<PAGE>
                                    [PHOTOS]

<PAGE>

                                                                       2002 BAM!
                                                                 BOOKS-A-MILLION
                                                                   ANNUAL REPORT
FIVE-YEAR HIGHLIGHTS

                                               For the Fiscal Year Ended

<TABLE>
<CAPTION>
(In thousands, except per share amounts)        2/2/02          2/3/01         1/29/00         1/30/99         1/31/98
-----------------------------------------------------------------------------------------------------------------------
                                               52 Weeks        53 Weeks        52 Weeks        52 Weeks        52 Weeks
<S>                                           <C>             <C>             <C>             <C>             <C>
STATEMENT OF OPERATIONS DATA
Net sales                                     $  442,886      $  418,606      $  404,057      $  347,877      $  324,762
Net income                                         3,985           3,066           5,942           4,514           6,969
Earnings per share - diluted                        0.24            0.17            0.33            0.26            0.40
Weighted average shares - diluted (000s)          16,945          17,991          18,250          17,554          17,428
EBITDA                                            26,432          24,542          27,624           24,69          27,160
Capital investment                                11,709          12,417          13,462          15,682          14,355

BALANCE SHEET DATA

Working capital                               $  104,687      $  104,124      $   93,872      $   84,022      $   82,771
Property and equipment, net                       56,716          60,659          64,232          67,377          65,814
Total assets                                     295,645         292,541         286,785         271,551         245,816
Long-term debt                                    38,846          41,526          35,936          36,944          45,240
Debt to total capital ratio                         0.24            0.25            0.23            0.24            0.30
Stockholders' investment                         122,375         123,230         121,405         115,022         103,485

OPERATIONAL DATA

Total number of stores                               204             185             180             173             165
Number of Books-A-Million superstores                157             145             135             124             107
Number of Bookland stores                             40              37              43              47              57
Number of Joe Muggs newsstands                         7               3               2               2               1
</TABLE>


                                       1

<PAGE>

LETTER TO STOCKHOLDERS:


The fiscal year 2002 will forever be remembered for the impact on all of our
lives of the events of September 11, 2001. The Company's response to the tragedy
was first to take care of those in our family of associates touched by the
terrorist attacks and then to meet the needs of our customers for information
about their impact. These events touched all of our business units as we sought
to adjust to new realities, the country at war and a holiday subdued by
sadness and recovery. Like all Americans, our associates did their best to
respond with firm resolve and renewed focus. In short, we got back to work.

The past year brought notable progress for our business in a number of key
areas. Our book business was strong and we moved aggressively to build on this
trend. We expanded the number of titles in our stores while improving margins
and reducing our inventories. Our investment in systems enhancements paid off
through improved inventory management.

As our nation recovered, we saw excellent sales in a number of book categories.
Many books related to world events, terrorism and Muslim culture became
bestsellers. The entertainment category rebounded quickly, and sales of movie
tie-in titles like the Lord Of The Rings trilogy and A Beautiful Mind were
strong. Children's books had performed well all year, and we added thousands of
titles to our assortment to reinforce this trend.

The results were particularly gratifying as we continued to cycle tough
comparable store sales in the collector's category and to overcome the impact of
removing music from most of our stores. We believe that the improving book
business, coupled with the reduced dependence on low-margin categories, will
generate the kind of margin improvement that we experienced in fiscal 2002.

We have an ambitious store remodeling program planned for the new year along
with a plan to improve the productivity of many of our Books-A-Million stores.
The new look is focused on books first. It is designed to showcase our expanded
title selection while adjusting our space commitments to a variety of
categories. We believe our new layout creates a more pleasing shopping
environment, and the results from the stores we have remodeled thus far tell us
our customers agree.

Our other business units, e-commerce, wholesale and the Joe Muggs Newsstands,
also made progress in the past year. We saw substantial efficiency improvements
at American Wholesale Book Company. Our NetCentral development group contributed
to this effort with


                                       2


<PAGE>


                                                                       2002 BAM!
                                                                 BOOKS-A-MILLION
                                                                   ANNUAL REPORT


significant systems enhancements for our direct-to-consumer fulfillment
operation. Booksamillion.com, operating in a tough competitive environment, saw
continued sales growth and improving margins. The Newsstands now number seven
stores with expansion in Atlanta, Georgia, and Birmingham, Alabama.

As we move into the new year, we are energized by the progress we have made, and
we are committed to the disciplined pursuit of sales and profitability growth.

Thank you for your continued interest and support. We hope you will visit one of
our stores soon or will shop with us online at Booksamillion.com.

Sincerely,


/s/ Clyde B. Anderson


Clyde B. Anderson
Chairman and Chief Executive Officer



Financial Highlights

<TABLE>
<CAPTION>
                                                     Fiscal Year Ended

(In thousands, except per share amounts)            2/2/02        2/3/01
-------------------------------------------------------------------------
<S>                                                <C>           <C>
Net sales                                          $442,886      $418,606
EBITDA                                               26,432        24,542
Operating profit                                     10,857         9,749
Net income                                            3,985         3,066
Net income per share - diluted                         0.24          0.17

<CAPTION>
                                                            As of

(In thousands)                                      2/2/02        2/3/01
-------------------------------------------------------------------------
<S>                                                <C>           <C>
Working capital                                    $104,687      $104,124
Total assets                                        295,645       292,541
Stockholders' investment                            122,375       123,230
</TABLE>


                                        3

<PAGE>

2002 BAM!
BOOKS-A-MILLION
ANNUAL REPORT


SELECTED CONSOLIDATED FINANCIAL DATA


<TABLE>
<CAPTION>
                                                                           Fiscal Year Ended
(In thousands, except per share data)            2/2/02          2/3/01         1/29/00         1/30/99         1/31/98
------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>             <C>             <C>             <C>             <C>
STATEMENT OF OPERATIONS DATA:
  Net sales                                   $  442,886      $  418,606      $  404,057      $  347,877      $  324,762
  Cost of products sold                          324,655         309,397         296,316         256,793         238,342
                                              --------------------------------------------------------------------------
  Gross profit                                   118,231         109,209         107,741          91,084          86,420
  Operating, selling and
    administrative expenses                       91,799          84,667          80,117          66,394          59,260
  Depreciation and amortization                   15,575          14,793          13,830          12,974          11,588
                                              --------------------------------------------------------------------------
  Operating profit                                10,857           9,749          13,794          11,716          15,572
  Interest expense, net                            4,429           4,804           4,211           4,435           4,331
                                              --------------------------------------------------------------------------
  Income before income taxes                       6,428           4,945           9,583           7,281          11,241
  Provision for income taxes                       2,443           1,879           3,641           2,767           4,272
                                              --------------------------------------------------------------------------
  Net income                                  $    3,985      $    3,066      $    5,942      $    4,514      $    6,969
                                              ==========================================================================
Weighted average number of
  shares outstanding - basic                      16,667          17,955          17,981          17,497          17,425
                                              ==========================================================================
Net income per share - basic                  $     0.24      $     0.17      $     0.33      $     0.26      $     0.40
                                              ==========================================================================
Weighted average number of
  shares outstanding - diluted                    16,945          17,991          18,250          17,554          17,428
                                              ==========================================================================
Net income per share - diluted                $     0.24      $     0.17      $     0.33      $     0.26      $     0.40
                                              ==========================================================================

<CAPTION>
                                                                           As of
(In thousands)                                   2/2/02          2/3/01         1/29/00         1/30/99         1/31/98
------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>             <C>             <C>             <C>             <C>
BALANCE SHEET DATA:
  Working capital                             $  104,687      $  104,124      $   93,872      $   84,022      $   82,771
  Property and equipment, net                     56,716          60,659          64,232          67,377          65,814
  Total assets                                   295,645         292,541         286,785         271,551         245,816
  Long-term debt                                  38,846          41,526          35,936          36,944          45,240
  Stockholders' investment                       122,375         123,230         121,405         115,022         103,485
</TABLE>

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This document contains certain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995, that involve a number of
risks and uncertainties. A number of factors could cause actual results,
performance, achievements of the Company, or industry results to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. These factors include, but are not
limited to, the competitive environment in the book retail industry in general
and in the Company's specific market areas; inflation; economic conditions in
general and in the Company's specific market areas; the number of store openings
and closings; the profitability of certain product lines; capital expenditures
and future liquidity; liability and other claims asserted against the Company;
uncertainties related to the Internet and the Company's Internet operations; 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 obligation to update any such factors or to publicly
announce the results of any of the forward-looking statements contained herein
to reflect future events or developments.


                                       4


<PAGE>


                                                                       2002 BAM!
                                                                 BOOKS-A-MILLION
                                                                   ANNUAL REPORT


MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION & RESULTS OF OPERATIONS


GENERAL

The Company was founded in 1917 and currently operates 204 retail bookstores,
including 157 superstores, concentrated in the southeastern United States.

The Company's growth strategy is focused on opening superstores in new and
existing market areas, particularly in the Southeast. In addition to opening new
stores, management intends to continue its practice of reviewing the
profitability trends and prospects of existing stores and closing or relocating
underperforming stores or converting stores to different formats.

CRITICAL ACCOUNTING POLICIES

INVENTORIES

Cost is assigned to store and warehouse inventories using the retail inventory
method. The valuation of store and warehouse inventories is determined by
applying a calculated cost-to-retail ratio to the retail value of inventories.
The retail method is an averaging method that is widely used within the retail
industry. Such valuations require certain significant management estimates and
judgments involving markdowns and shrinkage of inventories. These practices
affect ending inventories at cost as well as the resulting gross margins and
inventory turnover ratios.

Physical inventories are taken throughout the course of the fiscal period. Store
inventory counts are performed by an independent inventory service while
warehouse inventory counts are performed internally. All physical inventory
counts are taken and reconciled to the general ledger. The Company's accrual for
inventory shortages is based upon historical inventory shortage results that are
subject to certain estimates and averages.

ACCRUED EXPENSES

On a monthly basis, certain material expenses are estimated and accrued to
properly record those expenses in the period incurred. Such estimates are made
for payroll and employee benefits costs, occupancy costs and advertising
expenses among other items. These estimates are made based upon current and
historical results. Differences in management's estimates and assumptions could
result in accruals that are materially different from the actual result.

RESULTS OF OPERATIONS

The following table sets forth statement of operations data expressed as a
percentage of net sales for the periods presented.

<TABLE>
<CAPTION>
                                                                    Fiscal Year Ended
                                                          2/2/02         2/3/01        1/29/00
-----------------------------------------------------------------------------------------------
<S>                                                       <C>            <C>           <C>
Net sales                                                 100.0%         100.0%         100.0%
Gross profit                                               26.7%          26.1%          26.6%
  Operating, selling, and administrative expenses          20.7%          20.2%          19.8%
  Depreciation and amortization                             3.5%           3.5%           3.4%
Operating profit                                            2.5%           2.4%           3.4%
  Interest expense, net                                     1.0%           1.2%           1.0%
Income before income taxes                                  1.5%           1.2%           2.4%
  Provision for income taxes                                0.6%           0.5%           0.9%
Net income                                                  0.9%           0.7%           1.5%
</TABLE>


FISCAL 2002 COMPARED TO FISCAL 2001

Net sales increased $24.3 million, or 5.8%, to $442.9 million in fiscal 2002
from $418.6 million in fiscal 2001. Comparable store sales decreased 2.8% when
compared to the same 52-week period last year. Excluding the effects of
collectibles, comparable store sales increased 0.3% for the period. The increase
in net sales resulted from net sales generated by 18 stores acquired from Crown
Books Corporation in March 2001 combined with seven new stores opened during
fiscal 2002. In addition, the Company closed six underperforming stores in
fiscal 2002.

The factors affecting the future trend of comparable store sales include, among
others, overall demand for products the Company sells, the Company's marketing
programs, pricing strategies, store operations and competition.


                                       5

<PAGE>
2002 BAM!
BOOKS-A-MILLION
ANNUAL REPORT


MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION & RESULTS OF OPERATIONS

Gross profit increased $9.0 million, or 8.3%, to $118.2 million in fiscal 2002
from $109.2 million in fiscal 2001. Gross profit as a percentage of net sales
increased to 26.7% in fiscal 2002 from 26.1% in fiscal 2001, primarily due to
improved sales mix and less promotional activity, combined with improved
inventory management.

Operating, selling and administrative expenses increased $7.1 million, or 8.4%,
to $91.8 million in fiscal 2002, from $84.7 million in fiscal 2001. Operating,
selling and administrative expenses as a percentage of net sales increased to
20.7% in fiscal 2002 from 20.2% in fiscal 2001, primarily due to the lower
comparable store sales for fiscal 2002.

Depreciation and amortization increased $0.8 million, or 5.3% to $15.6 million
in fiscal 2002 from $14.8 million in fiscal 2001. Depreciation and amortization
as a percentage of net sales was even with last year at 3.5%.

Net interest expense decreased $0.4 million, or 7.8%, to $4.4 million in fiscal
2002 from $4.8 million in fiscal 2001, primarily due to lower average interest
rates during fiscal 2002.

FISCAL 2001 COMPARED TO FISCAL 2000

Net sales increased $14.5 million, or 3.6%, to $418.6 million in fiscal 2001
from $404.1 million in fiscal 2000. Comparable store sales decreased 2.9% for
fiscal year 2001. The increase in net sales resulted from net sales generated by
twelve new stores opened during fiscal 2001, and five new stores opened in the
second half of fiscal 2000. In addition, the Company closed seven
underperforming stores in fiscal 2001.

The factors affecting the future trend of comparable store sales include, among
others, overall demand for products the Company sells, the Company's marketing
programs, pricing strategies, store operations and competition.

Gross profit increased $1.5 million, or 1.4%, to $109.2 million in fiscal 2001
from $107.7 million in fiscal 2000. Gross profit as a percentage of net sales
decreased to 26.1% in fiscal 2001 from 26.6% in fiscal 2000, primarily due to
increased occupancy costs and higher warehouse distribution costs as a
percentage of net sales.

Operating, selling and administrative expenses increased $4.6 million, or 5.7%,
to $84.7 million in fiscal 2001, from $80.1 million in fiscal 2000. Operating,
selling and administrative expenses as a percentage of net sales increased to
20.2% in fiscal 2001 from 19.8% in fiscal 2000, primarily due to the lower
comparable store sales for fiscal 2001.

Depreciation and amortization increased $1.0 million, or 7.0%, to $14.8 million
in fiscal 2001 from $13.8 million in fiscal 2000. Depreciation and amortization
as a percentage of net sales increased to 3.5% in fiscal 2001 from 3.4% in
fiscal 2000, primarily due to increased investment in information systems
technology.

Net interest expense increased $0.6 million, or 14.1%, to $4.8 million in fiscal
2001 from $4.2 million in fiscal 2000, primarily due to increased average
borrowings during fiscal 2001.

SEASONALITY AND QUARTERLY RESULTS

Similar to many retailers, the Company's business is seasonal, with its highest
retail sales, gross profit and net income historically occurring in the fourth
fiscal quarter. This seasonal pattern reflects the increased demand for books
and gifts experienced during the year-end holiday selling season. Working
capital requirements are generally highest during the third fiscal quarter and
the early part of the fourth fiscal quarter due to the seasonality of the
Company's business.

In addition, the Company's 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. New stores require the Company to incur
pre-opening expenses and often require several months of operation before
generating acceptable sales volumes. Accordingly, the addition of a large number
of new stores in a particular quarter could adversely affect the Company's
results of operations for that quarter.


                                       6

<PAGE>

                                                                       2002 BAM!
                                                                 BOOKS-A-MILLION
                                                                   ANNUAL REPORT


MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION & RESULTS OF OPERATIONS

LIQUIDITY AND CAPITAL RESOURCES

The Company has a revolving credit facility that allows borrowings up to $90.0
million, for which no principal repayments are due until the facility expires on
June 18, 2003, and an unsecured working capital line of credit for $15.0
million, which is subject to annual renewal. The Company is currently
negotiating to renew its credit facilities until fiscal year 2006. The new
facility should be completed by the second quarter of fiscal 2003. As of
February 2, 2002, $31.1 million was outstanding under these facilities combined.
Additionally, as of February 2, 2002, the Company has outstanding borrowings
associated with the issuance of an industrial revenue bond totaling $7.5
million.

The Company's capital expenditures totaled $11.7 million in fiscal 2002. These
expenditures were primarily used for new store openings, renovation and
improvements to existing stores, warehouse distribution purposes, and investment
in management information systems. During March 2001, the Company acquired
inventory and lease rights of 18 retail stores from Crown Books Corporation for
$6.5 million. The stores are located in the Chicago, Illinois and Washington,
D.C. metropolitan areas. The results of operations for these stores were
reflected in the consolidated financial statements beginning in March 2001.
Management estimates that capital expenditures for fiscal 2003 will be
approximately $18.3 million and that such amounts will be used primarily for new
stores, renovation and improvements to existing stores, and investments in
management information systems. Management believes that existing cash balances
and net cash from operating activities, together with borrowings under the
Company's credit facilities, will be adequate to finance the Company's planned
capital expenditures and to meet the Company's working capital requirements for
fiscal 2003.

The following table lists the aggregate maturities of various classes of
obligations and expiration amounts of various classes of commitments related to
Books-A-Million, Inc. at February 2, 2002 (in thousands):


<TABLE>
<CAPTION>
                                                      Payments Due Under Contractual Obligations
                                 ------------------------------------------------------------------------------
                                   Total        FY 2003      FY 2004       FY  2005      FY 2006        FY 2007
---------------------------------------------------------------------------------------------------------------
<S>                              <C>           <C>           <C>           <C>           <C>           <C>
Notes payable                    $    699      $    499      $    200      $      0      $      0      $      0
Long-term debt - working
  capital line of credit            6,146            --         6,146            --            --            --
Long-term debt - revolving
  credit facility                  25,000            --        25,000            --            --            --
Long-term debt - industrial
  revenue bond                      7,500            --            --         7,500            --            --
                                 ------------------------------------------------------------------------------
Subtotal of debt                   39,345           499        31,346         7,500             0             0
Operating leases                  117,056        29,492        26,354        23,953        21,246        16,011
                                 ------------------------------------------------------------------------------
Total of obligations             $156,401      $ 29,991      $ 57,700      $ 31,453      $ 21,246      $ 16,011
                                 ==============================================================================
</TABLE>

RELATED PARTY ACTIVITIES

As discussed in Note 6 of Notes to Consolidated Financial Statements, the
Company conducts business with other entities in which certain officers,
directors and principal stockholders of the Company have controlling ownership
interests. The most significant related party transactions include inventory
purchases from, and sales to, related parties. Related party inventory purchases
decreased in fiscal 2002 due to lower music purchases. Related party sales
transactions decreased in fiscal 2002 due to lower sales of bargain books.
Management believes the terms of these related party transactions are
substantially equivalent to those available from unrelated parties and,
therefore, have no significant impact on gross profit.

FINANCIAL POSITION

During fiscal 2002, the Company acquired 18 stores from Crown Books Corporation
and opened seven new stores. The store openings resulted in increased inventory
balances at February 2, 2002, as compared to February 3, 2001. However, average
inventory balances per store decreased in fiscal 2002 due to strong inventory
control. Reduced capital expenditures, as compared to fiscal 2001, and the
closing of six stores during fiscal 2002 resulted in lower net property and
equipment balances at February 2, 2002, as compared to February 3, 2001.


                                       7
<PAGE>


2002 BAM!
BOOKS-A-MILLION
ANNUAL REPORT


CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                                        As Of
 (In thousands)                                                                                 2/2/02         2/3/01
------------------------------------------------------------------------------------------------------------------------
<S>                                                                                          <C>              <C>
ASSETS
CURRENT ASSETS:
  Cash and temporary cash investments                                                        $    5,539       $    5,282
  Accounts receivable, net of allowance for doubtful accounts of
    $785 and $787, respectively                                                                   8,937            8,417
  Related party receivables                                                                         967            2,358
  Inventories                                                                                   210,853          205,986
  Prepayments and other                                                                           5,680            4,521
  Deferred income taxes                                                                           5,093            3,791
                                                                                             ---------------------------
      Total Current Assets                                                                      237,069          230,355
                                                                                             ---------------------------
PROPERTY AND EQUIPMENT:
  Land                                                                                              628              628
  Buildings                                                                                       6,106            5,986
  Equipment                                                                                      54,119           48,252
  Furniture and fixtures                                                                         40,394           38,350
  Leasehold improvements                                                                         43,213           41,562
  Construction in process                                                                           968              123
                                                                                             ---------------------------
    Gross property and equipment                                                                145,428          134,901
  Less accumulated depreciation and amortization                                                 88,712           74,242
                                                                                             ---------------------------
    Net Property and Equipment                                                                   56,716           60,659
                                                                                             ---------------------------

OTHER ASSETS:
  Goodwill, net                                                                                   1,368            1,410
  Other                                                                                             492              117
                                                                                             ---------------------------
      Total Other Assets                                                                          1,860            1,527
                                                                                             ---------------------------
      TOTAL ASSETS                                                                           $  295,645       $  292,541
                                                                                             ===========================
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
  Accounts payable:
    Trade                                                                                    $   98,747       $   95,006
    Related party                                                                                 5,661            7,504
  Accrued income taxes                                                                            2,674              650
  Accrued expenses                                                                               24,801           22,611
  Current portion of long-term debt                                                                 499              460
                                                                                             ---------------------------
      Total Current Liabilities                                                                 132,382          126,231
                                                                                             ---------------------------
LONG-TERM DEBT                                                                                   38,846           41,526
                                                                                             ---------------------------
DEFERRED INCOME TAXES                                                                             2,042            1,554
                                                                                             ---------------------------
COMMITMENTS AND CONTINGENCIES                                                                        --               --
                                                                                             ---------------------------
STOCKHOLDERS' INVESTMENT:
  Preferred stock, $.01 par value; 1,000,000 shares authorized, no shares outstanding                --               --
  Common stock, $.01 par value; 30,000,000 shares authorized, 18,138,963 and 18,092,001
    shares issued at February 2, 2002 and February 3, 2001, respectively                            181              181
  Additional paid-in capital                                                                     70,719           70,634
  Treasury stock at cost (2,010,050 shares at February 2, 2002 and
      597,600 shares at February 3, 2001)                                                        (5,271)          (1,563)
  Accumulated other comprehensive loss, net of tax                                               (1,217)              --
  Retained earnings                                                                              57,963           53,978
                                                                                             ---------------------------
      Total Stockholders' Investment                                                            122,375          123,230
                                                                                             ---------------------------
      TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT                                         $  295,645       $  292,541
                                                                                             ===========================
</TABLE>

The accompanying notes are an integral part of these consolidated balance
sheets.


                                       8


<PAGE>


                                                                       2002 BAM!
                                                                 BOOKS-A-MILLION
                                                                   ANNUAL REPORT


CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                                         Fiscal Year Ended
(In thousands, except per share data)                           2/2/02         2/3/01         1/29/00
-------------------------------------------------------------------------------------------------------
                                                               52 Weeks       53 Weeks        52 Weeks
<S>                                                          <C>             <C>             <C>
Net sales                                                    $  442,886      $  418,606      $  404,057
Cost of products sold, including warehouse
  distribution and store occupancy costs(1)                     324,655         309,397         296,316
                                                             ------------------------------------------
     GROSS PROFIT                                               118,231         109,209         107,741

Operating, selling and administrative expenses                   91,799          84,667          80,117
                                                             ------------------------------------------
     EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION
       AND AMORTIZATION                                          26,432          24,542          27,624

Depreciation and amortization                                    15,575          14,793          13,830
                                                             ------------------------------------------
     OPERATING PROFIT                                            10,857           9,749          13,794

Interest expense, net                                             4,429           4,804           4,211
                                                             ------------------------------------------

     Income before income taxes                                   6,428           4,945           9,583

Provision for income taxes                                        2,443           1,879           3,641
                                                             ------------------------------------------
     NET INCOME                                              $    3,985      $    3,066      $    5,942
                                                             ==========================================

Weighted average number of shares outstanding - basic            16,667          17,955          17,981
                                                             ------------------------------------------
NET INCOME PER SHARE - BASIC                                 $     0.24      $     0.17      $     0.33
                                                             ==========================================

Weighted average number of shares outstanding - diluted          16,945          17,991          18,250
                                                             ------------------------------------------
NET INCOME PER SHARE - DILUTED                               $     0.24      $     0.17      $     0.33
                                                             ==========================================
</TABLE>

(1)      Inventory purchases from related parties were $31,058, $34,128 and
         $34,548, respectively, for the periods presented above.

The accompanying notes are an integral part of these consolidated statements.


                                       9

<PAGE>


2002 BAM!
BOOKS-A-MILLION
ANNUAL REPORT


CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT


<TABLE>
<CAPTION>
                                                                                                    Accumulated
                                           Common Stock    Additional   Treasury Stock                  Other          Total
                                         ----------------   Paid-In     ---------------   Retained  Comprehensive   Stockholders'
(In thousands)                            Shares   Amount   Capital     Shares   Amount    Earnings  Income (Loss)   Investment
---------------------------------------------------------------------------------------------------------------------------------
<S>                                      <C>     <C>       <C>          <C>    <C>        <C>       <C>            <C>
BALANCE, JANUARY 30, 1999                18,017  $    180  $ 70,124        82  $   (252)  $ 44,970  $          0   $    115,022
  Net income                                 --        --        --        --        --      5,942            --          5,942
  Issuance of stock for employee
    stock purchase plan                      16        --        77        --        --         --            --             77
  Exercise of stock options                  48         1       306        --        --         --            --            307
  Tax benefit from exercise
    of stock options                         --        --        57        --        --         --            --             57
                                         --------------------------------------------------------------------------------------
BALANCE, JANUARY 29, 2000                18,081       181    70,564        82      (252)    50,912            --        121,405
  Net income                                 --        --        --        --        --      3,066            --          3,066
  Purchase of treasury stock                 --        --        --       516    (1,311)        --            --         (1,311)
  Issuance of stock for employee
    stock purchase plan                      11        --        70        --        --         --            --             70
                                         --------------------------------------------------------------------------------------

BALANCE, FEBRUARY 3, 2001                18,092       181    70,634       598    (1,563)    53,978            --        123,230
  Net income                                 --        --        --        --        --      3,985            --          3,985
  Cumulative effect of accounting
    change for derivative instruments        --        --        --        --        --         --          (465)          (465)
  Unrealized loss on
    derivative instruments                   --        --        --        --        --         --          (752)          (752)
                                                                                                                   ------------
  Subtotal comprehensive income              --        --        --        --        --         --            --          2,768
                                                                                                                   ------------
  Purchase of treasury stock                 --        --        --     1,412    (3,708)        --            --         (3,708)
  Issuance of stock for employee
    stock purchase plan                      46        --        83        --        --         --            --             83
  Exercise of stock options                   1        --         2        --        --         --            --              2
                                         --------------------------------------------------------------------------------------
BALANCE, FEBRUARY 2, 2002                18,139  $    181  $ 70,719     2,010  $ (5,271)  $ 57,963  $     (1,217)  $    122,375
                                         ======================================================================================
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

                                       10

<PAGE>

                                                                       2002 BAM!
                                                                 BOOKS-A-MILLION
                                                                   ANNUAL REPORT

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                            Fiscal Year Ended
(Dollars in thousands)                                              2/2/02         2/3/01        1/29/00
--------------------------------------------------------------------------------------------------------
<S>                                                             <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                    $    3,985     $    3,066     $    5,942
  Adjustments to reconcile net income to net
    cash provided by operating activities:

     Depreciation and amortization                                  15,575         14,793         13,830
     (Gain) loss on sale of property                                   342          1,237          1,156
     Deferred income tax provision (credit), net                       (53)           440           (103)
     (Increase) decrease in assets:
       Accounts receivable                                            (520)           364          3,501
       Related party receivables                                     1,391          1,803           (163)
       Inventories                                                   1,047        (11,362)       (19,413)
       Prepayments and other                                        (1,173)        (1,171)          (444)
     Increase (decrease) in liabilities:

       Accounts payable                                              1,898           (995)         2,315
       Accrued income taxes                                          2,024         (1,442)         1,673
       Accrued expenses                                                212          1,641          4,178
                                                                ----------------------------------------
         Total adjustments                                          20,743          5,308          6,530
                                                                ----------------------------------------
         Net cash provided by operating activities                  24,728          8,374         12,472
                                                                ----------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures                                             (11,709)       (12,417)       (13,462)
  Acquisition of certain assets                                     (6,532)            --             --
  Proceeds from sale of property and equipment                          35             66          1,742
                                                                ----------------------------------------
         Net cash used in investing activities                     (18,206)       (12,351)       (11,720)
                                                                ----------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from exercise of stock options and
    purchase of shares under employee stock purchase plan               85             70            384
  Purchase of treasury stock                                        (3,708)        (1,311)            --
  Issuance of other debt                                                --             --          1,409
  Repayments of other debt                                            (449)          (262)            --
  Borrowings under credit facilities                               186,004        176,592        169,103
  Repayments under credit facilities                              (188,197)      (170,750)      (171,050)
                                                                ----------------------------------------
         Net cash provided by (used in) financing activities        (6,265)         4,339           (154)
                                                                ----------------------------------------
NET INCREASE IN CASH AND TEMPORARY CASH INVESTMENTS                    257            362            598
CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING OF YEAR             5,282          4,920          4,322
                                                                ----------------------------------------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF YEAR              $    5,539     $    5,282     $    4,920
                                                                ========================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid during the year for:
    Interest                                                    $    4,128     $    4,904     $    4,318
    Income taxes, net of refunds                                $      955     $    2,881     $    1,882
                                                                ========================================
</TABLE>

The accompanying notes are an integral part of these consolidated statements.


                                       11

<PAGE>
2002 BAM!
BOOKS-A-MILLION
ANNUAL REPORT


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BUSINESS

Books-A-Million, Inc. and its subsidiaries (the "Company") are principally
engaged in the sale of books, magazines and related items through a chain of
retail bookstores. The Company presently operates 204 bookstores in 18 states
and the District of Columbia, which are predominantly located in the
southeastern United States. The Company also serves as a wholesale book
distributor for certain other retailers and wholesalers and operates a retail
Internet website. The Company presently consists of Books-A-Million, Inc., and
its wholly owned subsidiaries, American Wholesale Book Company, Inc. ("American
Wholesale"), and American Internet Services, Inc. ("AIS"). All significant
intercompany balances and transactions have been eliminated in consolidation.

BASIS OF PRESENTATION

The Company operates on a 52-53 week year, with the fiscal year ending on the
Saturday closest to January 31. Fiscal years 2000 and 2002 were 52-week
periods. Fiscal year 2001 was a 53-week period.

USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

INVENTORIES

Inventories are valued at the lower of cost or market, using the retail method,
with cost determined on a first-in, first-out ("FIFO") basis and market based
on the lower of replacement cost or estimated realizable value. The Company
includes certain distribution and other expenses in its inventory costs.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Depreciation on equipment and
furniture and fixtures is provided on the straight-line method over the
estimated service lives, which range from three to seven years. Depreciation of
leasehold improvements is provided on the straight-line basis over the periods
of the applicable leases.

Maintenance and repairs are charged to expense as incurred. Costs of renewals
and betterments are capitalized by charges to property accounts and depreciated
using applicable annual rates. The cost and accumulated depreciation of assets
sold, retired or otherwise disposed of are removed from the accounts, and the
related gain or loss is credited or charged to income.

GOODWILL

The Company
continually evaluates whether events or circumstances have occurred that
indicate the remaining useful life of goodwill may warrant revision. The
Company's policy is to recognize any impairment as a charge to current net
income.

STORE OPENING COSTS

Non-capital expenditures incurred in preparation for opening new retail stores
are expensed as incurred.

INSURANCE ACCRUALS

The Company is subject to large deductibles under its workers' compensation
policy. Insurance coverage is maintained in amounts management considers
adequate. Amounts are accrued currently for the estimated cost of claims
incurred, both reported and unreported.

INCOME TAXES

The Company recognizes deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax assets and
liabilities are determined based on the differences between the financial
statement and tax bases of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to reverse.

STATEMENTS OF CASH FLOWS

For purposes of the consolidated statements of cash flows, the Company
considers all short-term, highly liquid investments with original maturities of
90 days or less to be temporary cash investments.


                                      12

<PAGE>

                                                                      2002 BAM!
                                                                BOOKS-A-MILLION
                                                                  ANNUAL REPORT


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


EARNINGS PER SHARE

Basic net income per share ("EPS") excludes dilution and is computed by
dividing income available to common shareholders by the weighted-average number
of common shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common
stock are exercised, converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the Company. Diluted EPS has
been computed based on the average number of shares outstanding including the
effect of outstanding stock options, if dilutive, in each respective year. A
reconciliation of the weighted average shares for basic and diluted EPS is as
follows:

<TABLE>
<CAPTION>
                                                                    Fiscal Year Ended
(In thousands)                                       2/2/02            2/3/01             1/29/00
--------------------------------------------------------------------------------------------------

                                                  <C>               <C>                 <C>
Weighted average shares outstanding:
  Basic                                              16,667            17,955              17,981
  Dilutive effect of stock options outstanding          278                36                 269
                                                     ---------------------------------------------
  Diluted                                            16,945            17,991              18,250
                                                     =============================================
</TABLE>

Options outstanding of 1,773,000, 1,391,000 and 464,000 for the years ended
February 2, 2002, February 3, 2001 and January 29, 2000, respectively, were not
included in the table above as they were anti-dilutive.

DISCLOSURE OF FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards ("SFAS") No. 107, "Disclosure About
Fair Value of Financial Instruments," requires all businesses to disclose the
fair value of financial instruments, both assets and liabilities recognized and
not recognized on the balance sheet, for which it is practicable to estimate
fair value. Based upon their remaining term to maturity and the current
interest rate environment, the estimated fair values of the Company's financial
instruments recognized on the balance sheet at February 2, 2002 and February 3,
2001 approximate their carrying values at those dates.

LEGAL

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

ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities," amended by
SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133," and SFAS No. 138,
"Accounting for Certain Derivatives and Certain Hedging Activities." SFAS No.
133 establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value. SFAS No. 133 requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the hedged
item in the income statement, and requires that a company must formally
document, designate, and assess the effectiveness of transactions that receive
hedge accounting. The adoption of these statements may increase volatility of
earnings. The Company adopted these statements on February 4, 2001. The
adoption of these statements resulted in a cumulative after-tax increase to
other comprehensive loss, pertaining to prior years, of $465,000 and an
after-tax increase to other comprehensive loss, for the current year, of
$752,000, of which $69,000 reduced net income for the period ended February 2,
2002. The $2.0 million liability related to the derivatives is reflected in
Accrued Expenses, and the relative tax benefit of $761,000 is reflected in
Current Deferred Tax Assets in the accompanying condensed consolidated balance
sheet at February 2, 2002.

RECENT ACCOUNTING PRONOUNCEMENTS

In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statements of Financial Accounting Standards ("SFAS") No. 141, "Business
Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets."
Business combinations initiated after June 30, 2001, must be accounted for
under the provisions of these two statements. The Company must also apply these
provisions to previously recorded business combinations as of January 1, 2002.
The principal provisions of SFAS No. 141 and SFAS No. 142 are as follows:


                                      13

<PAGE>

2002 BAM!
BOOKS-A-MILLION
ANNUAL REPORT


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


-        All business combinations initiated after June 30, 2001, will be
         accounted for using the "purchase" method, under which the
         identifiable assets and liabilities of the acquired business are
         recorded at their respective fair market values with the residual
         amount being recorded as goodwill. The "pooling-of-interests" method,
         under which the financial statements of the acquirer and the acquiree
         were combined as if the two businesses had always been one, will no
         longer be used.

-        Goodwill and identifiable intangible assets will no longer be
         amortized over a maximum period of forty years. Goodwill will not be
         amortized but will instead be tested for impairment annually or upon
         the occurrence of certain "triggering events". Identifiable intangible
         assets will be amortized over their expected useful lives; those with
         indefinite expected useful lives will not be amortized. Identifiable
         intangible assets will continue to be tested for impairment under
         previously existing accounting standards.

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

SFAS No. 144 superseded SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," and the
accounting and reporting provisions of Accounting Principles Board Opinion No.
30, "Reporting the Results of Operations and Transactions," "Reporting the
Effects of Disposal of a Segment of a Business," and "Extraordinary, Unusual
and Infrequently Occurring Events and Transactions" for the disposal of a
segment of a business. SFAS No. 144 also amended Accounting Research Bulletin
No. 51, "Consolidated Financial Statements," to eliminate the exception to
consolidation for a subsidiary for which control is likely to be temporary.

The Company adopted SFAS No. 142, SFAS No. 143 and SFAS No. 144 on February 3,
2002, and expects the adoption of these standards to have no material impact on
financial condition, results of operations or cash flows.

PRIOR YEAR RECLASSIFICATIONS

Certain prior year amounts have been reclassified to conform to the current
year presentation.

2. INCOME TAXES

A summary of the components of the income tax provision is as follows (dollars
in thousands):

<TABLE>
<CAPTION>
                                                       Fiscal Year Ended
                                           2/2/02            2/3/01           1/29/00
---------------------------------------------------------------------------------------
<S>                                       <C>               <C>               <C>
Current:
  Federal                                 $ 2,410           $ 1,386           $ 3,448
  State                                        86                53               296
                                          ---------------------------------------------
                                            2,496             1,439             3,744
                                          ---------------------------------------------
Deferred taxes arising from:
  Depreciation                                540              (871)            1,270
  Accruals                                   (113)              593              (522)
  Inventory                                  (366)             (110)             (113)
  Other                                      (114)              828              (738)
                                          ---------------------------------------------
                                              (53)              440              (103)
                                          ---------------------------------------------
Provision for income taxes                $ 2,443           $ 1,879           $ 3,641
                                          =============================================
</TABLE>

A reconciliation of the federal statutory income tax rate to the effective
income tax rate is as follows:

<TABLE>
<CAPTION>
                                                         Fiscal Year Ended
                                              2/2/02         2/3/01         1/29/00
------------------------------------------------------------------------------------

                                           <C>            <C>            <C>
Federal statutory income tax rate              34.0%          34.0%          34.0%
State income tax provision                      1.3%           1.0%           2.8%
Other                                           2.7%           3.0%           1.2%
                                               -------------------------------------
Effective income tax rate                      38.0%          38.0%          38.0%
                                               =====================================
</TABLE>


                                      14

<PAGE>

                                                                      2002 BAM!
                                                                BOOKS-A-MILLION
                                                                  ANNUAL REPORT


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Temporary differences which created deferred tax assets and liabilities at
February 2, 2002 and February 3, 2001, are detailed below (DOLLARS IN
THOUSANDS):

<TABLE>
<CAPTION>
                                                  AS OF 2/2/02                      As of 2/3/01
                                           ------------------------------------------------------------
                                           CURRENT       NONCURRENT          Current       Noncurrent
-------------------------------------------------------------------------------------------------------
<S>                                        <C>           <C>                 <C>           <C>
Depreciation                                $   --          $(1,944)          $   --          $(1,404)
Accruals                                     2,656               --            2,543               --
Interest rate swap                             761               --               --               --
Inventory                                    1,354               --              988               --
Other                                          322              (98)             260             (150)
                                            ---------------------------------------------------------
Deferred tax asset (liability)              $5,093          $(2,042)          $3,791          $(1,554)
                                            =========================================================
</TABLE>

No valuation allowance is deemed necessary by management, as the realization of
recorded deferred tax assets is considered more likely than not.

3. DEBT AND LINES OF CREDIT

The Company has a revolving credit facility that allows borrowings up to $90
million for which no principal repayments are due until the facility expires on
June 18, 2003, and an unsecured working capital line of credit for $15 million,
which is subject to annual renewal. Both credit facilities have certain
financial and non-financial covenants with which the Company is in compliance.
As of February 2, 2002 and February 3, 2001, $31.1 million and $33.3 million,
respectively, were outstanding under these credit facilities. The maximum and
average outstanding balances during fiscal 2002 were $77.0 million and $63.4
million, respectively. The outstanding borrowings as of February 2, 2002, had
interest rates ranging from 2.75% to 3.13%. The Company is currently
negotiating to renew its credit facilities until fiscal year 2006. The new
facility should be completed by the second quarter of fiscal year 2003.

The Company is subject to interest rate fluctuations involving its credit
facilities. However, the Company uses both fixed and variable debt to manage
this exposure. On February 9, 1998, the company entered into an interest rate
swap agreement with a five year term that carries a notional principal amount
of $30.0 million. The swap effectively fixes the interest rate on $30.0 million
of variable rate debt at 6.78%. The swap agreement expires on February 11,
2003. The counter party to the interest rate swap is one of the Company's
primary banks. The Company believes the credit and liquidity risk of the
counter party failing to meet its obligation is remote as the Company settles
its interest position with the bank on a quarterly basis.

During fiscal 1996 and fiscal 1995, the Company financed the acquisition and
construction of certain warehouse and distribution facilities through loans,
obtained from the proceeds of an industrial development revenue bond (the
"Bond"), which are secured by a mortgage interest in these facilities. As of
February 2, 2002 and February 3, 2001, there was $7.5 million of borrowings
outstanding under these arrangements, at variable rates. The Bond has a
maturity date of December 1, 2019, with a purchase provision obligating the
Company to repurchase the Bond on May 11, 2005, unless extended by the
bondholder. Such an extension may be renewed annually by the bondholder, at the
Company's request, to a date no more than five years from the renewal date. The
Company maintains a $7.5 million interest rate swap that effectively fixes the
interest rate on the Bond at 7.98%. The swap was entered into in May 1996 and
has a term of ten years.

4. LEASES

The Company leases the premises for its retail bookstores under operating
leases, which expire in various years through the year 2013. Many of these
leases contain renewal options and require the Company to pay executory costs
(such as property taxes, maintenance, and insurance). In addition to fixed
minimum rentals, some of the Company's leases require contingent rentals based
on a percentage of sales, which the Company records throughout the year based
upon best available information.

The Company also leases certain office, warehouse and retail store space from
related parties. Rental expense under these leases was approximately $651,000,
$658,000 and $674,000 in fiscal 2002, 2001 and 2000, respectively. Total
minimum future rental payments under these leases are $902,000.

Minimum future rental payments under non-cancelable operating leases having
remaining terms in excess of one year as of February 2, 2002, are as follows
(in thousands):

<TABLE>
<CAPTION>
                  Fiscal Year
                  ---------------------------------
                  <S>                    <C>
                  2003                   $  29,492
                  2004                      26,354
                  2005                      23,953
                  2006                      21,246
                  2007                      16,011
                  Subsequent years          31,942
                                          --------
                  Total                   $148,998
                                          ========
</TABLE>


                                      15

<PAGE>

2002 BAM!
BOOKS-A-MILLION
ANNUAL REPORT


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Rental expense for all operating leases consisted of the following (in
thousands):

<TABLE>
<CAPTION>
                                            Fiscal Year Ended
                                2/2/02            2/3/01          1/29/00
--------------------------------------------------------------------------
<S>                             <C>              <C>              <C>
Minimum rentals                 $28,880          $26,084          $23,458
Contingent rentals                  595              496              596
                                ------------------------------------------
Total                           $29,475          $26,580          $24,054
                                ==========================================
</TABLE>

5. EMPLOYEE BENEFIT PLANS

401(K) PROFIT-SHARING PLAN

The Company and its subsidiaries maintain a 401(k) plan covering all employees
who have completed 12 months of service and who are at least 21 years of age,
and permit participants to contribute from 2% to 15% of compensation to the
plan. Company matching and supplemental contributions are made at management's
discretion. The expense under this plan was $417,000, $335,000 and $554,000 in
fiscal 2002, 2001 and 2000, respectively.

STOCK OPTION PLAN

The Company maintains a stock option plan reserving 3,800,000 shares of the
Company's common stock for grants to executive officers, directors, and key
employees. Prior to January 9, 2001, all options granted to employees become
exercisable in equal annual increments over a five-year period and expire on
the sixth anniversary of the date of grant. On January 9, 2001, the
Compensation Committee approved an amendment to the Stock Option Plan that
allows all options granted after that date to vest in equal annual increments
over a three-year period and expire on the tenth anniversary of the date of the
grant. All stock options have exercise prices generally equal to the fair
market value of the common stock on the date of grant. A summary of the status
of the Company's stock option plan is as follows (shares in thousands):

<TABLE>
<CAPTION>
                                                                               Fiscal Year Ended
                                         -----------------------------------------------------------------------------------------
                                             FEBRUARY 2, 2002             February 3, 2001                 January 29, 2000
                                         -----------------------------------------------------------------------------------------
                                                         WEIGHTED                     Weighted                        Weighted
                                                          AVERAGE                      Average                         Average
                                         SHARES       EXERCISE PRICE  Shares       Exercise Price      Shares      Exercise Price
----------------------------------------------------------------------------------------------------------------------------------
<S>                                      <C>          <C>             <C>          <C>                 <C>         <C>
Outstanding at beginning of year          2,192           $5.79        1,562           $8.26           1,335           $8.25
Granted                                     439            3.10          804            1.87             632            8.21
Exercised                                    (1)           1.69           --              --             (49)           6.31
Forfeited                                  (150)           5.89         (174)           9.84            (356)           8.44
                                          ----------------------------------------------------------------------------------------
Outstanding at end of year                2,480           $5.29        2,192           $5.79           1,562           $8.26
                                          ----------------------------------------------------------------------------------------
Exercisable at end of year                1,107           $6.14          736           $7.57             363           $8.62
                                          ----------------------------------------------------------------------------------------
Weighted average fair value
  of options granted                                      $3.03                       $ 1.75                           $7.33
                                          ========================================================================================
</TABLE>

During fiscal years 2002, 2001 and 2000, the Company recognized tax benefits
related to the exercise of stock options in the amount of $0, $0 and $57,000,
respectively. The tax benefits were credited to paid-in capital in the
respective years.

The following table summarizes information about stock options outstanding at
February 2, 2002 (shares in thousands):

<TABLE>
<CAPTION>
                                            Options Outstanding                                Options Exercisable
                        ------------------------------------------------------------------------------------------------
                                                  Weighted
                            Number                 Average                                   Number
                        Outstanding at            Remaining              Weighted        Exercisable at     Weighted
   Range of               February 2,            Contractual              Average          February 2,      Average
Exercise Price               2002                Life (Years)          Exercise Price         2002       Exercise Price
------------------------------------------------------------------------------------------------------------------------
<S>                     <C>                      <C>                   <C>               <C>             <C>
$1.38 - $ 5.88               1,625                  7.12                   $3.24               690           $4.11
$5.89 - $13.00                855                   3.40                   $9.19               417           $9.50
</TABLE>

In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." SFAS No. 123 established financial accounting and reporting
standards for stock-based compensation and for transactions in which an entity
issues its equity


                                      16

<PAGE>

                                                                      2002 BAM!
                                                                BOOKS-A-MILLION
                                                                  ANNUAL REPORT


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


instruments to acquire goods and services for non-employees. In accordance with
SFAS No. 123, the Company continues to account for and record compensation
expense under APB No. 25. However, the Company adopted the disclosure only
provisions of SFAS No. 123, as required. If the Company had recorded
compensation expense in accordance with SFAS No. 123 under the fair value based
method, the Company's net income and net income per share would have been as
indicated below:

<TABLE>
<CAPTION>
                                                                  Fiscal Year Ended
(In thousands except per share data)              2/2/02            2/3/01                1/29/00
--------------------------------------------------------------------------------------------------
<S>                                               <C>               <C>                   <C>
Net income-as reported                            $3,985            $3,066                $5,942
Net income-pro forma                               2,852             2,024                 5,307
Net income per share-diluted, as reported           0.24              0.17                  0.33
Net income per share-diluted, pro forma             0.17              0.11                  0.29
</TABLE>

For the purposes of the foregoing calculation, the fair value of each option
grant is estimated on the date of grant using the Black-Scholes option pricing
model. The assumptions used in connection with this model show no expected
dividend yield, a six-year or ten-year expected life of the options, and an
expected stock price volatility rate of 1.21 with risk-free interest rates
ranging from 3.76% to 5.61%.

EMPLOYEE STOCK PURCHASE PLAN

The Company maintains an employee stock purchase plan under which 200,000
shares of the Company's common stock are reserved for purchase by employees at
85% of the fair market value of the common stock. Of the total reserved shares,
136,535 shares have been purchased as of February 2, 2002.

6. RELATED PARTY TRANSACTIONS

Certain stockholders of the Company have controlling ownership interests in
other entities with which the Company conducts business. Transactions between
the Company and these various other entities ("related parties") are summarized
in the following paragraphs and Note 4.

The Company purchases a portion of its inventories for resale from related
parties; such purchases amounted to $31,058,000, $34,128,000 and $34,548,000 in
fiscal 2002, 2001 and 2000, respectively. The Company sells a portion of its
inventories to related parties; such sales amounted to $1,905,000, $3,940,000
and $2,841,000 in fiscal 2002, 2001 and 2000, respectively. The Company also
purchases logistics services from related parties that amounted to $64,000,
$250,000 and $445,000 in fiscal 2002, 2001 and 2000, respectively.

7. ACQUISITION OF CERTAIN ASSETS

During March 2001, the Company acquired inventory and lease-rights of eighteen
stores from Crown Books Corporation for $6.5 million. The stores are located in
the Chicago, Illinois and Washington, D.C. metropolitan areas. The results of
operations for these stores were reflected in the consolidated financial
statements beginning in the first quarter of fiscal 2002.

8. COMMITMENTS AND CONTINGENCIES

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

9. INDEPENDENT PUBLIC AUDITORS

Arthur Andersen LLP was the Company's independent auditors for fiscal 2002 and
has been its independent auditors since its initial public offering in 1992.
The Company dismissed Arthur Andersen LLP as its independent auditors on April
26, 2002. The decision to dismiss Arthur Andersen as the Company's independent
auditors was recommended and approved by the Audit Committee. Arthur Andersen's
report on the Company's financial statements for the past two years did not
contain an adverse opinion or a disclaimer of opinion, and was not qualified or
modified as to uncertainty, audit scope or accounting principles. In addition,
during the two most recent fiscal years and since the end of fiscal year 2002,
there were no disagreements with Arthur Andersen on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreements, if not resolved to the satisfaction of Arthur
Andersen would have caused Arthur Andersen to make reference to the subject
matter of the disagreement in connection with its report.


                                      17

<PAGE>

2002 BAM!
BOOKS-A-MILLION
ANNUAL REPORT


REPORT OF INDEPENDENT ACCOUNTANTS


To Books-A-Million, Inc.:

We have audited the accompanying consolidated balance sheets of
Books-A-Million, Inc. (a Delaware corporation), and its subsidiaries as of
February 2, 2002 and February 3, 2001, and the related consolidated statements
of operations, stockholders' investment, and cash flows for each of the three
fiscal years in the period ended February 2, 2002. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Books-A-Million, Inc. and its
subsidiaries as of February 2, 2002 and February 3, 2001, and the results of
their operations and their cash flows for each of the three fiscal years in the
period ended February 2, 2002, in conformity with accounting principles
generally accepted in the United States.

As explained in Note 1 to the financial statements, effective February 4, 2001,
Books-A-Million, Inc. changed its method of accounting for derivative
instruments and hedging activities.



                                       ARTHUR ANDERSEN LLP


Birmingham, Alabama
March 19, 2002


                                      18

<PAGE>

                                                                      2002 BAM!
                                                                BOOKS-A-MILLION
                                                                  ANNUAL REPORT


SUMMARY OF QUARTERLY RESULTS (UNAUDITED)


<TABLE>
<CAPTION>
                                                                           FISCAL YEAR ENDED FEBRUARY 2, 2002
                                                 ---------------------------------------------------------------------------------
                                                   First            Second             Third            Fourth
(In thousands, except per share amounts)          Quarter           Quarter           Quarter           Quarter            Total
----------------------------------------------------------------------------------------------------------------------------------
<S>                                              <C>               <C>                <C>               <C>              <C>
Net sales                                        $ 97,490          $ 104,011          $ 97,812          $143,573         $442,886
Gross profit                                       25,486             26,842            24,207            41,696          118,231
Operating profit (loss)                               598                 52            (1,878)           12,085           10,857
Net income (loss)                                    (415)              (676)           (1,866)            6,942            3,985
Net income (loss) per share - basic (1)             (0.02)             (0.04)            (0.11)             0.43             0.24
Net income (loss) per share - diluted(1)            (0.02)             (0.04)            (0.11)             0.42             0.24
</TABLE>

<TABLE>
<CAPTION>
                                                                         Fiscal Year Ended February 3, 2001
                                                 ------------------------------------------------------------------------------
                                                  First           Second             Third           Fourth
(In thousands, except per share amounts)         Quarter          Quarter           Quarter          Quarter            Total
-------------------------------------------------------------------------------------------------------------------------------
<S>                                              <C>             <C>               <C>               <C>              <C>
Net sales                                        $93,099         $ 93,629          $ 90,133          $141,745         $418,606
Gross profit                                      24,700           24,344            22,235            37,930          109,209
Operating profit (loss)                            1,793              342            (1,295)            8,909            9,749
Net income (loss)                                    471             (568)           (1,637)            4,800            3,066
Net income (loss) per share - basic (1)             0.03            (0.03)            (0.09)             0.27             0.17
Net income (loss) per share - diluted(1)            0.03            (0.03)            (0.09)             0.27             0.17
</TABLE>

(1)      The sum of quarterly per share amounts are different from the annual
         per share amounts because of differences in the weighted average
         number of common and common equivalent shares used in the quarterly
         and annual computations.


                                      19

<PAGE>

2002 BAM!
BOOKS-A-MILLION
ANNUAL REPORT


DIRECTORS AND CORPORATE OFFICERS


<TABLE>
<CAPTION>
<S>                                          <C>
BOARD OF DIRECTORS                           CORPORATE OFFICERS

CLYDE B. ANDERSON                            CLYDE B. ANDERSON
Chairman of the Board                        Chairman of the Board
and Chief Executive Officer                  and Chief Executive Officer

CHARLES C. ANDERSON                          SANDRA B. COCHRAN
Retired Chairman                             President and Secretary

TERRY C. ANDERSON                            TERRANCE G. FINLEY
Chief Executive Officer and President,       Executive Vice President,
American Promotional Events, Inc.            Books-A-Million, Inc. and
                                             President,
RONALD G. BRUNO                              American Internet Services, Inc.
President,
Bruno Capital Management Corporation         RICHARD S. WALLINGTON
                                             Chief Financial Officer
DR. J. BARRY MASON
Dean, Culverhouse College of Commerce
The University of Alabama

WILLIAM H. ROGERS, JR.
Executive Vice President,
SunTrust Banks, Inc.
</TABLE>


                                      20

<PAGE>

CORPORATE INFORMATION


CORPORATE OFFICE
Books-A-Million, Inc.
402 Industrial Lane
Birmingham, Alabama  35211
(205) 942-3737

TRANSFER AGENT
Bank of New York
(800) 524-4458

STOCKHOLDER INQUIRIES:
Stockholder Relations Department - 11E
P.O. Box 11258
Church Street Station
New York, NY 10286
E-Mail address: shareowner-svcs@bankofny.com
Bank of New York's Stock Transfer Website:
http://stock.bankofny.com

CERTIFICATES FOR TRANSFER AND ADDRESS CHANGES TO:
Receive and Deliver Department - 11W
P.O. Box 11002
Church Street Station
New York, NY 10286

INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
Birmingham, Alabama

FORM 10-K AND INVESTOR CONTACT

A copy of the Company's Annual Report on Form 10-K for the fiscal year ended
February 2, 2002, as filed with the Securities and Exchange Commission is
available without charge to stockholders upon written request. Such requests
and other investor inquiries should be directed to Richard S. Wallington, the
Company's Chief Financial Officer, or you can view the Company's Annual Report
at www.booksamillioninc.com.

MARKET AND DIVIDEND INFORMATION

Common Stock

The Common Stock of Books-A-Million, Inc., is traded in the Nasdaq National
Market under the symbol BAMM. The chart below sets forth the high and low stock
prices for each quarter of the fiscal years ending February 2, 2002, and
February 3, 2001.

<TABLE>
<CAPTION>
Quarter Ended                    High        Low
--------------------------------------------------
<S>                            <C>        <C>
January, 2002                  $  3.90    $  2.80
October, 2001                     3.50       2.32
July, 2001                        2.89       2.12
April, 2001                       2.54       1.72

January, 2001                  $  3.25    $  1.38
October, 2000                     3.75       2.25
July, 2000                        4.75       3.13
April, 2000                       8.25       4.00
</TABLE>

The closing price on April 16, 2002, was $4.60. No cash dividends have been
declared since completion of the Company's initial public offering in 1992. As
of April 16, 2002, Books-A-Million, Inc., had approximately 11,400 stockholders
based on the number of individual participants represented by security position
listings.

ANNUAL MEETING OF STOCKHOLDERS

The annual meeting of stockholders will be held on June 6, 2002, at 10:00 a.m.
central time at The Harbert Center, 2019 Fourth Avenue North, Birmingham,
Alabama 35203. Stockholders of record as of April 16, 2002, are invited to
attend this meeting.

<PAGE>

                             Books-A-Million, Inc.
                              402 Industrial Lane
                           Birmingham, Alabama 35211

                                   2002 BAM!
                                BOOKS-A-MILLION
                                 ANNUAL REPORT

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                                                                      2002 BAM!
                                                                BOOKS-A-MILLION
                                                                  ANNUAL REPORT