, 1993,

File No. 0-20664,                            filedMay 3, 1993).                                                                                                                              |
|        |       |    |                                                                                                                                                                                                                                                                                                                                                                                                                          |
|        | 10.31 | -- | Executive Incentive Plan (incorporated by reference to                            Exhibit 10.8 to Annual Report on

Form 10-K for the fiscal year ended                            January 28, 1995,File No. 0-20664,                            filed

April 28,                            1995).******                                                                                                                     |
|        |       |    |                                                                                                                                                                                                                                                                                                                                                                                                                          |
|        | 10.32 | -- | Credit agreement dated as of July 1, 2002, between the                            Company and Bank of America,

N.A., SunTrust Bank, N.A., Wells Fargo                            Bank, N.A., SouthTrust Bank, N.A. and

AmSouth Bank, N.A.                            (incorporated by reference to Exhibit 10.20 to Form 10-Q for                            the

quarter                            ended August 3, 2002). |
|        |       |    |                                                                                                                                                                                                                                                                                                                                                                                                                          |
|        | 13    | -- | Portions of the Annual Report to Stockholders for the                            year ended February 2, 2008 that

are expressly incorporated by reference                            into Parts I and II of this Report.                                                                                                                                                                                                     |
|        |       |    |                                                                                                                                                                                                                                                                                                                                                                                                                          |
|        | 21    | -- | Subsidiaries of the Registrant                                                                                                                                                                                                                                                                                                                                                                                                |
|        |       |    |                                                                                                                                                                                                                                                                                                                                                                                                                          |
|        | 23.1  | -- | Consent of Grant Thornton LLP, Independent Registered                            Public Accounting Firm.                                                                                                                                                                                                                                                                                                                      |
|        |       |    |                                                                                                                                                                                                                                                                                                                                                                                                                          |
|        | 31.1  | -- | Certification of Clyde B. Anderson, Executive Chairman                            of the Board of

Books-A-Million, Inc., pursuant to                            Rule 13a-14(a) under the Securities Exchange Act                            of

1934, filed under Exhibit                            31 of Item 601 of Regulation S-K.                                                                                  |
|        |       |    |                                                                                                                                                                                                                                                                                                                                                                                                                          |
|        | 31.2  | -- | Certification of Douglas G. Markham, Chief Financial                            Officer of Books-A-Million, Inc.,

Pursuant to Rule 13a-14(a) under the                            Securities Exchange Act of 1934, filed under

Exhibit 31 of Item 601 of                            Regulation S-K.                                                                                                                         |
|        |       |    |                                                                                                                                                                                                                                                                                                                                                                                                                          |
|        | 31.3  | -- | Certification of Sandra B. Cochran, President and Chief                            Executive Officer

ofBooks-A-Million,                            Inc., pursuant to Rule 13a-14(a) under the Securities Exchange Act                            of

1934, filed under Exhibit                            31 of Item 601 of Regulation S-K.                                                                                  |

             

18

             

|   | 32.1 | -- | Certification of Clyde B. Anderson, Executive Chairman                            of the Board of

Books-A-Million, Inc., pursuant to 18                            U.S.C. Section 1350, filed under Exhibit 32 of

Item 601 of Regulation                            S-K.                 |
|--------|------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |      |    |                                                                                                                                                                                                                                                                                       |
|        | 32.2 | -- | Certification of Douglas G. Markham, Chief Financial                            Officer ofBooks-A-Million, Inc.,                            pursuant to 18 U.S.C. Section 1350, filed under Exhibit 32                            ofItem 601                            of Regulation S-K. |
|        |      |    |                                                                                                                                                                                                                                                                                       |
|        | 32.3 | -- | Certification of Sandra B. Cochran, President and Chief                            Executive Officer ofBooks-A-Million, Inc., pursuant to 18                            U.S.C. Section 1350, filed under Exhibit 32 of

Item 601 of Regulation                            S-K.             |

             

|   | ** | Indicates a management contract or compensatory plan or                            arrangement |
|--------|----|------------------------------------------------------------------------------------------------|

             

|   | (b) | See Item 15(a) (3), the Exhibit Index and the Exhibits                            attached hereto. |
|--------|-----|----------------------------------------------------------------------------------------------------|

             

|   | c) | See Item 15(a) (2). |
|--------|----|---------------------|

             

             

             

 

19

             

**SIGNATURES**

             

Pursuant to the requirements of Section 13 or 15(d) of the Securities            Exchange Act of 1934, the Registrant has duly caused this report to be signed on its            behalf by the undersigned, thereunto duly authorized.

             

|   | BOOKS-A-MILLION, INC. |
|--------|-----------------------|

             

             

|   | by: | /s/ Clyde B. Anderson |
|--------|-----|-----------------------|

|   | Clyde B. Anderson |
|--------|-------------------|

|   | Executive Chairman of the Board |
|--------|---------------------------------|

|   | Date: April 14, 2008 |
|--------|----------------------|

             

Pursuant to the requirements of the Securities Exchange Act of 1934,            this Report has been signed below by the following persons on behalf of the Registrant            and in the capacities and on the dates indicated:

             

**Principal Executive Officer:**

             

|   | /s/ Clyde B. Anderson |
|--------|-----------------------|

Clyde B. Anderson

Executive Chairman of the Board

Date: April 14, 2008

             

             

**Principal Financial and Accounting Officer:**

             

|   | /s/ Douglas G. Markham |
|--------|------------------------|

Douglas G. Markham

Chief Financial Officer

Date: April 14, 2008

             

             

**Directors:**

             

|   | /s/ Clyde B. Anderson |
|--------|-----------------------|

Clyde B. Anderson

Date: April 14, 2008

             

             

|   | /s/ Ronald G. Bruno |
|--------|---------------------|

Ronald G. Bruno

Date: April 14, 2008

             

             

             

             

             

20

             

**Directors:**

             

             

             

|   | /s/ J. Barry Mason |
|--------|--------------------|

J. Barry Mason

Date: April 14, 2008

             

             

             

|   | /s/ Terry C. Anderson |
|--------|-----------------------|

Terry C. Anderson

Date: April 14, 2008

             

             

             

|   | /s/ Albert C. Johnson |
|--------|-----------------------|

Albert C. Johnson

Date: April 14, 2008

             

             

             

|   | /s/ William H. Rogers, Jr. |
|--------|----------------------------|

William H. Rogers, Jr.

Date: April 14, 2008

             

             

|   | /s/ Sandra B. Cochran |
|--------|-----------------------|

Sandra B. Cochran

Date: April 14, 2008

             

             

21

**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM, ON            FINANCIAL STATEMENT SCHEDULE**

 

Board            of Directors and

Shareholders of Books-A-Million, Inc.

 

We have            audited in accordance with the standards of the Public Company Accounting Oversight            Board (United States) the consolidated financial statements of Books-A-Million, Inc.            and subsidiaries (the “Company”) referred to in our report dated April 15,            2008, which is included in the annual report to stockholders and incorporated by            reference in Part II of this form. As discussed in Note 1 to the consolidated financial            statements, the Company adopted the provisions of Financial Accounting Standards Board            (“FASB”) Interpretation No. 48, "Accounting for Uncertainty in Income Taxes            - an interpretation of FASB Statement No. 109" effective February 4, 2007 and adopted            the provisions of Statement of Financial Accounting Standards No. 123 (revised 2004),            “Share-Based Payment” effective January 29, 2006. Our audits of the            basic financial statements included the financial statement schedule listed in the            index appearing under Item 15(a)(2), which is the responsibility of the Company’s            management. In our opinion, this financial statement schedule, when considered in            relation to the basic financial statements taken as a whole, present fairly, in all            material respects, the information set forth therein.

 

/s/            GRANT THORNTON LLP

 

Atlanta, Georgia

April            15, 2008

 

 

 

 

 

 

S-1

 

22

 

**Schedule II.**

             

**Books-A-Million, Inc.**

             

**Valuation And Qualifying Accounts**

             

**For The Years Ended January 28, 2006, February 3, 2007 and February            2, 2008**

             

             

**Charged/**

|   | **Balance at** | **(Credited)** | **(Deductions)/** |
|--------|----------------|----------------|-------------------|

|   | **Beginning** | **to Costs** | **Recoveries** |
|--------|---------------|--------------|----------------|

|   | **of Year** | **and Expenses** | **Net** | **End of Year** |
|--------|-------------|------------------|---------|-----------------|

             

| **For the year ended January 28, 2006:** |
|------------------------------------------|

| Allowance for doubtful accounts | $ | 580,552 | $ | 218,493 | $ | 41,086 | $ | 840,131 |
|---------------------------------|---|---------|---|---------|---|--------|---|---------|

             

| **For the year ended February 3, 2007:** |
|------------------------------------------|

| Allowance for doubtful accounts | $ | 840,131 | $ | 438,634 | $ | (567,348) | $ | 711,417 |
|---------------------------------|---|---------|---|---------|---|-----------|---|---------|

             

| **For the year ended February 2, 2008:** |
|------------------------------------------|

| Allowance for doubtful accounts | $ | 711,417 | $ | 430,453 | $ | (401,039) | $ | 740,831 |
|---------------------------------|---|---------|---|---------|---|-----------|---|---------|

             

             

             

             

             

             

             

             

             

             

             

             

             

             

             

             

             

S-2

 

 

23