10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended January 31, 2009

OR

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

For the transition period from to

Commission File No. 0-20664

BOOKS-A-MILLION, INC.

(Exact name of Registrant as specified in its charter)

DELAWARE 63-0798460

(State or other jurisdiction of (IRS Employer

incorporation or organization) Identification No.)

402 Industrial Lane

Birmingham, Alabama 35211

(Address of principal executive offices) (Zip Code)

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

Securities registered pursuant to Section 12(b) of the Act:                     Common Stock, par value $.01 per share

                                                                                                                                                    (Title of Class)

Securities registered pursuant to Section 12(g) of the Act: None

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

Yes o No x

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

Yes o No x

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

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

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

Large Accelerated Filer o Accelerated Filer x

Non-Accelerated Filer o Smaller Reporting Company o

(Do not check if a smaller reporting company)

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

Yes o No x

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

August 1, 2008 (based on the closing sale price as reported on the NASDAQ Stock Market on such date), was $92,872,562.

The number of shares outstanding of the Registrant's Common Stock as of March 27, 2009 was 15,810,249.

DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Annual Report to Stockholders for the fiscal year ended January 31, 2009 are incorporated by reference into Parts I and II of this report.

     Portions of the Proxy Statement for the Annual Meeting of Stockholders to be held on May 21, 2009 are incorporated by reference into Part III of this report.

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BOOKS-A-MILLION, INC. AND SUBSIDIARIES

10-K INDEX

PART I
Item 1.	Business	4
Item 1A.	Risk Factors	6
Item 1B.	Unresolved Staff Comments	11
Item 2.	Properties	11
Item 3.	Legal Proceedings	12
Item 4.	Submission of Matters To A Vote of Security Holders	12
PART II
Item 5.	Market For Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities	13
Item 6.	Selected Financial Data	13
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	13
Item 8.	Financial Statements and Supplementary Data	14
Item 9.	Changes In and Disagreements With Accountants on Accounting and Financial Disclosure	14
Item 9A.	Controls and Procedures	14
Item 9B.	Other Information	15
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	16
Item 11.	Executive Compensation	17
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	17
Item 13.	Certain Relationships and Related Transactions, and Director Independence	17
Item 14.	Principal Accountant Fees and Services	17
PART IV
Item 15.	Exhibits and Financial Statement Schedules	18

Signatures

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PART I

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

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

ITEM 1. BUSINESS

General

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

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

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

Business Segments

We have two reportable segments: retail trade and electronic commerce trade. In the retail trade segment we are engaged in the retail sale of primarily book merchandise at our retail stores. The retail trade segment includes our distribution center operations which predominantly supplies merchandise to our retail stores. In the electronic commerce trade segment we are engaged in the retail sale of book merchandise over the Internet. This segment is managed separately due to divergent technology and marketing requirements. For additional information on our reportable business segments, see Note 8 “Business Segments” in the Notes to Consolidated Financial Statements in the Annual Report to Stockholders for the fiscal year ended January 31, 2009 incorporated herein by reference.

In both our retail trade and electronic commerce trade segments we sell books, and other merchandise, which consist of gifts, cards, collectibles, magazines, cafe sales, music, DVDs and other products. Sales as a percentage of net sales by merchandise category is as follows:

	1/31/09	2/2/08	2/3/07
Books and Magazines	83.0%	83.9%	83.7%
General Merchandise	8.1%	7.8%	7.6%
Other	8.9%	8.3%	8.7%
Total	100%	100%	100%

                  General merchandise consists of gifts, cards, collectibles and similar types of products.  Other products include cafe, music, DVD, E-Book and other products.

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Retail Stores

          We opened our first Books-A-Million superstore in 1987. We developed superstores to capitalize on the growing consumer demand for the convenience, selection and value associated with the superstore retailing format. Each superstore is designed to be a receptive and open environment conducive to browsing and reading and includes ample space for promotional events open to the public, including book autograph sessions and children's storytelling. We operated 200 superstores as of January 31, 2009.

          Our superstores emphasize selection, value and customer service. Each of our superstores offers an extensive selection of books, magazines, general merchandise, including, gifts, cards, collectibles and similar products, including music and DVDs. Each superstore has a service center staffed with associates who are knowledgeable about the store's merchandise and who are trained to answer customers' questions, assist customers in locating books within the store and place special orders. The majority of our superstores also include a Joe Muggs café, serving Joe Muggs coffee and assorted pastries. Our superstores are conveniently located on major, high-traffic roads and in enclosed malls or strip shopping centers with adequate parking, and generally operate for extended hours up to 11:00 pm local time.

          Our traditional stores are tailored to the size, demographics and competitive conditions of the particular market area. Traditional stores are located primarily in enclosed malls and generally feature a wide selection of books, magazines and gift items. We had 20 traditional stores as of January 31, 2009.

Merchandising

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

Marketing

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

Store Operations and Site Selection

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

Internet Operations

           On Booksamillion.com we sell a wide selection of books, magazines and general merchandise similar to those sold in our Books-A-Million superstores.

Purchasing

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

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          We purchase merchandise from over 1,500 vendors. We purchase the majority of our collectors' supplies from Anderson Press and substantially all of our magazines from Anderson Media, each of which is a related party (see the disclosure under the heading “Transactions with Related Persons” included in the Proxy Statement of the Company for the Annual Meeting of Stockholders to be held on May 21, 2009). No one vendor accounted for over 13.0% of our overall merchandise purchases in the fiscal year ended January 31, 2009. In general, more than 80% of our inventory may be returned to the publishers for credit, which substantially reduces our risk of inventory obsolescence.

Distribution Capabilities

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

Competition

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

Seasonality

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

Trademarks

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

Employees

          As of January 31, 2009, we employed approximately 2,800 full-time associates and 2,500 part-time associates. The number of part-time associates employed fluctuates based upon seasonal needs. None of our associates are covered by a collective bargaining agreement. We believe that relations with our associates are good.

ITEM 1A. RISK FACTORS

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

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

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

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

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

Our business is highly seasonal.

       Our business is highly seasonal, with sales and earnings generally highest in the fourth fiscal quarter and lowest in the first fiscal quarter. Our results of operations depend significantly upon the holiday selling season in the fourth fiscal quarter. During the fiscal year ended January 31, 2009, approximately 32% of our sales and approximately 96% of our operating income were generated in the fourth fiscal quarter. If we do not stock popular products in sufficient amounts or fail to have sources to timely restock popular products during the busy holiday period such that we fail to meet customer demand, it could significantly affect our revenue and earnings and our future growth. In addition, if we experience less than satisfactory net sales during a fourth fiscal quarter, we may not be able to sufficiently compensate for any losses which may have been incurred during the first three quarters of such fiscal year.

The current economic recession, along with difficult and volatile conditions in the capital and credit markets, could materially adversely affect our financial position, results of operations and cash flow, and we do not know if these conditions will improve in the near future.

       The Company believes that the United States and global economies are presently experiencing extremely challenging times and that general economic conditions could deteriorate further. The Company believes that these conditions have had and will continue to have an adverse impact on spending by the Company’s current retail customer base and potential new customers. Because of these significant challenges, we are continuously reviewing and adjusting our business activities to address the changing economic environment. We are carefully managing our inventory and liquidity and enforcing expense controls while working diligently and prudently to grow our business. Because of the uncertainty in the overall economic environment, the unpredictability of consumer behavior and the concern as to whether current conditions will improve, it is very difficult for us to predict how our business may be affected in the future. Our business and financial performance may be adversely affected by current and future economic conditions that cause a further decline in business and consumer spending, including a reduction in the availability of credit, increased unemployment levels, higher energy and fuel costs, rising interest rates, financial market volatility and long-term recession. These conditions could have a negative impact on the earnings, liquidity and capital resources of the Company.

Current economic conditions have accentuated these risks and magnified their potential effect on us and our business. The current economic recession and difficult conditions in the capital and credit markets may affect our business in a number of ways. For example:

• The economic recession could have a significant adverse impact on consumer confidence and discretionary consumer spending, which may result in decreased sales and earnings for us.

• Although we believe we have sufficient liquidity under our credit agreement to run our business and to provide for our plans for growth, under extreme market conditions, there can be no assurance that such funds would be available or sufficient and, in such a case, we may not be able to successfully obtain additional debt financing on favorable terms, or at all.

• Recent market volatility has exerted downward pressure on our stock price, which may make it more difficult for us to raise additional capital in the future.

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       We do not know if the state of the economy or market conditions will improve in the near future or when any such improvement will occur.

Our business is dependent upon consumer spending patterns.

       Sales of books may depend upon discretionary consumer spending, which may be affected by general economic conditions, consumer confidence and other factors beyond our control. Weather, among other things, can affect comparable store sales, because inclement weather can require us to close certain stores temporarily and thus reduce store traffic. Even if stores are not closed, customers may decide to avoid going to stores in bad weather. In addition, sales are dependent in part on the strength of new release titles offered by vendors. A decline in consumer spending on books could have a material adverse effect on our financial condition and results of operations.

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

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

Our vendor relationships subject us to a number of risks, and we rely on certain vendors that are related parties.

       Although we purchase merchandise from over 1,500 vendors and no one vendor accounted for more than 13% of our inventory purchases in the fiscal year ended January 31, 2009, we have significant vendors that are important to us. If our current vendors were to stop selling merchandise to us on acceptable terms, we may not be able to acquire merchandise from other suppliers in a timely and efficient manner and on acceptable terms. We have entered into and may, in the future, enter into various transactions and agreements with entities wholly or partially owned by certain stockholders or directors (including certain officers) of the Company, including one such entity that serves as our primary magazine vendor. We believe that the transactions and agreements that we have entered into with related parties are on terms that are at least as favorable to us as could reasonably have been obtained at such time from third parties.

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

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

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

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

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

Failure to retain key personnel.

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

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

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

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

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

Our electronic commerce trade faces business risks, which include:

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

• risks associated with a failure to manage growth effectively;

• risks of the Internet as a medium for commerce, including Internet security risks;

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

• risks of system failure or inadequacy; and

• risks associated with the maintenance of domain names.

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

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

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

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

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

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

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

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

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

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

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

Our stock price may be subject to volatility.

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

• general economic conditions;

• changes in interest rates;

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

• fluctuations in the stock market in general;

• quarterly variations in operating results;

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

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

• changes in regulation;

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

• corporate restructurings, including layoffs or closures of facilities;

• changes in the valuation methodology of, or performance by, others in the retail book and electronic trade industries; and transactions in our common stock by major investors, and analyst reports, news, and speculation.

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

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ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

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

The number of stores located in each state and the District of Columbia as of January 31, 2009 are listed below:

State	Number of Super Stores	Number of Traditional Book Stores
Florida	39	1
Alabama	25	2
Virginia	17	2
N. Carolina	16	2
Georgia	14	2
Tennessee	16	1
S. Carolina	14	--
Louisiana	10	--
Texas	11	--
Mississippi	7	4
Ohio	5	1
Indiana	4	--
Kentucky	4	3
Arkansas	4	--
W. Virginia	3	--
Missouri	3	--
Oklahoma	2	--
Maryland	2	1
Illinois	1	1
District of Columbia	1	--
Nebraska	1	--
Kansas	1	--
Total	200	20

          The Company operates two distribution facilities near Florence, Alabama. The combined square footage of these distribution facilities is 500,000 square feet.

          Our principal executive offices are located in a 20,550 square-foot leased building located in Birmingham, Alabama. We also lease a 37,000 square-foot building located in Irondale, Alabama. Each of the leases involves related parties (see the disclosure under the heading “Transactions with Related Persons” included in the Proxy Statement of the Company for the Annual Meeting of Stockholders to be held on May 21, 2009). The Birmingham, Alabama office space is leased month-to-month. The Irondale, Alabama office space is leased month-to-month. In addition, we lease approximately 4,025 square feet of office space in Nashville, Tennessee and an additional 27,400 square-foot building located in Birmingham, Alabama for additional corporate office space. The Nashville, Tennessee space is leased month-to-month. The additional Birmingham space is leased for a four year period ending on March 6, 2013. We believe that the loss of any office space currently leased on a month-to-month basis would not have a material adverse effect on our business, financial condition or results of operations.

11

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

ITEM 3. LEGAL PROCEEDINGS

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

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

Not Applicable.

12

PART II

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

          The information under the heading “Market and Dividend Information” on page 41 of the Annual Report to Stockholders for the year ended January 31, 2009, is incorporated herein by reference.

          The following table provides information with respect to purchases by the Company of shares of its common stock during the fourth quarter of the fiscal year ended January 31, 2009.

Period	Total Numberof Shares Purchased	Average PricePaid per Share		TotalNumber of Shares Purchased as Part of Publicly Announced Plans	Maximum Dollar Value of Shares That May Yet Be Purchased UnderthePlans
November 2, 2008 – November 29, 2008	--	$	--	--	$	3,274,060
November 30, 2008 – January 3, 2009	--	$	--	--	$	3,274,060
January 4, 2009 – January 31, 2009	24,919	$	2.34	24,919	$	3,215,749
Total	24,919	$	2.34	24,919

ITEM 6. SELECTED FINANCIAL DATA

          The information under the heading "Selected Consolidated Financial Data" on page 3 of the Annual Report to Stockholders for the year ended January 31, 2009, is incorporated herein by reference.

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

          The information under the heading "Management's Discussion & Analysis of Financial Condition & Results of Operations" on pages 4 through 17 of the Annual Report to Stockholders for the year ended January 31, 2009, is incorporated herein by reference.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

To illustrate the sensitivity of the results of operations to changes in interest rates on our debt, we estimate that a 1052% increase or decrease in LIBOR rates would have changed interest expense by $11.4 million for the fiscal year ended January 31, 2009 due to average debt of $48,205,000. The average debt under our credit agreement and the Bond was $41.3 million and $6.9 million, respectively, for the fiscal year ended January 31, 2009. Prior to this year, fiscal year 2002 experienced the maximum LIBOR fluctuation at 66%.

          The information in note 3, “Debt and Lines of Credit,” in the Notes to Consolidated Financial Statements on page 32 of the Annual Report to Stockholders for the fiscal year ended January 31, 2009 is incorporated herein by reference.

13

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

          The following financial statements of the Registrant and its subsidiaries included in the Annual Report to Stockholders for the year ended January 31, 2009 are incorporated herein by reference:

Consolidated Balance Sheets as of January 31, 2009 and February 2, 2008.

Consolidated Statements of Income for the Fiscal Years Ended January 31, 2009, February 2, 2008, and February 3, 2007.

Consolidated Statements of Changes in Stockholders' Equity for the Fiscal Years Ended January 31, 2009, February 2, 2008, and February 3, 2007.

Consolidated Statements of Cash Flows for the Fiscal Years Ended January 31, 2009, February 2, 2008, and February 3, 2007.

Notes to Consolidated Financial Statements.

Reports of Independent Registered Public Accounting Firm.

The information in note 12, Summary of Quarterly Results (Unaudited), in the Notes to Consolidated Financial Statements on page 39 of the Annual Report to Stockholders for the fiscal year ended January 31, 2009, is incorporated herein by reference.

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

None.

ITEM 9A. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

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

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

14

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

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

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

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

The independent registered public accounting firm, Grant Thornton LLP has audited the consolidated financial statements as of and for the year ended January 31, 2009 and has also issued their report on the effectiveness of the Company’s internal control over financial reporting, as included in pages 18 and 19 of the Annual Report to Stockholders for the fiscal year ended January 31, 2009, which is incorporated herein by reference.

(c) Changes in Internal Control over Financial Reporting

          There have been no changes in our internal control over financial reporting during the fourth quarter of the fiscal year ended January 31, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

15

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors

          The sections under the heading “Proposal 1-Election of Directors” entitled “Nominees for Election - Term Expiring 2012,” “Incumbent Directors - Term Expiring 2010,” and “Incumbent Directors - Term Expiring 2011” of the Proxy Statement for the Annual Meeting of Stockholders to be held May 21, 2009, are incorporated herein by reference. The information under the heading “Information Concerning the Board of Directors” included in the Proxy Statement for the Annual Meeting of Stockholders to be held May 21, 2009 is incorporated herein by reference. The information under the heading “Beneficial Ownership of Common Stock – Compliance with Section 16(a) of the Securities Exchange Act of 1934” included in the Proxy Statement for the Annual Meeting of Stockholders to be held May 21, 2009 is incorporated herein by reference.

Executive Officers

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

Name	Age	Position with the Company
Clyde B. Anderson	48	Chairman and Chief Executive Officer
Terrance G. Finley	55	President Books-A-Million, Inc. Merchandising Group
Brian W. White	38	Interim Chief Financial Officer

           Clyde B. Anderson has served as the Chairman and Chief Executive Officer of the Company since March 2009. Mr. Anderson was re-elected to the position of Chief Executive Officer upon the resignation of Sandra B. Cochran from that position in March 2009. He served as the Executive Chairman of the Board of Directors from February 2004 to March 2009. He has served as a director of the Company since August 1987. Mr. Anderson has served as the Chairman of the Board of Directors since January 2000 and also served as the Chief Executive Officer of the Company from July 1992 until February 2004. Mr. Anderson also served as the President of the Company from November 1987 to August 1999. From November 1987 to March 1994, Mr. Anderson served as the Company's Chief Operating Officer. Mr. Anderson is the brother of Terry C. Anderson, a member of the Company's Board of Directors.

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

          Brian W. White has served as the Interim Chief Financial Officer of the Company since January 2, 2009. Prior to his appointment as Interim Chief Financial Officer upon the deployment of Douglas G. Markham to military service, Mr. White served as the Vice President Controller of Books-A-Million upon joining the Company in October 2007. Mr. White is scheduled to serve as Interim Chief Financial Officer until Mr. Markham returns to Birmingham, Alabama from active military service. Prior to joining the Company, Mr. White was the Southeast Regional Product Line Controller for the Ready Mix division of Lafarge North America from September 2003 to October 2007. Prior to September 2003, Mr. White was employed by Saks, Inc. for approximately five years where he held various positions including Director of Corporate Accounting.

          The section under the heading “Code of Business Conduct and Ethics” included in the Proxy Statement of the Company for the Annual Meeting of Stockholders to be held May 21, 2009 is incorporated herein by reference.

16

ITEM 11. EXECUTIVE COMPENSATION

          The sections under the heading "Compensation Discussion and Analysis," other than those titled "Compensation Committee Report", "Compensation Committee Interlocks and Insider Participation", and "Transactions with Related Persons", included in the Proxy Statement of the Company for the Annual Meeting of Stockholders to be held May 21, 2009 are incorporated herein by reference.

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

Securities Authorized for Issuance Under Equity Compensation Plans

          The following table summarizes certain information regarding the securities that have been authorized for issuance under the Company’s Amended and Restated Stock Option Plan, 2005 Incentive Award Plan and Employee Stock Purchase Plan.

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)	Weighted average exercise prices of outstanding options, warrants and rights (b)	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by stockholders:	42,893 (1)	$5.31 (2)	609,513 (3)
Equity compensation plans not approved by stockholders:	-0-	N/A	-0-
Total	42,893	$5.31	609,513

(1) Represents shares of common stock issuable with respect to outstanding stock options granted under the Company’s Amended and Restated Stock Option Plan.

(2) Represents the exercise price of the options issued under the Amended and Restated Stock Option Plan.

(3) Includes (i) 498,544 shares of common stock available for future issuance under the Company’s 2005 Incentive Award Plan and (ii) 110,969 shares of common stock available for future issuance under the Company’s Employee Stock Purchase Plan. The Company’s Amended and Restated Stock Option Plan has been terminated, and no shares of common stock are available for future issuance thereunder.

          Additional information under the heading "Information Concerning the Board of Directors" entitled "Beneficial Ownership of Common Stock" included in the Proxy Statement of the Company for the Annual Meeting of Stockholders to be held May 21, 2009 is incorporated herein by reference.

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

The sections under the heading "Compensation Discussion and Analysis" titled "Compensation Committee Interlocks and Insider Participation" and "Transactions with Related Persons" included in the Proxy Statement of the Company for the Annual Meeting of Stockholders to be held May 21, 2009 are incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

           The section under the heading “Proposal 2 – Ratification of Appointment of Independent Registered Public Accounting Firm” titled “Auditor Fees and Services” included in the Proxy Statement of the Company for the Annual Meeting of Stockholders to be held May 21, 2009 is incorporated herein by reference.

17

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) 1. Financial Statements:

The following Consolidated Financial Statements of Books-A-Million, Inc. and its subsidiaries, included in the Registrant's Annual Report to Stockholders for the fiscal year ended January 31, 2009 are incorporated by reference in Part II, Item 8:

Consolidated Balance Sheets as of January 31, 2009 and February 2, 2008.

Consolidated Statements of Income for the Fiscal Years Ended January 31, 2009, February 2, 2008 and February 3, 2007.

Consolidated Statements of Changes in Stockholders' Equity for the Fiscal Years Ended January 31, 2009, February 2, 2008 and February 3, 2007.

Consolidated Statements of Cash Flows for the Fiscal Years Ended January 31, 2009, February 2, 2008 and February 3, 2007.

Notes to Consolidated Financial Statements.

Reports of Independent Registered Public Accounting Firm.

2.    Financial Statement Schedule:

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

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

Schedule II - Valuation and Qualifying Accounts

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

3. Exhibits

Exhibit Number

3.1 --     Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to Registration Statement on Form S-1, File No. 33-52256, originally filed September 21, 1992 (the “S-1 Registration           Statement”)).

3.2 --     Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the S-1 Registration Statement).

4.1 --     See Exhibits 3.1 and 3.2 hereto incorporated herein by reference to the Exhibits of the same number to the S-1 Registration Statement.

10.1 --     Lease Agreement between First National Bank of Florence, Alabama, as Trustee, and Bookland Stores, Inc. (which is a predecessor of the Registrant), an Alabama corporation, dated January 30, 1991        (incorporated by reference to Exhibit 10.1 to the S-1 Registration Statement).

10.2 --     Amended and Restated Stock Option Plan (incorporated by reference to Exhibit 10.2 to Annual Report on Form 10-K for the fiscal year ended January 30, 1999, File No. 0-20664, filed on April 30, 1999).**

10.3 --     Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.7 to the S-1 Registration Statement).**

18

10.4 --     Amendment to Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.6 to Annual Report on Form 10-K for the fiscal year ended January 29, 1994, File No. 0-20664, filed on April 29, 1994).**

10.5 --     1999 Amended and Restated Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.5 to Annual Report on Form 10-K for the fiscal year ended January 29, 2000, File No. 0-20664, filed on          April 28, 2000).**

10.6 --     401(k) Plan adopted September 15, 2003, with SunTrust Bank as Trustee (incorporated by reference to Exhibit 10.6 to Annual Report on Form 10-K for the fiscal year ended January 31, 2004, File No. 0-20664, filed         April 27, 2004).** 

              

10.7 --     Executive Incentive Plan (incorporated by reference to Exhibit 10.8 to Annual Report on Form 10-K for the fiscal year ended January 28, 1995, File No. 0-20664, filed April 28, 1995).**  

10.8 --     Credit Agreement dated as of July 1, 2002, between the Company and Bank of America, N.A., SunTrust Bank, N.A., Wells Fargo Bank, N.A., SouthTrust Bank N.A. and AmSouth Bank, N.A. (incorporated by        reference to Exhibit 10.20 to Form 10-Q for the quarter ended August 3, 2002).

10.9 --     First Amendment to the Credit Agreement dated as of June 14, 2004 between the company and Bank of America, N. A., SunTrust Bank, N.A., Wells Fargo Bank, N.A., SouthTrust Bank N.A., and        AmSouth Bank, N.A. (incorporated by reference to Exhibit 10.21 to Annual Report on Form 10-K for the fiscal year ended January 29, 2005).

    10.10     --    Second Amendment to the Credit Agreement dated as of June 20, 2005 between the company and Bank of America, N. A., SunTrust Bank, N.A., Wells Fargo Bank, N.A., SouthTrust Bank N.A., and AmSouth

                         Bank, N.A. (incorporated by reference to Exhibit 99 (B)(3) to Tender Offer Statement by Issuer on Form SC TO-I for the Tender Offer closed on June 23, 2005).   

    10.11     --     2005 Incentive Award Plan, as amended (incorporated by reference to Exhibit 10.1 to Form 8-K File No. 0-20664, filed June 2, 2008).**

   10.12     --     Executive Deferred Compensation Plan (incorporated by reference to Exhibit 10.3 on Form 8-K, File No. 0-20664, filed August 22, 2005).**

   10.13    --     Director’s Deferred Compensation Plan (incorporated by reference to Exhibit 10.2 on Form 8-K, File No. 0-20664, filed August 22, 2005).**

  10.14    --     Third Amendment to Credit Agreement among Books-A-Million and Bank of America N.A., Sun Trust Bank N. A., Wells Fargo Bank, N.A., South Trust Bank N. A. and AmSouth Bank N.A.

                       (Exhibit 10 to Form 8-K dated July 7, 2006).

  10.15    --     Fourth Amendment to Credit Agreement among Books-A-Million and Bank of America N.A., Sun Trust Bank N. A., Wells Fargo Bank, N.A., SouthTrust Bank N. A. and AmSouth Bank N.A.

                      (Exhibit 10 to Form 8-K dated August 9, 2006).

  10.16    --     Fifth Amendment to Credit Agreement among Books-A-Million and Bank of America N.A., Sun Trust Bank N. A., Wells Fargo Bank, N.A., SouthTrust Bank N. A. and AmSouth Bank N.A.

                       (Exhibit 10 to Form 8-K dated September 6, 2006).

  10.17    --     Sixth Amendment to Credit Agreement among Books-A-Million and Bank of America N.A., Sun Trust Bank N. A., Wells Fargo Bank, N.A., Wachovia Bank N. A. and Regions Bank N.A.

                       (Exhibit 10 to Form 8-K dated June 11, 2007).

  10.18    --     Form of Restricted Stock Agreement (Career Based Shares) for restricted stock issued under the 2005 Incentive Award Plan of the Company (Exhibit 10.30 to Annual Report on Form 10-K

                      for fiscal year ended February 2, 2008).**

19

  10.19    --     Form of Restricted Stock Agreement (Performance Based Shares) for restricted stock issued under the 2005 Incentive Award Plan of the Company (Exhibit 10.31 to Annual Report on Form 10-K for fiscal year

                      ended February 2, 2008) .**

          10.20    --     First Amendment to the Bond Agreement, dated as of June 18, 2007 between the Company and Wells Fargo Bank, N.A. (Exhibit 10 to Form 8-K dated June 18, 2007).

 10.21    --     Supply Agreement dated February 25, 2008 between MSolutions, LLC and the Company. (Certain portions of this Exhibit have been omitted pursuant to a request for confidential treatment. The non-public

                information has been filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.)

      13    --     Portions of the Annual Report to Stockholders for the year ended January 31, 2009 that are expressly incorporated by reference into Parts I and II of this Report. 21 -- Subsidiaries of the Registrant               

23.1 --     Consent of Grant Thornton LLP, Independent Registered Public Accounting Firm.

31.1 --     Certification of Clyde B. Anderson, Chairman and Chief Executive Officer of Books-A-Million, Inc., pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, filed under Exhibit 31 of Item 601 of           Regulation S-K.

31.2 --     Certification of Brian W. White, Interim Chief Financial Officer of Books-A-Million, Inc., pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, filed under Exhibit 31 of Item 601 of Regulation S-K.

32.1 --     Certification of Clyde B. Anderson, Chairman and Chief Executive Officer of Books-A-Million, Inc., pursuant to 18 U.S.C. Section 1350, filed under Exhibit 32 of Item 601 of Regulation S-K.

32.2  --     Certification of Brian W. White, Interim Chief Financial Officer of Books-A-Million, Inc., pursuant to 18 U.S.C. Section 1350, filed under Exhibit 32 of Item 601 of Regulation S-K.

** Indicates a management contract or compensatory plan or arrangement

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

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

20

SIGNATURES

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

BOOKS-A-MILLION, INC.

by: /s/ Clyde B. Anderson

Clyde B. Anderson

Chairman and Chief Executive Officer

Date: April 16, 2009

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

Principal Executive Officer:

/s/ Clyde B. Anderson

Clyde B. Anderson

Chairman and Chief Executive Officer

Date: April 16, 2009

Principal Financial and Accounting Officer:

/s/ Brian W. White

Brian W. White

Interim Chief Financial Officer

Date: April 16, 2009

Directors:

/s/ Clyde B. Anderson

Clyde B. Anderson

Date: April 16, 2009

/s/ Ronald G. Bruno

Ronald G. Bruno

Date: April 16, 2009

/s/ J. Barry Mason

J. Barry Mason

Date: April 16, 2009

21

Directors:

/s/ Terry C. Anderson

Terry C. Anderson

Date: April 16, 2009

/s/ Albert C. Johnson

Albert C. Johnson

Date: April 16, 2009

/s/ William H. Rogers, Jr.

William H. Rogers, Jr.

Date: April 16, 2009

22

REPORT OF GRANT THORNTON, LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM, ON FINANCIAL STATEMENT SCHEDULE 

Board of Directors and

Stockholders of Books-A-Million, Inc.

We have audited in accordance with the standards of the Public Company Accounting Oversight Board (United States) the consolidated financial statements of Books-A-Million, Inc. and subsidiaries (the “Company”) referred to in our report dated April 14, 2009, which is included in the annual report to stockholders and incorporated by reference in Part II of this form. Our audits of the basic financial statements included the financial statement schedule listed in the index appearing under Item 15(a)(2), which is the responsibility of the Company’s management. In our opinion, this financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

/s/ GRANT THORNTON LLP

Atlanta, Georgia

April 14, 2009

23

Schedule II

Books-A-Million, Inc.

Valuation And Qualifying Accounts

For The Years Ended February 3, 2007, February 2, 2008 and January 31, 2009

                                                                                                 Charged/

Balance at (Credited) (Deductions)/

Beginning to Costs Recoveries

of Year and Expenses Net End of Year

For the year ended February 3, 2007:

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

For the year ended February 2, 2008:

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

For the year ended January 31, 2009:

Allowance for doubtful accounts $ 740,831 $ (31,919) $ (354,943) $ 353,969

24

EX-13

2009 Annual Report 

COMPANY PROFILE

Books-A-Million is one of the nation’s leading book retailers and sells on the Internet at www.booksamillion.com. The Company presently operates 220 stores in 21 states and the District of Columbia. The Company operates two distinct store formats, including large superstores operating under the names Books-A-Million and Books & Co. and traditional bookstores operating under the names Books-A-Million and Bookland.

                                                                                           FIVE-YEAR HIGHLIGHTS

(In thousands, except per share amounts, ratios and operational data)	For the Fiscal Year Ended:
	1/31/09	2/2/08	2/3/07(1)	1/28/06	1/29/05
Statement of Income Data	52 weeks	52 weeks	53 weeks	52 weeks	52 weeks
Net revenue	$513,271	$535,128	$520,416	$ 503,751	$ 474,099
Net income	10,574	16,522	18,887	13,067	10,199
Earnings per share - diluted	0.68	1.01	1.12	0.77	0.59
Weighted average shares - diluted	15,609	16,302	16,805	16,888	17,178
Capital investment	19,806	16,878	14,907	11,297	14,923
Dividends per share - declared	0.28	3.36	0.33	0.23	0.23
Balance Sheet Data
Property and equipment, net	$58,038	$53,514	$ 51,471	$ 51,001	$ 55,946
Total assets	279,292	284,833	304,037	311,659	300,812
Long-term debt	6,720	6,975	7,100	7,200	7,500
Stockholders’ equity	104,494	99,051	157,034	145,009	134,859
Other Data
Working capital	$62,145	$58,785	$117,737	$ 106,637	$ 95,382
Debt to total capital ratio	0.18	0.26	0.04	0.05	0.05
Operational Data
Total number of stores	220	208	206	205	206
Number of superstores	200	184	179	173	168
Number of traditional stores	20	24	27	32	38

(1) The year ended February 3, 2007 included an extra week and $2.3 million of gift card breakage from prior periods.

1

2009 Annual Report

TO OUR STOCKHOLDERS:

Fiscal Year 2009 brought extraordinary challenges. The economic downturn that began developing in the fourth quarter of fiscal 2008 gained momentum and dramatically affected our sales in the second half of the year. The downturn was most pronounced in the third quarter. We did manage a modest improvement during the holiday season, outperforming our key competitors in comparable store sales.

The sales challenge was felt broadly across most departments of our stores as low consumer confidence led to decreased traffic. The core book business, while down, did have some bright spots as Teen and the phenomenal success of Stephanie Meyer’s Twilight saga drove customers to the stores in December. Books related to the election season, faith based titles such as William Young’s The Shack and media driven bestsellers like Glenn Beck’s The Christmas Sweater also performed well. A price conscious consumer contributed to strong growth in our bargain book category and we aggressively expanded and promoted our assortment to take advantage of this trend.

Another positive trend was the growth of sales of general merchandise. Gifts, toys, games and book accessories all had solid increases as our investment in inventory delivered results, particularly in the fourth quarter.

We closed Fiscal Year 2009 with an improved balance sheet and a focus on expense control. During the fiscal year, we reduced our inventory balance by $2.5 million and reduced debt by $12.5 million.

We opened 16 new stores during the year. We expect to open three to five new stores in the coming year. This anticipated reduction in new stores is the result of a severe economic climate and the lack of quality real estate opportunities.

We will undoubtedly continue to face an unsettled economic climate in the year ahead. However, we are determined to maintain our disciplined approach to the fundamentals of our business both to deliver the best possible results in the short term and to position our company for the opportunities to come in a recovering economy.

Clyde B. Anderson

Chairman and Chief Executive Officer

FINANCIAL HIGHLIGHTS	Fiscal Year Ended
(In thousands, except per share amounts)	1/31/09	2/2/08
Net revenue	$513,271	$535,128
Operating profit	18,890	27,420
Net income	10,574	16,522
Net income per share - diluted	0.68	1.01
Dividends per share - declared	0.28	3.36
	As of
(In thousands)	1/31/09	2/2/08
Working capital	$62,145	$58,785
Total assets	279,292	284,833
Stockholders' equity	104,494	99,051

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2009 Annual Report 

SELECTED CONSOLIDATED FINANCIAL DATA
	Fiscal Year Ended
(In thousands, except per share data)	1/31/09	2/2/08	2/3/07	1/28/06	1/29/05
Statement of Operations Data:	52 weeks	52 weeks	53 weeks	52 weeks	52 weeks
Net revenue	$513,271	$535,128	$520,416	$503,751	$474,099
Cost of products sold, including warehouse    distribution and store occupancy costs	361,934	376,580	363,688	357,166	339,012
Gross profit	151,337	158,548	156,728	146,585	135,087
Operating, selling and administrative expenses	116,648	117,079	112,227	108,945	98,870
Impairment Charges	1.351	60	333	215	337
Gain on insurance recovery	--	--	--	1,248	--
Depreciation and amortization	14,448	13,989	14,069	15,636	17,788
Operating profit	18,890	27,420	30,099	23,037	18,092
Interest expense, net	1,920	1,346	105	1,441	1,874
Income from continuing operations before income    taxes	16,970	26,074	29,994	21,596	16,218
Provision for income taxes	6,396	9,552	11,107	8,545	6,001
Income from continuing operations	10,574	16,522	18,887	13,051	10,217
Discontinued operations:
Income (Loss) from discontinued operations    (including impairment charge)	--	--	--	27	(29)
Income tax provision (benefit)	--	--	--	11	(11)
Income (Loss) from discontinued operations	--	--	--	16	(18)
Net income	$10,574	$16,522	$ 18,887	$ 13,067	$ 10,199
Net income per common share:
Basic:
Net income per share	$0.70	$1.03	$ 1.16	$ 0.80	$ 0.62
Weighted average number of shares outstanding -    basic	15,219	16,089	16,352	16,275	16,453
Diluted:
Net income per share	$0.68	$1.01	$ 1.12	$ 0.77	$ 0.59
Weighted average number of shares outstanding -    diluted	15,609	16,302	16,805	16,888	17,178
Dividends per share – declared	$0.28	$3.36	$ 0.33	$ 0.23	$ 0.23
Balance Sheet Data:
Property and equipment, net	$58,038	$53,514	$ 51,471	$ 51,001	$ 55,946
Total assets	279,292	284,833	304,037	311,659	300,812
Long-term debt	6,720	6,975	7,100	7,200	7,500
Deferred Rent	8,554	8.079	8,706	8,637	12,622
Liability for uncertain tax positions	2,032	2.174	--	--	--
Stockholders’ investment	104,494	99,051	157,034	145,009	134,859
Other Data:
Working capital	$62,145	$58,785	$117,737	$106,637	$ 95,382

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2009 Annual Report

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

General

The Company was founded in 1917 and currently operates 220 retail bookstores concentrated primarily in the southeastern United States. Of the 220 stores, 200 are superstores that operate under the names Books-A-Million and Books & Co., and 20 are traditional stores that operate under the Bookland and Books-A-Million names. In addition to the retail store formats, the Company offers its products over the Internet at www.booksamillion.com. As of January 31, 2009, the Company employed approximately 5,300 full and part-time employees.

The Company’s growth strategy is focused on opening superstores in new and existing market areas, particularly in the Southeast. In addition to opening new stores, management intends to continue its practice of reviewing the profitability trends and prospects of existing stores and closing or relocating under-performing stores. During fiscal 2009, the Company opened sixteen stores, closed four stores and relocated seven stores.

The Company’s performance is partially measured based on comparable store sales, which is similar to most retailers. Comparable store sales are determined each fiscal quarter during the year based on all stores that have been open at least 12 full months as of the first day of the fiscal period. Any stores closed during a fiscal period are excluded from comparable store sales as of the first day of the fiscal period in which they close. Remodeled and relocated stores are also included as comparable stores. 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.

Current Economic Environment

The United States and global economies are presently experiencing extremely challenging times and it is possible that general economic conditions could deteriorate further. The Company believes that these conditions have had and will continue to have an adverse impact on spending by the Company’s current retail customer base and potential new customers. Because of these significant challenges, we are continuously reviewing and adjusting our business activities to address the changing economic environment. We are carefully managing our inventory and liquidity and enforcing expense controls while working diligently and prudently to grow our business. Despite overall store number growth in fiscal 2009, the Company reduced its year-end inventory balance by $2.5 million as of January 31, 2009 to $204.3 million, as compared to the fiscal year-end 2008 balance of $206.8 million. In addition, we reduced our outstanding loan balance at fiscal year-end 2009 under the Company’s revolving credit facility, that allows for borrowings up to $100.0 million, to $15.8 million. This credit facility had a balance of $28.0 million at February 2, 2008. The Company was also able to reduce its selling and administrative expenses during fiscal 2009 by $0.4 million as compared to fiscal 2008. The Company opened 16 new stores in fiscal 2009. Due to current economic conditions, we will not open as many new stores in fiscal 2010 as were opened in fiscal 2009. Because of the uncertainty in the overall economic environment, the unpredictability of consumer behavior and the concern as to whether current conditions will improve, it is very difficult for us to predict how our business may be affected in the future. Our business and financial performance may be adversely affected by current and future economic conditions that cause a further decline in business and consumer spending, including a reduction in the availability of credit, increased unemployment levels, higher energy and fuel costs, rising interest rates, financial market volatility and long-term recession. These conditions could have a negative impact on the earnings, liquidity and capital resources of the Company.

Executive Summary

The purpose of this section is to provide a brief summary overview of the 52-week period ended January 31, 2009. Additional detail about the income statement and balance sheet is provided in the pages following this summary.

Income Statement

For the 52-week period ended January 31, 2009, Books-A-Million reported net income of $10.6 million. This represents a 36.0% decrease from the 52-week period ended February 2, 2008. The decrease is attributable to severe macro-economic conditions in fiscal 2009 and the impact of the release of Harry Potter and the Deathly Hallows, the final book in the Harry Potter series, in the prior year. Harry Potter and the Deathly Hallows contributed $7.3 million in sales during the 52-week period ended February 2, 2008.

Consolidated net revenue decreased $21.9 million, or 4.0%, in the 52-week period ended January 31, 2009, compared to the 52-week period ended February 2, 2008. Comparable store sales decreased 7.2% in fiscal year 2009 compared to the 52-week period ended February 2, 2008. The decrease is due to severe macro-economic conditions in fiscal 2009 and the impact of the release of Harry Potter and the Deathly Hallows in the prior year as detailed above.

Gross profit, which includes cost of sales, distribution costs and occupancy costs, decreased $7.2 million, or 4.5%, in the 52-week period ended January 31, 2009, compared to the 52-week period ended February 2, 2008. Gross profit as a percentage of sales decreased from 29.6% to 29.5% over the same period. The decrease is attributable to higher occupancy costs offset by improved sales of higher margin items, lower promotional discounts and lower markdowns.

Operating, selling and administrative expenses decreased $0.4 million, or 0.04%, in the 52-week period ended January 31, 2009, compared to the 52-week period ended February 2, 2008. The decrease was attributable to reduced salary, bonus, 401(k) and payroll tax expense, reduced advertising expenses and reduced bad debt expense, partially offset by increased credit card fees, travel, insurance and new store expenses. Impairment charges increased $1.3 million in the 52-week period ended January 31, 2009, compared to the 52-week period ended February 2, 2008. The increase was attributable to $0.7 million in impairment charges taken on leasehold improvements at various stores and a $0.7 million impairment of goodwill.

Consolidated operating profit was $18.9 million for the 52-week period ended January 31, 2009, compared to $27.4 million for the 52-week period ended February 2, 2008, a decrease of $8.5 million. This decrease was attributable to decreased sales and gross margin, along with an increase in operating selling and administrative expenses.

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2009 Annual Report 

Balance Sheet

Current assets decreased $7.7 million, or 3.4%, in fiscal year 2009 compared to fiscal year 2008. The decrease is attributable to a $2.5 million decrease in inventory, a $1.4 million decrease in prepaid expenses and a $3.7 million decrease in accounts and related party receivables. The reduction in inventory is attributable to a tight focus on inventory reduction and control in both our stores and our warehouses in response to difficult macro-economic conditions. This reduction was accomplished despite the addition of sixteen new stores. The decrease in prepaid expenses is attributable to reduced prepayments of rent, supplies and import duties. The decrease in accounts and related party receivables is the result of reduced sales.

Current liabilities decreased $11.0 million, or 6.8%, in fiscal year 2009 compared to fiscal year 2008. The decrease is attributable to a $12.2 million decrease in short-term borrowings and a $6.0 million decrease in accrued expenses, partially offset by a $5.5 million increase in accounts payable. The decrease in short-term borrowings is the result of cost control, a reduction in inventory and an increase in accounts payable leverage. The reduction in accrued expenses is the result of reduced accruals for bonuses, insurance, returns and capital expenditures. Accounts payable increased due to more effective management of payment terms.

Critical Accounting Policies

General

Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements require management to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying consolidated financial statements and related footnotes. In preparing these financial statements, management has made its best estimates and judgments of certain amounts included in the financial statements, giving due consideration to materiality. The Company believes that the likelihood is remote that materially different amounts will be reported related to actual results for the estimates and judgments described below. However, application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates.

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 buildings and amortization of leasehold improvements, including remodels, is provided on the straight-line basis over the lesser of the assets estimated useful lives (ranging from five to 40 years) or, if applicable, the periods of the leases. Determination of useful asset life is based on several factors requiring judgment by management and adherence to generally accepted accounting principles for depreciable periods. Judgment used by management in the determination of useful asset life could relate to any of the following factors: expected use of the asset; expected useful life of similar assets; any legal, regulatory, or contractual provisions that may limit the useful life; and other factors that may impair the economic useful life of the asset. Maintenance and repairs are charged to expense as incurred. Improvement costs are capitalized 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.

Other Long-Lived Assets

The Company’s other long-lived assets consist of property and equipment which include leasehold improvements. At January 31, 2009, the Company had $58.0 million of property and equipment, net of accumulated depreciation, accounting for approximately 20.8% of the Company’s total assets. The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with Statement of Financial Accounting Standards (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” The Company evaluates long-lived assets for impairment at the individual store level, which is the lowest level at which individual cash flows can be identified. When evaluating long-lived assets for potential impairment, the Company will first compare the carrying amount of the assets to the individual store’s estimated future undiscounted cash flows. If the estimated future cash flows are less than the carrying amount of the assets, an impairment loss calculation is prepared. The impairment loss calculation compares the carrying amount of the assets to the individual store’s fair value based on its estimated discounted future cash flows. If required, an impairment loss is recorded for that portion of the asset’s carrying value in excess of fair value. Impairment losses, excluding goodwill impairment, totaled $0.7 million, $0.1 million and $0.3 million in fiscal 2009, 2008 and 2007, respectively. For all years presented, the impairment losses related to the retail trade business segment.

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2009 Annual Report

Goodwill

At January 31, 2009, the Company had $0.7 million of goodwill, accounting for approximately 0.3% of the Company’s total assets. SFAS No. 142, “Goodwill and Other Intangible Assets,” requires that goodwill and other unamortizable intangible assets be tested for impairment at least annually or earlier if there are impairment indicators. The Company performs a two-step process for impairment testing of goodwill as required by SFAS No. 142. The first step of this test, used to identify potential impairment, compares the estimated fair value of a reporting unit with its carrying amount. The second step (if necessary) measures the amount of the impairment. The Company completed its annual impairment test on the goodwill during the fourth quarter of fiscal 2009 and determined that an impairment charge was required. As a result, impairment charges of $0.7 million were recorded the fourth quarter of fiscal 2009, which are the direct result of declining market conditions.

Closed Store Expenses

Management considers several factors in determining when to close or relocate a store. Some of these factors are: decreases in store sales from the prior year, decreases in store sales from the current year budget, annual measurement of individual store pre-tax future net cash flows, indications that an asset no longer has an economically useful life, remaining term of an individual store lease, or other factors that would indicate a store in the current location cannot be profitable.

When the Company closes or relocates a store, the Company charges unrecoverable costs to expense. Such costs include the net book value of abandoned fixtures and leasehold improvements, lease termination costs, costs to transfer inventory and usable fixtures, other costs in connection with vacating the leased location, and a provision for future lease obligations, net of expected sublease recoveries. Costs associated with store closings of $0.4 million, $0.6 million and $0.4 million during fiscal 2009, 2008 and 2007, respectively, are included in selling and administrative expenses in the accompanying consolidated statements of income.

Inventories

Inventories are taken throughout the fiscal year. Store inventory counts are performed by an independent inventory service, while warehouse inventory counts are performed internally. All physical inventory counts are reconciled to the Company’s records. The Company’s accrual for inventory shortages is based upon historical inventory shortage results.

Cost is assigned to store and warehouse inventories using the retail inventory method. Using this method, store and warehouse inventories are valued 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. Inventory costing also requires certain significant management estimates and judgments involving markdowns, the allocation of vendor allowances and shrinkage. These practices affect ending inventories at cost as well as the resulting gross margins and inventory turnover ratios.

The Company estimates and accrues shrinkage for the period between the last physical count of inventory and the balance sheet date. The accrual is calculated based on historical results. As this estimate is based on historical experience, the variances between the estimate of shrinkage and the adjustment resulting from physical inventories are traditionally not significant.

Reserves for markdowns are estimated based upon the Company’s history of liquidating non-returnable inventory.

The Company utilizes the last-in, first-out (LIFO) method of accounting for inventories. The cumulative difference between replacement and current cost of inventory over stated LIFO value is $2.9 million as of January 31, 2009 and $2.5 million as of February 2, 2008. The estimated replacement cost of inventory at January 31, 2009 is the current first-in, first out (FIFO) value of $207.2 million.

Vendor Allowances

The Company receives allowances from its vendors from a variety of programs and arrangements, including merchandise placement and cooperative advertising programs. Effective February 3, 2002, the Company adopted the provisions of Emerging Issues Task Force (“EITF”) No. 02-16, Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor, which addresses the accounting for vendor allowances. As a result of the adoption of this statement, vendor allowances in excess of incremental direct costs are reflected as a reduction of inventory costs and recognized in cost of products sold upon the sale of the related inventory.

Accrued Expenses

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

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2009 Annual Report 

Income Taxes

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that result in temporary differences between the amounts recorded in its financial statements and 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.

Results of Operations

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

	Fiscal Year Ended
	1/31/09	2/2/08	2/3/07
	52 weeks	52 weeks	53 weeks
Net revenue	100.0%	100.0%	100.0%
Gross profit	29.5%	29.6%	30.1%
Operating, selling, and administrative expenses	23.0%	21.9%	21.6%
Impairment charges	0.3%	0.0%	0.1%
Depreciation and amortization	2.8%	2.6%	2.7%
Operating profit	3.7%	5.1%	5.8%
Interest expense, net	0.4%	0.3%	0.0%
Income from continuing operations before income taxes	3.3%	4.9%	5.8%
Provision for income taxes	1.2%	1.8%	2.2%
Income from continuing operations	2.1%	3.1%	3.6%
Net income	2.1%	3.1%	3.6%

Fiscal 2009 Compared to Fiscal 2008

Consolidated net revenue decreased $21.8 million, or 4.0%, to $513.3 million for the 52-week period ended January 31, 2009 from $535.1 million for the 52-week period ended February 2, 2008.

Comparable store sales for the 52-week period ended January 31, 2009 decreased 7.2% when compared to the same 52-week period in the prior fiscal year. The decrease in comparable store sales was attributable to severe macro-economic conditions and the positive impact of the release of Harry Potter and the Deathly Hallows on sales in the prior year.

Our core book department business was down for the year. However, several categories performed well. Teen, faith based titles and election related items demonstrated strength. The teen category was positively impacted by the success of Stephanie Meyer’s Twilight series. Titles such as William Young’s The Shack and Glenn Beck’s The Christmas Sweater also had a positive impact. Bargain books and gifts continue to increase year over year driven by the broader economic climate and better assortments.

The Company opened sixteen new stores during fiscal 2009 resulting in partial year sales of $13.9 million and closed four stores during fiscal 2009 with partial year sales of $1.4 million. The Company also converted one traditional store to a superstore during fiscal 2009 with partial year sales of $1.3 million.

Net sales for the retail trade segment decreased $20.4 million, or 3.9%, to $508.3 million in the 52-week period ended January 31, 2009, from $528.6 million in the 52-week period ended February 2, 2008. The decrease is due to the 7.2% decrease in comparable store sales as described above, partially offset by the impact of sales from new stores opened in fiscal 2008 and fiscal 2009.

Net sales for the electronic commerce segment decreased $1.8 million, or 6.8%, to $25.2 million in the 52-week period ended January 31, 2009, from $27.0 million in the 52-week period ended February 2, 2008. The decrease in net sales for the electronic commerce segment was due to severe macro-economic conditions and decreased business-to-business sales.

Gross profit, which includes cost of sales, distribution costs and occupancy costs (including rent, common area maintenance, property taxes, utilities and merchant association dues), decreased $7.2 million, or 4.5%, to $151.3 million in the 52-week period ended January 31, 2009, from $158.5 million in the 52-week period ended February 2, 2008. Gross profit as a percentage of net sales decreased to 29.5% in the 52-week period ended January 31, 2009, from 29.6% in the 52-week period ended February 2, 2008. The decrease is attributable to higher occupancy costs offset by higher club card membership income and lower markdowns.

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2009 Annual Report

Operating, selling and administrative expenses decreased $0.4 million, or 0.04%, to $116.6 million in the 52-week period ended January 31, 2009, from $117.1 million in the 52-week period ended February 2, 2008. Operating, selling and administrative expenses as a percentage of net sales increased to 22.7% in the 52-week period ending January 31, 2009 from 21.9% in the 52-week period ended February 2, 2008. The decrease was attributable to reduced salary, bonus, 401(k) and payroll tax expense, reduced advertising expenses and reduced bad debt expense, partially offset by increased credit card fees, travel, insurance and new store expenses. Impairment charges increased $1.3 million to $1.4 million in the 52-week period ended January 31, 2009, compared to the 52-week period ended February 2, 2008. The increase was attributable to $0.7 million in impairment charges taken on leasehold improvements at various stores and a $0.7 million impairment of goodwill.

Depreciation and amortization increased $0.5 million, or 3.3%, to $14.5 million in fiscal 2009, from $14.0 million in fiscal 2008. Depreciation and amortization as a percentage of net sales increased to 2.8% in fiscal 2009, from 2.6% in fiscal 2008, due to new store growth in fiscal years 2009 and 2008.

Consolidated operating profit was $18.9 million for the 52-week period ended January 31, 2009, compared to $27.4 million for the 52-week period ended February 2, 2008. This 31.1% decrease was attributable to decreased store sales for the reasons set forth above, which resulted in lower gross profit for fiscal 2009. Operating profit as a percentage of sales was 3.7% for fiscal 2009. Operating profit was 5.1% of sales for fiscal 2008. The decrease as a percentage of sales from fiscal 2008 is attributable to the decrease in gross margin as a percent of sales plus the increase in operating, selling and administrative expenses and depreciation as outlined above. Operating profit for the electronic commerce segment was $1.5 million in each of fiscal 2009 and 2008. Operating profit for the electronic commerce segment was flat from last year in spite of a $1.8 million decrease in net sales. This was caused by improved gross margin through less discounting and greater sales of higher margin items such as gifts and bargain books.

Net interest expense increased $0.6 million, or 42.6%, to $1.9 million in fiscal 2009, from $1.3 million in fiscal 2008, due to higher average debt in fiscal 2009 partially offset by lower average interest rates. Average debt for the 52-week period ended January 31, 2009 was $41.3 million compared to $27.8 million for the 52-week period ended February 2, 2008. The increase in average debt is attributable to reduced sales, additional share repurchases in fiscal 2009 and the impact of the special dividend paid on July 5, 2007.

The effective rate for income tax purposes was 37.7% for fiscal 2009 and 36.6% for fiscal 2008. The increase in the effective tax rate was due to a higher effective state tax rate in the current fiscal year, as well as the impact of more favorable federal tax credits in fiscal 2008.

The Company did not close any stores in fiscal 2009 in a market where the Company does not expect to retain the closed stores’ customers at another store in the same market. Two such stores were closed in fiscal 2008. The financial impact of these closings was not reported as discontinued operations in the financial statements as the impact was immaterial.

Fiscal 2008 Compared to Fiscal 2007

Consolidated net revenue increased $14.7 million, or 2.8%, to $535.1 million for the 52-week period ended February 2, 2008 from $520.4 million for the 53-week period ended February 3, 2007. Two events occurred in the year ended February 3, 2007 that increased total net revenue when compared to the year ended February 2, 2008. First, the 2007 fiscal year included one more week than the 2008 fiscal year. This additional week produced $9.0 million in net sales. Second, the 2007 fiscal year included one-time additional sales income of $2.3 million related to the recognition of gift card breakage from prior years. Consolidated net revenue increased $25.9 million, or 5.1%, to $535.1 million for the 52-week period ended February 2, 2008, when compared with $509.3 million during the period ending February 3, 2007 on a 52-week operating basis (which excludes the $9.0 million of additional sales from the 53rd week of the 2007 fiscal year and the one-time additional sales income of $2.3 million in fiscal 2007 related to gift card breakage from prior years).

Comparable store sales for the 52-week period ended February 2, 2008 increased 1.4% when compared to the same 52-week period in the prior fiscal year. The increase in comparable store sales was attributable to a strong performance in our best sellers and promotional items. During the second quarter of the year ended February 2, 2008, Harry Potter and the Deathly Hallows was released and added to our comparable store sales increase.

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2009 Annual Report 

Consolidated net revenue included $1.4 million of gift card breakage income for the 52-week period ended February 2, 2008 compared to $3.2 million for the 53-week period ended February 3, 2007. The 53-week period ended February 3, 2007 included $2.3 million, $1.4 million net of taxes, of gift card breakage income related to periods prior to fiscal 2007. In fiscal 2007 the Company formed a gift card subsidiary, Books-A-Million Card Services (“Card Services”), and began recording gift card breakage income for those cards for which the likelihood of redemption is deemed to be remote (after 24 months of inactivity) and which there is no legal obligation to remit the value of such redeemed gift cards to the relevant jurisdictions. The primary function of Card Services is to administer the Company’s gift card program and to provide a more advantageous legal structure. The $2.3 million related to periods prior to fiscal 2007 represents a change in estimate in the escheat liability due to operational changes related to the creation of Card Services.

Our core book department business was down slightly for the year. However, sales of fiction titles were very strong, driven by sales of commercial fiction titles and the January publication of John Grisham's The Appeal and Steven King's Duma Key.  Biography titles experienced the success of Elizabeth Gilbert’s memoir, Eat, Pray Love. We also built on the positive sales trends in teen titles, graphic novels and our Faithpoint inspirational titles.  Sales of children’s books increased over prior year due to sales of Harry Potter and The Deathly Hallows setting new records and the ongoing growth of children's titles generally. Our stores produced solid gains in bargain books and gifts with toys and games experiencing gains over prior periods.

The Company opened nine new stores during fiscal 2008 resulting in partial year sales of $6.4 million and closed seven stores during fiscal 2008 with partial year sales of $1.2 million. The Company also converted one traditional store to a superstore during fiscal 2008 with partial year sales of $1.0 million.

Net sales for the retail trade segment increased $15.6 million, or 3.0%, to $528.6 million in the 52-week period ended February 2, 2008, from $513.0 million in the 53-week period ended February 3, 2007. When compared to the same 52-week period last year, the retail trade segment increased $23.8 million, or 4.7%. In addition to the factors discussed above, the increase in net sales for the retail trade segment was due to new stores opened in fiscal 2008.

Net sales for the electronic commerce segment increased $1.0 million, or 3.6%, to $27.0 million in the 52-week period ended February 2, 2008, from $26.0 million in the 53-week period ended February 3, 2007. When compared to the same 52-week period last year, the electronic commerce segment increased $1.7 million, or 6.7%. The increase in net sales for the electronic commerce segment was due to increased business to business sales.

Gross profit, which includes cost of sales, distribution costs and occupancy costs (including rent, common area maintenance, property taxes, utilities and merchant association dues), increased $1.8 million, or 1.2%, to $158.5 million in the 52-week period ended February 2, 2008, from $156.7 million in the 53-week period ended February 3, 2007. Gross profit as a percentage of net sales decreased to 29.6% in the 52-week period ended February 2, 2008 from 30.1% in the 53-week period ended February 3, 2007. Excluding the extra week and gift card breakage recorded in fiscal 2007, gross profit as a percentage of net sales decreased 0.2% in fiscal 2008. The decrease is the result of higher occupancy and warehouse costs partially offset by lower promotional discounts, lower markdowns, improvements in store inventory shrinkage and higher club card membership income.

Operating, selling and administrative expenses increased $4.5 million, or 4.1%, to $117.1 million in the 52-week period ended February 2, 2008, from $112.6 million in the 53-week period ended February 3, 2007. Operating, selling and administrative expenses as a percentage of net sales remained relatively flat at 21.9% in the 52-week period ending February 2, 2008 compared to 21.6% in the 53-week period ended February 3, 2007. Excluding the extra week recorded in fiscal 2007, operating, selling and administrative expenses as a percentage of net sales increased 0.2% in fiscal 2008. The increase was due to an increase in health care expense, promotional expense for our club card program and a revision of the franchise tax estimate.

Depreciation and amortization decreased $0.1 million, or 0.6%, to $14.0 million in fiscal 2008, from $14.1 million in fiscal 2007. Depreciation and amortization as a percentage of net sales decreased to 2.6% in fiscal 2008, from 2.7% in fiscal 2007, due to the impact of certain assets becoming fully depreciated during the prior year.

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2009 Annual Report

Consolidated operating profit was $27.4 million for the 52-week period ended February 2, 2008, compared to $30.1 million for the 53-week period ended February 3, 2007. Excluding the extra week and gift card breakage recorded in fiscal 2007, operating profit increased $0.6 million during fiscal 2008. This increase was attributable to increased store sales for the reasons set forth above, which resulted in higher gross profit for fiscal 2008. Operating profit as a percentage of sales was 5.1% for fiscal 2008. Excluding the extra week and the gift card breakage recorded in fiscal 2007, operating profit was 5.3% of sales for fiscal 2007. The decrease as a percentage of sales from fiscal 2007 is attributable to the decrease in gross margin as a percent of sales plus the increase in operating, selling and administrative expenses offset by the reduction in depreciation as outlined above. The operating profit for the electronic commerce segment was $1.5 million, compared to $1.4 million in fiscal 2007. The improvement in operating results was due to higher gross margin partially offset by higher customer service payroll, an adjustment to our gift card reserves, software maintenance and bad debt.

Net interest expense increased $1.2 million, or 1185.8%, to $1.3 million in fiscal 2008, from $0.1 million in fiscal 2007, due to borrowing from our revolving credit facility as a result of the special dividend paid on July 5, 2007 and our share repurchase program. During fiscal 2008, the Company purchased 1.4 million shares of its common stock at a total cost of $20.0 million under its share repurchase program.

The effective rate for income tax purposes was 36.64% for fiscal 2008 and 37.0% for fiscal 2007. The decrease in the effective tax rate was due to federal tax credits for prior year returns taken in fiscal 2008.

The Company closed two stores in fiscal 2008 in a market where the Company does not expect to retain the closed stores’ customers at another store in the same market. The store’s sales and operating results for fiscal 2008 have not been included in discontinued operations because the impact on the financial statements was immaterial. The Company continues to report in discontinued operations for prior year stores closed where the Company does not expect to retain the closed stores’ customers at another store. One such store was closed in fiscal 2007. The financial impact of these closings was reported as discontinued operations in the financial statements, but had a minimal impact on the financial results of the Company.

Presented below is certain financial information for the fiscal year ended February 3, 2007 on a 52-week “operating basis,” the effect of which is to exclude the financial results for the final week of the fiscal period and to exclude the effect of prior year gift card breakage income. This information is presented because the fiscal year ended February 3, 2007 was one week longer than the fiscal year ended February 2, 2008 and included gift card breakage income related to periods prior to fiscal 2007.

Management uses these non-GAAP financial measures because it believes that they are important to investors in comparing the Company’s financial performance in one fiscal period against a prior fiscal period in circumstances where the fiscal periods are of a different duration or include a material non-recurring item such as a change in estimate. As noted above, the fiscal year ended February 3, 2007, was one week longer than the fiscal year ended February 2, 2008 and included $2.3 million, $1.4 million net of taxes, of prior year gift card breakage income.

These non-GAAP financial measures have limitations as analytical tools, and you should not consider them in isolation or as substitutes for results determined in accordance with GAAP. Additionally, other companies in the retail industry may not exclude portions of a fiscal period from the financial results for such period, limiting their usefulness as a comparative measure. The following table reconciles the non-GAAP measures from the fiscal year ended February 3, 2007, with the comparable financial measure calculated and presented in accordance with GAAP.

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2009 Annual Report 

BOOKS-A-MILLION, INC.
Unaudited Consolidated Statements of Income
(In thousands, except per share data)
	Year Ended February 2, 2008	Year Ended February 3, 2007
	GAAP Basis	GAAP Basis	Adjustments	Operating Basis
	(52 weeks)	(53 weeks)		(52 weeks)
NET SALES	$535,128	$520,416	$11,244	$509,172
Cost of sales (including warehouse,    distribution and store occupancy costs)	376,580	363,688	6,005	357,683
GROSS PROFIT	158,548	156,728	5,239	151,489
Operating, selling and administrative     expenses	117,139	112,560	1,892	110,668
Depreciation and amortization	13,989	14,069	-	14,069
OPERATING INCOME	27,420	30,099	3,347	26,752
Interest expense (income), net	1,346	105	-	105
INCOME BEFORE INCOME TAXES	26,074	29,994	3,347	26,647
Income tax provision	9,552	11,107	1,239	9,868
NET INCOME	$ 16,522	$ 18,887	$   2,107	$ 16,780
NET INCOME PER COMMON SHARE:
Basic:
Net income	$     1.03	$     1.16	$     0.13	$     1.03
Weighted average shares outstanding	16,089	16,353	16,353	16,353
Diluted:
Net income	$     1.01	$     1.12	$     0.12	$     1.00
Weighted average shares outstanding	16,302	16,805	16,805	16,805

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2009 Annual Report

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. The Company’s results of operations depend significantly upon net sales generated during the fourth fiscal quarter, and any significant adverse trend in the net sales of such period would have a material adverse impact on the Company’s results of operations for the full year.

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.

Liquidity and Capital Resources

The Company’s primary sources of liquidity are cash flows from operations, including credit terms from vendors, and borrowings under its credit facilities. The Company has an unsecured revolving credit facility under a credit agreement with a syndicate of banks that allows borrowings up to $100.0 million, which expires in July 2011. Availability under the facility is reduced by outstanding letters of credit issued under this facility. The credit agreement contains certain financial and non-financial covenants, the most restrictive of which is the maintenance of a minimum fixed charge coverage ratio. The outstanding balance under this credit facility as of January 31, 2009 and February 2, 2008, was $15.8 million and $28.0 million, respectively, and the face amount of letters of credit issued under the facility as of such dates was $2.2 million and $2.4 million, respectively. The maximum and average outstanding borrowings under the credit facility (excluding the face amount of letters of credit issued thereunder) during fiscal 2009 were $58.5 million and $41.3 million, respectively.

During fiscal 1996 and fiscal 1995, the Company acquired and constructed certain warehouse and distribution facilities with the proceeds of loans made pursuant to an industrial development revenue bond (the “Bond”). As of January 31, 2009 and February 2, 2008, there was $6.7 million and $7.0 million of borrowings outstanding, respectively, under these arrangements, which bear interest at variable rates.

The Company’s capital expenditures totaled $19.8 million in fiscal 2009. These expenditures were used for new store openings, renovation and improvements to existing stores, upgrades and expansion of warehouse distribution facilities and investment in management information systems.

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2009 Annual Report 

Financial Position

During fiscal 2009, the Company opened sixteen stores, closed four stores and relocated seven other stores. Despite severe macro-economic conditions and overall store growth in fiscal 2009, inventory balances decreased $2.5 million to $204.3 million at January 31, 2009, as compared to $206.8 million at February 2, 2008. The reduction in inventory is attributable to a more disciplined and focused approach to managing our average inventory balances in our stores and at our warehouses in response to difficult macro-economic conditions. This was accomplished by lower receipts and an acceleration of returns to our publishers for returnable product.

Net property and equipment increased $4.5 million due to higher capital expenditures for sixteen new stores opened and seven other stores re-opened in fiscal 2009. Additionally, accounts and related party receivables decreased by $3.7 million as of January 31, 2009 as compared with the balance as of February 2, 2008, due to reduced sales. Accounts payable increased $5.4 million due to more effective management of payment terms. Accrued expenses and short-term borrowing decreased $6.0 million and $12.2 million, respectively. The decrease in short-term borrowings is the result of cost control, a reduction in inventory and an increase in accounts payable leverage. The reduction in accrued expenses is the result of reduced accruals for bonuses, insurance, returns and capital expenditures.

Future Commitments

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 January 31, 2009:

	Payments Due Under Contractual Obligations(2)
(in thousands)	Total	FY 2010	FY 2011	FY 2012	FY 2013	FY 2014	Thereafter
Short-term borrowings(1)	$15,760	$15,760	$ --	$ --	$ --	$ --	$ --
Long-term debt-industrial revenue bond	6,720	--	--	6,720	--	--	--
Subtotal of debt	22,480	15,760	--	6,720	--	--	--
Interest	597	167	200	230	--	--	--
Operating leases	186,846	39,633	33,310	26,151	20,857	16,990	49,905
Total of obligations	$209,923	$55,560	$33,510	$33,101	$20,857	$16,990	$49,905

(1) Short term borrowings represent borrowings under the $100 million credit facility that are due in 12 months or less.

(2) This table excludes any amounts related to the payment of the $2.0 million of income tax uncertainties, as the Company cannot make a reasonably reliable estimate of the periods of cash settlements with the respective taxing authorities.

Guarantees

From time to time, the Company enters into certain types of agreements that require the Company to indemnify parties against third-party claims. Generally, these agreements relate to: (a) agreements with vendors and suppliers, under which the Company may provide customary indemnification to its vendors and suppliers in respect of actions they take at the Company’s request or otherwise on its behalf, (b) agreements with vendors who publish books or manufacture merchandise specifically for the Company to indemnify the vendors against trademark and copyright infringement claims concerning the books published or merchandise manufactured on behalf of the Company, (c) real estate leases, under which the Company may agree to indemnify the lessors for claims arising from the Company’s use of the property, and (d) agreements with the Company’s directors, officers and employees, under which the Company may agree to indemnify such persons for liabilities arising out of their relationship with the Company. The Company has Directors and Officers Liability Insurance, which, subject to the policy’s conditions, provides coverage for indemnification amounts payable by the Company with respect to its directors and officers up to specified limits and subject to certain deductibles.

The nature and terms of these types of indemnities vary. The events or circumstances that would require the Company to perform under these indemnities are transaction and circumstance specific. The overall maximum amount of obligations cannot be reasonably estimated. Historically, the Company has not incurred significant costs related to performance under these types of indemnities. No liabilities have been recorded for these obligations on the Company’s balance sheet at January 31, 2009 or February 2, 2008, as such liabilities are considered de minimis.   Cash Flows

Operating activities provided cash of $39.2 million, $34.5 million and $21.3 million in fiscal 2009, 2008 and 2007, respectively, and included the following effects:

• Cash provided by inventories in fiscal 2009 of $2.5 million was the result of tighter controls over receipts and returns in light of the economic environment. Cash used by inventories in fiscal 2008 was $6.6 million. This was the result of the sales shortfall in the fourth quarter of fiscal 2008. Cash provided by inventories in fiscal 2007 was $4.5 million. This was the result of increased sales and improved inventory management during the respective year.

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2009 Annual Report

• Cash provided by accounts payable (including related party payables) in fiscal 2009 of $5.5 million was the result of improved accounts payable leveraging with vendors. Cash provided by accounts payable (including related party payables) in fiscal 2008 of $4.8 million was due to a deliberate change in our payment practices to more effectively meet vendor payment guidelines. Cash used by accounts payable (including related party payables) in fiscal 2007 of $14.5 million was due to the timing of vendor payments for fourth quarter merchandise versus the prior year end and lower inventory levels for fiscal 2007.

• Depreciation and amortization expenses were $14.4 million, $14.0 million and $14.1 million in fiscal 2009, 2008 and 2007, respectively. The increase in fiscal 2009 was due to the timing of store openings. The decrease in fiscal 2008 was due to the impact of certain assets becoming fully depreciated during the prior year.

• Cash used by accrued expenses was $5.6 million in fiscal 2009 and was due to a reduction in the annual bonus accrual, lower capital expenditure accruals and lower sales tax audit accruals. Cash provided by accrued expenses was $4.5 million in fiscal 2008 and was due to unused gift card reserve, accrued payroll taxes and the adoption of FASB Staff Position FIN 48-1. Cash used by accrued expenses was $3.1 million in fiscal 2007 and was due to a lower gift card liability due to the recognition of gift card breakage, lower capital expenditure accruals and lower audit fee accruals.

Cash used in investing activities in fiscal 2009, 2008 and 2007 reflected a net use of cash of $19.8 million, $16.9 million and $16.2 million, respectively. Cash was used to fund capital expenditures for new store openings, renovation and improvements to existing stores, warehouse distribution purposes and investments in management information systems.

Financing activities used cash of $19.5 million in fiscal 2009 to repay debt ($12.5 million), to purchase stock ($1.8 million), for dividend payments ($5.0 million) and for excess tax benefit from stock based compensation ($0.3 million), offset by proceeds from the issuance of stock options ($0.1 million). Financing activities used cash of $46.1 million in fiscal 2008 to purchase stock ($20.1 million) and for dividend payments ($56.8 million), offset by borrowings under the credit facility ($27.8 million), proceeds from the issuance of stock upon the exercise of stock options ($1.3 million) and related tax benefits ($1.6 million). Financing activities used cash of $8.5 million in fiscal 2007 to purchase stock ($7.5 million), repay debt ($0.1 million) and for dividend payments ($5.3 million), offset by proceeds from the issuance of stock upon the exercise of stock options ($1.8 million) and the tax benefit from stock based compensation ($2.6).

Dividends

The Company paid $5.0 million in dividends in fiscal 2009 and $56.8 million in dividends in fiscal 2008. See the table below for a summary of dividends declared each quarter. On June 4, 2007, the Company’s board of directors declared a special one-time cash dividend of $3.00 per common share. The dividend was paid on July 5, 2007 to stockholders of record at the close of business on June 20, 2007. A total of $50.9 million was paid on the Company’s 16,958,000 outstanding shares of common stock as a result of the special dividend.

	Dividends Declared
	Fiscal 2009	Fiscal 2008
First quarter	$0.09	$0.09
Second quarter	$0.09	$3.09
Third quarter	$0.05	$0.09
Fourth quarter	$0.05	$0.09
Annual Total	$0.28	$3.36

Impact of Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In June 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes.” FIN 48 prescribes a recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company adopted the provisions of FIN 48, effective February 4, 2007. As a result of the adoption of FIN 48, the Company recorded an increase of $1,987,000 in other long-term liabilities in its consolidated balance sheet for unrecognized tax benefits, which was accounted for as a cumulative effect adjustment to the February 4, 2007 balance of retained earnings.

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2009 Annual Report 

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS No. 157”), which defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles in the United States (“GAAP”) and expands disclosures about fair value measurements. For financial assets and liabilities, this statement is effective for fiscal periods beginning after November 15, 2007 and does not require any new fair value measurements. In February 2008, FASB Staff Position No. 157-2 was issued which delayed the effective date of SFAS No. 157 to fiscal years ending after November 15, 2008 for nonfinancial assets and liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The Company adopted SFAS No. 157 effective February 3, 2008. The adoption of SFAS No. 157 did not have a material effect on the Company's consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities — including an amendment of FASB Statement No. 115. This statement permits entities to choose to measure many financial instruments and certain other items at fair value. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, including interim periods within that fiscal year. The Company did not elect the fair value option for any of its existing financial instruments as of February 3, 2008 and the Company has not determined whether or not it will elect this option for financial instruments it may acquire in the future.

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2007, the FASB issued SFAS No. 141 (revised), Business Combinations ("SFAS No. 141R"). The objective of this statement is to improve the relevance, representational faithfulness and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects.   SFAS No. 141R is effective for the Company on February 1, 2009 and its adoption is not expected to have a significant impact on the Company’s financial statements. In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51 ("SFAS No. 160").  The objective of this statement is to improve the relevance, comparability and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary.  SFAS No. 160 is effective for the Company on February 1, 2009 and its adoption is not expected to have a significant impact on the Company’s financial statements.

In February 2008, the FASB issued FASB Staff Position (FSP) FAS 157-1, Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements that Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13, and FSP FAS 157-2, Effective Date of FASB Statement No. 157. These FSPs:

•     Exclude certain leasing transactions accounted for under FASB Statement No. 13, Accounting for Leases, from the scope of FASB Statement No. 157, “Fair Value Measurements” (Statement 157). The exclusion does not apply to fair value measurements of assets and liabilities recorded as a result of a lease transaction but measured pursuant to other pronouncements within the scope of Statement 157.

•     Defer the effective date in Statement 157 for one year for certain nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually).

FSP FAS 157-1 is effective upon the initial adoption of Statement 157.  FSP FAS 157-2 is effective February 12, 2008.  The Company adopted the provisions of FSP 157-1 and 157-2 in the first quarter of 2008.  See Note 8 for details regarding the impact of adoption on the Company.

In March 2008, the FASB issued FASB Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities (“SFAS No. 161”). The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. Based on current conditions, the Company does not expect the adoption of SFAS No. 161 to have a significant impact on its results of operations or financial position.

In May 2008, the FASB issued FASB Statement No. 162, The Hierarchy of Generally Accepted Accounting Principles ("SFAS No. 162"). SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with GAAP. This Statement became effective on November 15, 2008. The Company adopted SFAS No. 162 in the fourth quarter of 2008 and has concluded that it does not have a material effect on its consolidated financial statements.

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2009 Annual Report

In June 2008, the FASB ratified EITF Issue No. 08-3, Accounting for Lessees for Maintenance Deposits Under Lease Arrangements (“EITF No. 08-3”). EITF No. 08-3 requires that all nonrefundable maintenance deposits be accounted for as a deposit with the deposit expensed or capitalized in accordance with the lessee's maintenance accounting policy when the underlying maintenance is performed. Once it is determined that an amount on deposit is not probable of being used to fund future maintenance expense, it is to be recognized as additional expense at the time such determination is made. EITF No. 08-3 is effective for the Company as of the beginning of its fiscal year that begins on February 1, 2009. The adoption of EITF No. 08-3 will not have a material effect on the Company's consolidated financial statements.

In September 2008, the FASB issued FSP No. FAS 133-1 and FIN 45-4, Disclosures about Credit Derivatives and Certain Guarantees – An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161.   This FSP amends SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, to require disclosures by sellers of credit derivatives, including credit derivatives embedded in a hybrid instrument.  This FSP also amends FASB Interpretation No. (FIN) 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, to require an additional disclosure about the current status of the payment/performance risk of a guarantee.   Further this FSP clarifies the FASB’s intent about the effective date of SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities.  The provisions of this FSP that amend SFAS No. 161 and FIN 45 are effective for reporting periods ending after November 15, 2008 and the clarification of the effective date of SFAS No. 161 is effective upon issuance of this FSP.  The Company adopted FSP FAS 133-1 and FIN 45-4 in the fourth quarter of 2008 and has concluded that it does not have a material effect on its consolidated financial statements.

In October 2008, the FASB issued FASB Staff Position (FSP) No. FAS 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active.   FSP 157-3 clarifies the application of SFAS No. 157, Fair Value Measurements , in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active.  The FSP stipulates that determining fair value in a dislocated market depends on the facts and circumstances and may require the use of significant judgment when evaluating individual transactions or broker quotes which are some of the sources of the fair value measurement.  In addition, FSP FAS 157-3 states that if an entity uses its own assumptions to determine fair value, it must include appropriate risk adjustments that market participants would make for nonperformance and liquidity risks.  FSP FAS 157-3 is effective upon issuance, including prior periods for which financial statements have not been issued.  The Company adopted FSP FAS 157-3 in the third quarter of 2008 and has concluded that it does not have a material effect on its consolidated financial statements.

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 of merchandise to, related parties. Related party inventory purchases decreased by $4.5 million, or 14.6%, to $26.3 million in fiscal 2009, compared to fiscal 2008 purchases of $30.8 million. The decrease in related party purchases was due to reduced magazine, music and collectibles purchases versus fiscal 2008. Related party sales transactions decreased in fiscal 2009 to $1.3 million, a decrease of $2.3 million, as a result of decreased book merchandise sales. The Company leases certain office, retail and warehouse space from related parties, for which the rents have remained relatively unchanged. Management believes the terms of these related party transactions are substantially equivalent to those available from unrelated parties. The Company co-owns with three related parties two airplanes that are used by the Company in its business. The Company owns a 26% interest in each of these airplanes. Prior to July 1, 2008, the Company owned 49.9% in one airplane co-owned by the Company and one of the related parties. In an effort to reduce operating and administrative expenses, on July 1, 2008 the Company entered into a like-kind exchange transaction whereby it transferred 23.9% of its interest in the one airplane in exchange for a 26% interest in another airplane co-owned by the three related parties and certain other parties. The value of the airplane interests transferred and received by the Company in this exchange was approximately $1.6 million. No cash traded hands in this exchange.

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2009 Annual Report 

Disclosure Regarding Forward-Looking Statements

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 or deflation; economic conditions in general and in the Company’s specific market areas, including the length of time that the U.S. economy remains in the current recession; 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 and in the Company’s Annual Report and Form 10-K for the fiscal year ended January 31, 2009. 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.

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2009 Annual Report

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

Books-A-Million, Inc.

We have audited the accompanying consolidated balance sheets of Books-A-Million, Inc. and subsidiaries (the “Company”) as of January 31, 2009 and February 2, 2008 and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the three years in the period ended January 31, 2009. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of January 31, 2009 and February 2, 2008, and the results of its operations and its cash flows for each of the three years in the period ended January 31, 2009 in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of January 31, 2009, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated April 14, 2009 expressed an unqualified opinion.

/s/ GRANT THORNTON LLP

Atlanta, Georgia

April 14, 2009

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2009 Annual Report 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

Books-A-Million, Inc.

We have audited Books-A-Million, Inc.'s and subsidiaries (the "Company") internal control over financial reporting as of January 31, 2009, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Controls Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

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

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 31, 2009, based on criteria established in Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Company as of January 31, 2009 and February 2, 2008, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the three years in the period ended January 31, 2009 and our report dated April 14, 2009 expressed an unqualified opinion on those financial statements.

/s/ GRANT THORNTON LLP

Atlanta, Georgia

April 14, 2009

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2009 Annual Report

Consolidated Balance Sheets
	As of
(Dollars in thousands, except per share amounts)	1/31/09	2/2/08
Assets
Current Assets:
Cash and cash equivalents	$5,529	$5,595
Accounts receivable, net of allowance for doubtful accounts of $354 and $741,    respectively	5,431	6,450
Related party receivables	1,133	3,780
Inventories	204,305	206,836
Prepayments and other	3,239	4,678
Total Current Assets	219,637	227,339
Property and Equipment:
Land	628	628
Buildings	6,915	6,915
Equipment	79,003	76,653
Furniture and fixtures	88,999	84,843
Leasehold improvements	58,086	53,071
Construction in process	536	398
Gross Property and Equipment	234,167	222,508
Less accumulated depreciation and amortization	176,129	168,994
Net Property and Equipment	58,038	53,514
Deferred Income Taxes	463	2,452
Other Assets:
Goodwill	653	1,368
Other	501	160
Total Other Assets	1,154	1,528
Total Assets	$279,292	$284,833
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable:
Trade	$94,418	$88,994
Related party	2,321	2,213
Accrued expenses	35,554	41,539
Accrued income taxes	848	995
Deferred income taxes	8,591	6,846
Short-term borrowings	15,760	27,967
Total Current Liabilities	157,492	168,554
Long-term Debt	6,720	6,975
Deferred Rent	8,554	8,079
Liability for Uncertain Tax Positions	2,032	2,174
Total Non-current Liabilities	17,306	17,228
Commitments and Contingencies
Stockholders’ Equity:
Preferred stock, $.01 par value; 1,000,000 shares authorized, no shares outstanding	-	-
Common stock, $.01 par value; 30,000,000 shares authorized, 21,236,218 and 20,850,611 shares outstanding at January 31, 2009 and February 2, 2008, respectively	212	209
Additional paid-in capital	91,432	89,752
Treasury stock at cost (5,455,720 shares at January 31, 2009 and 5,216,951 shares at February 2, 2008, respectively)	(46,258)	(44,468)
Retained earnings	59,108	53,558
Total Stockholders’ Equity	104,494	99,051
Total Liabilities and Stockholders’ Equity	$279,292	$284,833

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

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2009 Annual Report 

                                                                                            CONSOLIDATED STATEMENTS OF INCOME

	Fiscal Year Ended
(In thousands, except per share data)	1/31/09	2/2/08	2/3/07
	52 weeks	52 weeks	53 weeks
Net revenue	$513,271	$535,128	$520,416
Cost of products sold, including warehouse distribution and store occupancy    costs	361,934	376,580	363,688
Gross profit	151,337	158,548	156,728
Operating, selling and administrative expenses	116,648	117,079	112,227
Impairment charges	1,351	60	333
Depreciation and amortization	14,448	13,989	14,069
Operating profit	18,890	27,420	30,099
Interest expense, net	1,920	1,346	105
Income before income taxes	16,970	26,074	29,994
Provision for income taxes	6,396	9,552	11,107
Net Income	$10,574	$16,522	$  18,887
Net income per common share:
Basic
Net income per share	$0.70	$1.03	$     1.16
Weighted average number of shares outstanding – basic	15,219	16,089	16,352
Diluted
Net income per share	$0.68	$1.01	$     1.12
Weighted average number of shares outstanding – diluted	15,609	16,302	16,805
Dividends per share – declared	$0.28	$     3.36	$     0.33

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

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2009 Annual Report

                                                                                              CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

							Accumulated
			Additional				Other	Total
	Common Stock		Paid-In	Treasury Stock		Retained	Comprehensive	Stockholders'
(In thousands)	Shares	Amount	Capital	Shares	Amount	Earnings	Income (Loss)	Equity
Balance, January 28, 2006	19,764	$198	$79,509	3,287	$(16,954)	$82,263	$(7)	$145,009
Net income						18,887		18,887
Unrealized gain on accounting    for derivative instruments,    net of tax provision of $4							7	7
Subtotal comprehensive    income								18,894
Purchase of treasury stock, at    cost				531	(7,460)			(7,460)
Dividends paid						(5,303)		(5,303)
Issuance of restricted stock	148	1	1,558					1,559
Issuance of stock for employee    stock purchase plan	9		88					88
Exercise of stock options	540	6	1,674					1,680
Tax benefit from exercise of    stock options			2,567					2,567
Balance, February 3, 2007	20,461	$205	$85,396	3,818	$(24,414)	$95,847	$    --	$157,034
Net income						$16,522		$16,522
Subtotal comprehensive    income								$16,522
FIN 48 Adjustment						(1,987)		(1,987)
Purchase of treasury stock, at    cost				1,399	$(20,054)			(20,054)
Dividends paid						(56,824)		(56,824)
Issuance of restricted stock	155	$2	$1,464					1,466
Issuance of stock for employee    stock purchase plan	8		118					118
Exercise of stock options	226	2	1,136					1,138
Tax benefit from exercise of    stock options			1,638					1,638
Balance, February 2, 2008	20,850	$209	$89,752	5,217	$(44,468)	$53,558	$    --	$99,051
Net income						$10,574		$10,574
Subtotal comprehensive    income								$10,574
Purchase of treasury stock, at    cost				239	$(1,790)			(1,790)
Dividends paid						(5,024)		(5,024)
Issuance of restricted stock	374	$3	$1,887					1,890
Issuance of stock for employee    stock purchase plan	12		132					132
Tax decrement from stock    based compensation			(339)					(339)
Balance, January 31, 2009	21,236	$212	$91,432	5,456	$(46,258)	$59,108	$    --	$104,494

The accompanying notes are an integral part of these consolidated statements

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2009 Annual Report 

                                                                                            CONSOLIDATED STATEMENTS OF CASH FLOWS

	Fiscal Year Ended
(In thousands)	1/31/09	2/2/08	2/3/07
	52 Weeks	52 Weeks	53 Weeks
Cash Flows from Operating Activities:
Net income	$10,574	$16,522	$18,887
Adjustments to reconcile net income to net cash provided by operating    activities:
Depreciation and amortization	14,448	13,989	14,069
Stock-based compensation	1,890	1,466	1,559
Loss on impairment of assets	1,351	60	336
Loss on sale of property and equipment	271	479	228
Deferred income tax provision	3,734	2,933	465
Excess tax benefit of stock based compensation	339	(1,638)	(2,567)
Bad debt expense	93	430	254
(Increase) decrease in assets:
Accounts receivable	926	644	1,890
Related party receivables	2,647	(1,133)	(1,513)
Inventories	2,531	(6,559)	4,512
Prepayments and other	1,439	(315)	(25)
Noncurrent assets (excluding amortization)	(412)	(3)	(124)
Increase (decrease) in liabilities:
Accounts payable	5,424	5,575	(14,752)
Related party payables	108	(775)	297
Accrued income taxes	(486)	(1,719)	880
Accrued expenses	(5,654)	4,537	(3,090)
Total adjustments	28,649	17,971	2,419
Net cash provided by operating activities	39,223	34,493	21,306
Cash Flows from Investing Activities:
Capital expenditures	(19,819)	(16,878)	(16,191)
Proceeds from sale of property and equipment	13	--	15
Net cash used in investing activities	(19,806)	(16,878)	(16,176)
Cash Flows from Financing Activities:
Borrowings under credit facilities	236,125	174,212	2,850
Repayments under credit facilities	(248,587)	(146,370)	(2,950)
Proceeds from exercise of stock options and issuance of common stock under    employee stock purchase plan	132	1,257	1,768
Purchase of treasury stock	(1,790)	(20,054)	(7,460)
Payment of dividends	(5,024)	(56,824)	(5,303)
Excess tax benefit from stock based compensation	(339)	1,638	2,567
Net cash used in financing activities	(19,483)	(46,141)	(8,528)
Net Decrease in Cash and Cash Equivalents	(66)	(28,526)	(3,398)
Cash and Cash Equivalents at Beginning of Year	5,595	34,121	37,519
Cash and Cash Equivalents at End of Year	$5,529	$5,595	$34,121
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest	$2,013	$1,907	$     910
Income taxes, net of refunds	$3,319	$6,666	$  7,199
Supplemental Disclosures of Non Cash Investing Activities:
Capital expenditures in accrued expenses	$(833)	$(368)	$(1,284)
Like-kind exchange of assets	$1,600	--	--

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

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2009 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 220 bookstores in 21 states and the District of Columbia, which are predominantly located in the southeastern United States. The Company also operates a retail Internet website. The Company presently consists of Books-A-Million, Inc. and its three wholly owned subsidiaries, American Wholesale Book Company, Inc., Booksamillion.com, Inc. and BAM Card Services, LLC. All inter-company balances and transactions have been eliminated in consolidation. For a discussion of the Company’s business segments, see Note 8.

Fiscal Year

The Company operates on a 52 or 53-week year, with the fiscal year ending on the Saturday closest to January 31. Fiscal year 2009 and fiscal year 2008 were each 52-week periods. Fiscal year 2007 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 of America requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Revenue Recognition

The Company recognizes revenue from the sale of merchandise at the time the merchandise is sold and the customer takes delivery. Returns are recognized at the time the merchandise is returned and processed. At each period end, an estimate of sales returns is recorded. Sales return reserves are based on historical returns as a percentage of sales activity. The historical returns percentage is applied to the sales for which returns are projected to be received after period end. The estimated returns percentage and return dollars have not materially changed in the last several years. Sales tax collected is recorded net and is not recognized as revenue and is included on the consolidated balance sheets in accrued expenses.

The Company sells its Millionaire’s Club Card, which entitles the customer to receive a ten percent discount on all purchases made during the twelve-month membership period, for a non-refundable fee. The Company recognizes this revenue over the twelve-month membership period based upon historical customer usage patterns. Related deferred revenue is included in accrued expenses. The Company sells gift cards to its customers in its retail stores. The gift cards do not have an expiration date. Income is recognized from gift cards when: (1) the gift card is redeemed by the customer; or (2) the likelihood of the gift card being redeemed by the customer is remote (gift card breakage) and there is no legal obligation to remit the value of the unredeemed gift cards to the relevant jurisdictions. The gift card breakage rate is determined based upon historical redemption patterns. Based on this historical information, the likelihood of a gift card remaining unredeemed can be determined after 24 months of card inactivity. At that time, breakage income is recognized for those cards for which the likelihood of redemption is deemed to be remote and for which there is no legal obligation to remit the value of such unredeemed gift cards to the relevant jurisdictions. In fiscal 2007, the Company formed a gift card subsidiary, Books-A-Million Card Services, now known as BAM Card Services, LLC ("Card Services"), to administer the Company’s gift card program and to provide a more advantageous legal structure. During fiscal 2009, the Company recognized $1.7 million of gift card breakage income. Breakage income for fiscal 2008 was $1.4 million. Breakage income for fiscal 2007 was $3.2 million, of which $2.3 million relates to periods prior to fiscal 2007. The $2.3 million represents a change in estimate in the escheat liability due to operational changes related to the creation of Card Services. Gift card breakage income is included in revenue.

Vendor Allowances

The Company receives allowances from its vendors from a variety of programs and arrangements, including placement and co-operative advertising programs. Effective February 3, 2002, the Company adopted the provisions of Emerging Issues Task Force (“EITF”) No. 02-16, Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor, which addresses the accounting for vendor allowances. As a result of the adoption of this statement, vendor allowances in excess of incremental direct costs are reflected as a reduction of inventory costs and recognized in cost of products sold upon the sale of the related inventory.

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2009 Annual Report 

Accounts Payable

The Company classifies its checks written but not yet cleared by the bank in Accounts Payable since the right to offset does not exist as of January 31, 2009 as described in the provisions of FASB Interpretation No. 39, Offset Amounts Related to Certain Contracts. Checks are only written once approved by management. Amounts included in Accounts Payable representing checks written but not yet cleared as of January 31, 2009 and February 2, 2008 were $19.5 million and $25.0 million, respectively.

Inventories

Inventories are valued at the lower of cost or market, using the retail method. Market is determined based on the lower of replacement cost or estimated realizable value. Using the retail method, store and warehouse inventories are valued by applying a calculated cost to retail ratio to the retail value of inventories.

The Company currently utilizes the last-in, first-out (LIFO) method of accounting for inventories. The cumulative difference between replacement and current cost of inventory over stated LIFO value was $2.9 million as of January 31, 2009 and $2.5 million as of February 2, 2008. The estimated replacement cost of inventory is the current first-in, first-out (FIFO) value of $207.2 million.

Physical inventory counts are taken throughout the course of the fiscal period and reconciled to the Company’s records. Accruals for inventory shortages are estimated based upon historical shortage results.

Inventories were:

	Fiscal Year Ended
(In thousands)	January 31, 2009	February 2, 2008
Inventories (at FIFO)	$207,217	$209,314
LIFO reserve	(2,912)	(2,478)
Net inventories	$204,305	$206,836

Property and Equipment

Property and equipment are recorded at cost. Depreciation of 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 buildings and amortization of leasehold improvements, including remodels, is provided on the straight-line basis over the lesser of the assets’ estimated useful lives (ranging from five to 40 years) or, if applicable, the periods of the leases. Determination of useful asset life is based on several factors requiring judgment by management and adherence to generally accepted accounting principles for depreciable periods. Judgment used by management in the determination of useful asset life could relate to any of the following factors: expected use of the asset; expected useful life of similar assets; any legal, regulatory, or contractual provisions that may limit the useful life; and other factors that may impair the economic useful life of the asset. Maintenance and repairs are charged to expense as incurred. Improvement costs, which extend the useful life of an asset, are capitalized to property accounts and depreciated over the asset's expected remaining life. 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.

Long-Lived Assets

The Company’s long-lived assets consist of property and equipment which includes leasehold improvements. At January 31, 2009, the Company had $58.0 million of property and equipment, net of accumulated depreciation, accounting for approximately 20.8% of the Company’s total assets. The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with Statement of Financial Accounting Standards (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” The Company evaluates long-lived assets for impairment at the individual store level, which is the lowest level at which individual cash flows can be identified. When evaluating long-lived assets for potential impairment, the Company will first compare the carrying amount of the assets to the individual store’s estimated future undiscounted cash flows. If the estimated future cash flows are less than the carrying amount of the assets, an impairment loss calculation is prepared. The impairment loss calculation compares the carrying amount of the assets to the individual store’s fair value based on its estimated discounted future cash flows. If required, an impairment loss is recorded for that portion of the asset’s carrying value in excess of fair value. Impairment losses on long-lived assets, excluding goodwill impairment, totaled $0.7 million, $0.1 million and $0.3 million in fiscal 2009, 2008 and 2007, respectively, and were recorded in impairment charges. For all years presented, the impairment losses related to the retail trade business segment.

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2009 Annual Report

Goodwill

At January 31, 2009, the Company had $0.7 million of goodwill, accounting for approximately 0.2% of the Company’s total assets. SFAS No. 142, “Goodwill and Other Intangible Assets,” requires that goodwill and other indefinite life intangible assets be tested for impairment at least annually or earlier if there are impairment indicators. The Company performs a two-step process for impairment testing of goodwill as required by SFAS No. 142. The first step of this test, used to identify potential impairment, compares the estimated fair value of a reporting unit with its carrying amount. The second step (if necessary) measures the amount of the impairment.

The valuation approaches are subject to key judgments and assumptions that are sensitive to change such as judgments and assumptions about appropriate sales growth rates, operating margins, weighted average cost of capital (“WACC”), and comparable company market multiples. When developing these key judgments and assumptions, the Company considers economic, operational and market conditions that could impact the fair value of the reporting unit. However, estimates are inherently uncertain and represent only management’s reasonable expectations regarding future developments.

The Company completed its latest annual impairment test on goodwill during the fourth quarter of fiscal 2009 and determined that an impairment charge was required. As a result, an impairment charge of $0.7 million was recorded in the fourth quarter of fiscal 2009, which was the direct result of declining market conditions.

Deferred Rent

The Company recognizes rent expense by the straight-line method over the lease term, including lease renewal option periods that can be reasonably assured at the inception of the lease. The lease term commences on the date when the Company takes possession and has the right to control use of the leased premises. Also, funds received from the lessor intended to reimburse the Company for the cost of leasehold improvements are recorded as a deferred credit resulting from a lease incentive and are amortized over the lease term as a reduction of rent expense. As of January 31, 2009, deferred rent totaled $8.6 million compared to $8.1 million as of February 2, 2008.

Loss from Discontinued Operations

The Company periodically closes under-performing stores. The Company believes that a store is a component under SFAS No. 144. Therefore, each store closure would result in the reporting of a discontinued operation unless the operations and cash flows from the closed store could be absorbed in some part by surrounding Company stores(s) within the same market area. Management evaluates certain factors in determining whether a closed store’s operations could be absorbed by surrounding store(s); the primary factor considered is the distance to the next closest Books-A-Million store. When a closed store results in a discontinued operation, the results of operations of the closed store include store closing costs and any related asset impairments. See Note 7 for discontinued operations disclosures.

Store Opening Costs

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

Store Closing Costs

The Company continually evaluates the profitability of its stores. When the Company closes or relocates a store, the Company incurs unrecoverable costs, including net book value of abandoned fixtures and leasehold improvements, lease termination payments, costs to transfer inventory and usable fixtures and other costs of vacating the leased location. Such costs are expensed as incurred and are included in selling, general and administrative costs. During fiscal 2009, 2008 and 2007, the Company recognized store closing costs of $0.4 million, $0.6 million and $0.4 million, respectively.

Advertising Costs

The costs of advertising are expensed as incurred. Advertising costs, net of applicable vendor reimbursements of $1.8 million, $1.8 million and $1.4 million, are charged to operating, selling and administrative expenses, and totaled $3.3 million, $3.8 million and $3.6 million for fiscal years 2009, 2008 and 2007, respectively.

Insurance Accruals

The Company is subject to large deductibles under its workers’ compensation and health insurance policies. 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 result in temporary differences between the amounts recorded in its financial statements and tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

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2009 Annual Report 

Accounts Receivable and Allowance for Doubtful Accounts

Receivables represent customer, landlord and other receivables due within one year and are net of any allowance for doubtful accounts. Net receivables were $6.6 million and $10.2 million for January 31, 2009 and February 2, 2008, respectively. Trade accounts receivable are stated at the amount the Company expects to collect and do not bear interest. The collectability of trade receivable balances is regularly evaluated based on a combination of factors such as customer credit-worthiness, past transaction history with the customer, current economic industry trends and changes in customer payment patterns. If it is determined that a customer will be unable to fully meet its financial obligation, such as the case of a bankruptcy filing or other material events impacting its business, a specific reserve for doubtful accounts is recorded to reduce the related receivable to the amount expected to be recovered.

Cash and Cash Equivalents

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 cash equivalents.

Sales and Use Tax Contingencies

The Company is subject to potential ongoing sales and use tax audits, income tax audits and other tax issues for both its retail and electronic commerce segments. It is the policy of the Company to estimate any potential tax contingency liabilities based on various factors such as ongoing state and federal tax audits, historical results of audits at the state or federal level and specific tax issues. Accruals for potential tax contingencies are recorded by the Company when they are deemed to have a probable likelihood of a liability and the liability can be reasonably estimated.

Stockholders' Equity

Basic net income per common share (“EPS”) 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, using the treasury stock method that could occur if stock options are exercised or restricted stock granted to employees vested and resulted in an increase 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 and restricted stock, if dilutive, in each respective year. A reconciliation of the weighted average shares for basic and diluted EPS is as follows:

	Fiscal Year Ended
(In thousands)	1/31/09	2/2/08	2/3/07
Weighted average shares outstanding:
Basic	15,219	16,089	16,352
Dilutive effect of unvested restricted stock outstanding	390	213	453
Diluted	15,609	16,302	16,805

In March 2004, the Board of Directors authorized a common stock repurchase program for up to 1.6 million shares, or 10% of the outstanding stock (the “March 2004 Plan”). Under the March 2004 Plan, the Company repurchased a total of 1,452,000 shares at a cost of $13.7 million. This plan is now discontinued.

On June 8, 2006, the Board approved a new stock repurchase program (the “June 2006 Plan”). The program authorized the repurchase of up to $10 million in shares of the Company’s common stock over the following twelve months, but no specific number of shares was approved. Under the June 2006 Plan, the Company repurchased a total of 300,000 shares at a cost of $4.4 million. This stock repurchase program replaced the March 2004 Plan.

On August 23, 2006, the Board approved an additional stock repurchase program (the “August 2006 Plan”). This program authorized the repurchase of up to an additional $25 million in shares of the Company’s common stock over the following eighteen months. This program is in addition to the June 2006 Plan to repurchase up to $10 million in shares of common stock. Under the August 2006 Plan, the Company repurchased 1,399,000 shares at a cost of $20.1 million during the fiscal year ended February 2, 2008. This plan expired on February 23, 2008.

On March 26, 2008, the Board of Directors authorized a new common stock repurchase program (the “March 2008 Plan”) for up to $5 million in shares of common stock through the expiration of this plan on April 30, 2009. Under the March 2008 Plan, the Company repurchased 239,000 shares at a cost of $1.8 million during the fiscal year ended January 31, 2009.

On March 26, 2009, the Board of Directors authorized a new common stock repurchase program for up to $5 million in shares of common stock through the expiration of this plan on April 30, 2010.

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2009 Annual Report

Disclosure of Fair Value of Financial Instruments

Cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities are reflected in the accompanying financial statements at cost, which approximates fair value because of the short-term maturity of these instruments. Based on the borrowing rates currently available to the Company for bank loans with similar terms and maturities at January 31, 2009 and February 2, 2008, the Company’s debt approximates fair value.

Stock-Based Compensation

On January 29, 2006, the Company adopted the provisions of SFAS No. 123(R), “Share-Based Payment,”which revises SFAS No. 123, “Accounting for Stock-Based Compensation,” and supersedes APB Opinion 25, “Accounting for Stock Issued to Employees.” SFAS No. 123(R) requires the Company to recognize expense related to the fair value of its stock-based compensation awards, including employee stock options.

Prior to the adoption of SFAS No. 123(R), the Company accounted for stock-based compensation awards using the intrinsic value method as required by APB Opinion 25. Accordingly, the Company did not recognize compensation expense in the statement of income for options granted that had an exercise price equal to or greater than the market value of the underlying common stock on the date of grant. However, the Company did record compensation expense related to restricted stock units based on the market value of its stock at the date of grant. As required by SFAS No. 123, the Company also provided certain pro forma disclosures for stock-based awards as if the fair-value-based approach of SFAS No. 123 had been applied.

The Company used the modified prospective transition method as permitted by SFAS No. 123(R) and, therefore, did not restate its financial results for prior periods. Under this transition method, the Company applied the provisions of SFAS No. 123(R) to new awards and to awards modified, repurchased or cancelled after January 29, 2006. In addition, the Company will recognize compensation cost for the portion of awards for which the requisite service has not been rendered (unvested awards) that are outstanding as of January 29, 2006, as the remaining service was rendered. The compensation cost recorded for these awards was based on their grant-date fair value as calculated for the pro forma disclosures required by SFAS No. 123.

The Company’s pre-tax compensation cost for stock-based employee compensation was $1.9 million ($1.2 million net of taxes), $1.5 million ($0.9 million net of taxes) and $1.6 million ($1.0 million net of taxes) for the years ended January 31, 2009, February 2, 2008 and February 3, 2007, respectively, and were recorded in operating, selling and administrative expenses.

Under the 2005 Incentive Award Plan, employees are entitled to receive dividends on non-vested restricted stock. Pursuant to Emerging Issues Task Force (“EITF”) No 06-11, Accounting for Income Tax Benefits of Dividends on share based payment awards, the Company has recorded a tax benefit on these dividends of $48,000, $463,000 and $32,000 for fiscal 2009, 2008 and 2007, respectively.

Comprehensive Income (Loss)

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

Recently Adopted Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”), which defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles in the United States (“GAAP”) and expands disclosures about fair value measurements. For financial assets and liabilities, this statement is effective for fiscal periods beginning after November 15, 2007 and does not require any new fair value measurements. In February 2008, FASB Staff Position No. 157-2 was issued which delayed the effective date of SFAS No. 157 to fiscal years ending after November 15, 2008 for nonfinancial assets and liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The adoption of SFAS No. 157, effective February 3, 2008, did not have a material effect on the Company's consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — including an amendment of FASB Statement No. 115.” This statement permits entities to choose to measure many financial instruments and certain other items at fair value. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, including interim periods within that fiscal year. The Company did not elect the fair value option for any of its existing financial instruments as of February 3, 2008 and the Company has not determined whether or not it will elect this option for financial instruments it may acquire in the future.

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2009 Annual Report 

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2007, the FASB issued SFAS No. 141 (revised), “Business Combinations” ("SFAS No. 141R"). The objective of this statement is to improve the relevance, representational faithfulness and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects.   SFAS No. 141R is effective for the Company on February 1, 2009 and its adoption is not expected to have a significant impact on the Company’s financial statements.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51” ("SFAS No. 160").  The objective of this statement is to improve the relevance, comparability and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary.  SFAS No. 160 is effective for the Company on February 1, 2009 and its adoption is not expected to have a significant impact on the Company’s financial statements.

In February 2008, the FASB issued FASB Staff Position (FSP) FAS 157-1, “Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements that Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13,” and FSP FAS 157-2, “Effective Date of FASB Statement No. 157.” These FSPs:

•     Exclude certain leasing transactions accounted for under FASB Statement No. 13, Accounting for Leases, from the scope of FASB Statement No. 157, “Fair Value Measurements” (Statement 157). The exclusion does not apply to fair value measurements of assets and liabilities recorded as a result of a lease transaction but measured pursuant to other pronouncements within the scope of Statement 157.

•     Defer the effective date in Statement 157 for one year for certain nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually).

FSP FAS 157-1 is effective upon the initial adoption of Statement 157.  FSP FAS 157-2 is effective February 12, 2008.  The Company adopted the provisions of FSP 157-1 and 157-2 in the first quarter of 2008.  See Note 8 for details regarding the impact of adoption on the Company.

In March 2008, the FASB issued FASB Statement No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“SFAS No. 161”). The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. Based on current conditions, the Company does not expect the adoption of SFAS No. 161 to have a significant impact on its results of operations or financial position.

In May 2008, the FASB issued FASB Statement No. 162, “The Hierarchy of Generally Accepted Accounting Principles” ("SFAS No. 162"). SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with GAAP. SFAS No. 162 will become effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board’s amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. The Company does not expect the adoption of SFAS No. 162 to have a significant impact on its results of operations or financial position.

In June 2008, the FASB ratified EITF Issue No. 08-3, “Accounting for Lessees for Maintenance Deposits Under Lease Arrangements” (“EITF No. 08-3”). EITF No. 08-3 requires that all nonrefundable maintenance deposits be accounted for as a deposit with the deposit expensed or capitalized in accordance with the lessee's maintenance accounting policy when the underlying maintenance is performed. Once it is determined that an amount on deposit is not probable of being used to fund future maintenance expense, it is to be recognized as additional expense at the time such determination is made. EITF No. 08-3 is effective for the Company as of the beginning of its fiscal year that begins on February 1, 2009. The adoption of EITF No. 08-3 will not have a material effect on the Company's consolidated financial statements.

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2009 Annual Report

In September 2008, the FASB issued FSP No. FAS 133-1 and FIN 45-4, “Disclosures about Credit Derivatives and Certain Guarantees – An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161.”   This FSP amends SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” to require disclosures by sellers of credit derivatives, including credit derivatives embedded in a hybrid instrument.  This FSP also amends FASB Interpretation No. (FIN) 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” to require an additional disclosure about the current status of the payment/performance risk of a guarantee.   Further this FSP clarifies the FASB’s intent about the effective date of SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities.”  The provisions of this FSP that amend SFAS No. 161 and FIN 45 are effective for reporting periods ending after November 15, 2008 and the clarification of the effective date of SFAS No. 161 is effective upon issuance of this FSP.  The Company adopted FSP FAS 133-1 and FIN 45-4 in the fourth quarter of 2008 and has concluded that it does not have a material effect on its consolidated financial statements.

In October 2008, the FASB issued FASB Staff Position (FSP) No. FAS 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active.”   FSP 157-3 clarifies the application of SFAS No. 157, “Fair Value Measurements ,” in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active.  The FSP stipulates that determining fair value in a dislocated market depends on the facts and circumstances and may require the use of significant judgment when evaluating individual transactions or broker quotes which are some of the sources of the fair value measurement.  In addition, FSP FAS 157-3 states that if an entity uses its own assumptions to determine fair value, it must include appropriate risk adjustments that market participants would make for nonperformance and liquidity risks.  FSP FAS 157-3 is effective upon issuance, including prior periods for which financial statements have not been issued.  The Company adopted FSP FAS 157-3 in the third quarter of 2008 and has concluded that it does not have a material effect on its consolidated financial statements.

2. Income Taxes

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

	Fiscal Year Ended
	1/31/09	2/2/08	2/3/07
Current:
Federal	$2,398	$6,304	$10,089
State	264	314	553
	$2,662	$6,618	$10,642
Deferred:
Federal	$3,388	$2,481	$338
State	347	453	127
	$3,734	$2,934	$465
Provision for income taxes	$6,396	$9,552	$11,107

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

	Fiscal Year Ended
	1/31/09	2/2/08	2/3/07
Federal statutory income tax rate	35.0%	35.0%	35.0%
State income tax provision	3.2%	2.1%	1.7%
Nondeductible meals and entertainment expense	0.5%	0.3%	0.2%
Other	--	0.1%	0.1%
FIN 48 unrecorded tax benefit adjustment	(0.8%)	--	--
Federal tax credits	(0.2%)	(0.9%)	--
Effective income tax rate	37.7%	36.6%	37.0%

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2009 Annual Report 

Temporary differences (in thousands) which created deferred tax assets (liabilities) at January 31, 2009 and February 2, 2008, are as follows:

	As of 1/31/09				As of 2/2/08
		Current	Noncurrent	Current		Noncurrent
Depreciation		$ --	$ (2,175)	$ --		$ (628)
Accruals		1,507	--	1,646		-
Inventory		(10,494)	--	(8,672)		--
State net operating loss carry forwards		--	28	--		--
Deferred Rent		631	2,547	695		3,418
Prepaids		(1,196)	--	(1,435)		--
Amortization		--	(77)	--		(358)
Allowance for bad debts		143	--	305		--
State tax		--	140	--		20
Stock Compensation		818	--	615		--
		(8,591)	463	(6,846)		2,452
Less: Valuation allowances		--	--	--		--
Deferred tax asset (liability)		$(8,591)	$463	$(6,846)		$2,452

In July 2006, the FASB issued FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109" ("FIN 48"), which provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax positions. The Company adopted the provisions of FIN 48 on February 4, 2007. As a result of the implementation of FIN 48, the Company has recognized an increase of $2.0 million in the liability for unrecognized tax benefits, which was accounted for as a decrease to the balance of retained earnings. The Company evaluates these unrecognized tax benefits each reporting period. As of January 31, 2009, the total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is $2.0 million. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	1/31/09	2/2/08
Balance at Beginning of Year	2,174	2,227
Additions based on tax positions related to current year	120	350
Reductions for tax positions of previous year	(262)	(403)
Balance at End of Year	2,032	2,174

The Company and its subsidiaries are subject to United States federal income tax as well as income tax of multiple state jurisdictions. In many cases these uncertain tax positions are related to tax years that remain subject to examination by the relevant taxing authorities. The Company has operations in various state jurisdictions that are currently under audit for years ranging from 2001 through 2006. With few exceptions, we are no longer subject to U.S. federal, state or local, or non-United States, income tax examinations for years prior to 2005.

It is reasonably possible that the amount of unrecognized tax benefits will increase or decrease in the next twelve months. These changes may be the result of settlement of ongoing state audits. It is expected that certain state audits will be completed in the next 12 months resulting in a reduction of the liability for unrecognized tax benefits of $60,000. It is also expected that the statute of limitations for certain unrecognized tax benefits will expire in the next 12 months resulting in a reduction of the liability for unrecognized tax benefits of $345,000. Depending on the outcome of these audits, the reduction of the liability for unrecognized tax benefits discussed above may affect the effective tax rate.

The Company's policy is to record interest and penalties related to income tax matters in income tax expense. Accrued interest and penalties were $0.83 million and $0.68 million as of January 31, 2009 and February 2, 2008, respectively. During fiscal year 2009 the Company recognized no interest or penalties.

A valuation allowance was established at the end of fiscal 2007 for net deferred taxes for a wholly-owned subsidiary. As of January 31, 2009, that entity was merged into the parent company. As a result, the net operating losses of that subsidiary are no longer available, and a valuation allowance is deemed unnecessary, as the realization of the remaining net operating losses is considered more likely than not. All remaining net operating losses relate to entities that were not merged.

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2009 Annual Report

3. Debt and Lines of Credit

The Company’s current credit facility allows for unsecured borrowings up to $100 million for which no principal payments are due until the facility expires in July 2011. Availability under the facility is reduced by outstanding letters of credit issued there under. Interest on borrowings under the credit facility is determined based upon applicable LIBOR rates and the Company’s rate spread, which varies depending on the maintenance of certain covenants. The credit facility contains financial and non-financial covenants, the most restrictive of which is the maintenance of a minimum fixed charge coverage ratio. Additionally, the covenants restrict the amount of dividends that can be paid if a certain amount of equity is not maintained. The Company was in compliance with all covenants during fiscal 2009 and as of January 31, 2009. The outstanding balance under this credit facility as of January 31, 2009 and February 2, 2008, was $15.8 million and $28.0 million, respectively, and the face amount of letters of credit issued under the facility was $2.2 million and $2.4 million, respectively. The maximum and average outstanding borrowings under the credit facility (excluding the face amount of letters of credit issued thereunder) during fiscal 2009 were $58.5 million and $41.3 million, respectively. The outstanding amount is considered short-term in the financial statements because all borrowings under the credit facility are completed under tranches that are due in 12 months or less, as allowed under the facility.

During fiscal 1996 and fiscal 1995, the Company acquired and constructed certain warehouse and distribution facilities with the proceeds of loans made pursuant to an industrial development revenue bond (the “Bond”), which was secured by a mortgage interest in these facilities. As of January 31, 2009 and February 2, 2008, there were $6.7 million and $7.0 million of borrowings outstanding, respectively, under these arrangements, which bear interest at variable rates (1.50% as of January 31, 2009). The Bond has a maturity date of December 1, 2019, with a purchase provision obligating the Company to repurchase the Bond, unless extended by the bondholder. In fiscal 2007, an unrelated bank purchased the Bond from the existing bondholder, and the new bondholder extended the date of the Company’s purchase obligation of the Bond until July 1, 2011 and did not require a mortgage interest to secure the bond. 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 entered into a $7.5 million interest rate swap in May 1996 that expired on June 7, 2006 and effectively fixed the interest rate on the Bond during that period at 8.73% (the “Bond Hedge”). The Company did not replace the Bond Hedge when it expired.

The Company’s hedges were designated as cash flow hedges because they are interest rate swaps that convert variable payments to fixed payments. Cash flow hedges protect against the variability in future cash outflows of current or forecasted debt and related interest expense. The changes in the fair value of these hedges are reported on the balance sheet with a corresponding adjustment to accumulated other comprehensive income (loss) or in earnings, depending on the type of hedging relationship. Over time, the amounts held in accumulated other comprehensive income (loss) were reclassified to earnings if the hedge transaction became ineffective.

Prior to its expiration, the Bond Hedge was reported as a liability in the accompanying consolidated balance sheets at a fair value of $61,000 as of February 3, 2007. For the fiscal years ended January 31, 2009, February 2, 2008 and February 3, 2007, adjustments of $0, $0, and $7,000 were recorded as unrealized gains in accumulated other comprehensive income (loss), after tax.

4. Leases

The Company leases the premises for its retail bookstores under operating leases, which expire in various years through the year 2022. 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. The Company also has minimal operating leases for equipment and trailer trucks.

Minimum future rental payments under non-cancelable operating leases having remaining terms in excess of one year as of January 31, 2009 are as follows (in thousands):

Fiscal Year	Future Minimum Rent
2010	$ 39,633
2011	33,310
2012	26,151
2013	20,857
2014	16,990
Subsequent years	49,905
Total	$186,846

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2009 Annual Report 

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

	Fiscal Year Ended
	1/31/09	2/2/08	2/3/07
Minimum rentals	$37,483	$35,347	$33,205
Contingent rentals	90	(25)	53
Total	$37,573	$35,322	$33,258

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 six months of service and who are at least 21 years of age, and permit participants to contribute from 1% to 15% of compensation and participants over 50 years of age are allowed to make catch-up contributions. Limits to contributions by employees are established by the Internal Revenue Code. Company matching and supplemental contributions are made at management’s discretion. Company matching contributions were 50%, 50% and 70% for fiscal 2009, 2008 and 2007, respectively. The employer contributions are made on employee contributions up to a maximum of 6% of the employee’s salary. The expense under this plan was $389,000, $744,000 and $472,000 in fiscal 2009, 2008 and 2007, respectively.

2005 Incentive Award Plan

On June 1, 2005, the stockholders of the Company approved the adoption of the Books-A-Million, Inc. 2005 Incentive Award Plan (the “2005 Plan”) for a total of 300,000 shares. On June 8, 2006, the stockholders of the Company approved an additional 300,000 shares to be awarded under the Plan, and on May 29, 2008, the stockholders of the Company approved an additional 600,000 shares to be awarded under the Plan. An aggregate of 1,200,000 shares of common stock may be awarded under the 2005 Plan. From June 1, 2005 through January 31, 2009, awards under the 2005 Plan consisted solely of awards of restricted stock. Each year the compensation committee makes awards to the Company’s officers and key employees pursuant to the terms of the plan. In addition, directors who have served eleven consecutive months are eligible for awards as well as new directors appointed to the Board. Shares granted under the 2005 Plan (net of cancellations) were 309,583, 81,475 and 161,800 in fiscal 2009, 2008 and 2007, respectively. The compensation expense related to these grants is being expensed over the vesting period for the individual grants. The Company has recorded $1,890,000, $1,425,000 and $643,000 of stock-based compensation for the restricted stock grants in fiscal 2009, 2008 and 2007 respectively.

There are two types of restricted stock awards to employees. The first type of restricted stock award is “career based shares.” Career based shares are completely unvested until the last day of the third or fifth fiscal year after the date of the grant (as applicable based on the service period specified) whereupon such career based shares vest in full if the employee who received the grant is then employed by the Company. The compensation expense for these shares is recognized ratably over the three-year or five-year requisite service period. The second type of restricted stock award is “performance based shares.” Performance based shares are earned based on the achievement of certain performance goals for the fiscal year in which they are granted. If the performance goals are met, the performance based shares vest in 50% increments at the end of the first and second fiscal years after the fiscal year in which they were granted if the employee who received the grant is then employed by the Company. Compensation expense for these shares is recognized ratably over the period beginning on the date the Company determines that it is probable the performance goals will be achieved and ending on the last day of the vesting period.

Additionally, there are annual restricted stock grants to directors. Each director who has served at least eleven consecutive months as of the Company’s annual meeting of stockholders receives a restricted stock grant, which shares of restricted stock vest in one-third increments on each of the first, second and third anniversaries of the grant date. The expense related to the directors’ grants is recognized ratably over the three-year vesting period.

Executive Incentive Plan

The Company maintains an Executive Incentive Plan (the “Incentive Plan”). The Incentive Plan provides for awards to certain executive officers of either cash or shares of restricted stock. The Company has historically issued awards only in the form of restricted stock. Issuance of awards under the Incentive Plan is based on the Company achieving pre-established performance goals during a three consecutive fiscal year performance period. Awards issued under the Incentive Plan for a particular performance period vest on the third anniversary of the last day of such performance period if the recipient remains employed by the Company on such vesting date. Awards under the Incentive Plan are expensed ratably over the period from the date that the issuance of such awards becomes probable through the end of the restriction period. Awards granted under the Incentive Plan for the performance period ended February 3, 2007 totaled $100,000 (6,707 shares). The final grant for the Incentive Plan was awarded in March 2006 for the January 28, 2006 three-year performance period. There will be no future awards under the Incentive Plan.

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2009 Annual Report

Restricted Stock Table

A combined summary of the status of restricted stock grants to employees and directors under the 2005 Incentive Award Plan and the Executive Incentive Plan is as follows (shares in thousands):

	Fiscal Year Ended
	January 31, 2009		February 2, 2008
	Shares	Weighted Average Grant Date Fair Value	Shares	Weighted Average Grant Date Fair Value
Shares at beginning of period	271	$12.44	281	$11.56
Shares granted	377	$6.82	87	$14.16
Shares vested	(114)	$11.04	(92)	$11.35
Shares forfeited	(3)	$11.67	(5)	$13.14
Shares at end of period	531	$8.49	271	$12.44

Stock Option Plan

In April 1999, the Company adopted the 1999 Amended and Restated Employee Stock Option Plan (the “Stock Option Plan”) which provided for option grants to executive officers, directors, and key employees. Upon the approval of the 2005 Incentive Award Plan by the Company’s stockholders at the Company’s annual meeting held in June 2005, the board determined that no more awards would be made under the Stock Option Plan. Options previously issued under the Stock Option Plan remain valid. All options granted prior to January 9, 2001 vested over a five-year period and expired on the sixth anniversary of the date of grant, and all options granted on and after January 9, 2001 vest over a three-year period and expire on the tenth anniversary of the date of grant. All options have exercise prices 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):

	Fiscal Year Ended
	January 31, 2009		February 2, 2008		February 3, 2007
	Shares	Weighted Average Grant Date Fair Value	Shares	Weighted Average Grant Date Fair Value	Shares	Weighted Average Grant Date Fair Value
Outstanding at beginning of year	43	$5.31	270	$5.09	814	$3.77
Granted	--	--	--	--	--	N/A
Exercised	--	--	(226)	5.05	(540)	3.11
Forfeited	--	--	(1)	5.76	(4)	4.80
Outstanding at end of year	43	$5.31	43	$5.31	270	$5.09
Exercisable at end of year	43	$5.31	43	$5.31	268	$5.08

During fiscal years 2009, 2008 and 2007, the Company recognized tax benefits related to the exercise of stock options in the amount of $(339,000), $1,638,000 and $2,567,000, respectively. The tax benefits were credited to paid-in capital in the respective years.

The total intrinsic value of stock options exercised during the year ended January 31, 2009 was $0.

The following table summarizes information about stock options outstanding as of January 31, 2009 (shares in thousands):

	Options Outstanding			Options Exercisable
Range of Exercise Price	Number Outstanding at January 31, 2009	Weighted Average Remaining Contractual Life (Years)	Weighted Average Exercise Price	Number Exercisable at January 31, 2009	Weighted Average Exercise Price
$1.69 - $ 2.37	11	3.82	$2.31	11	$2.31
$2.68 - $ 5.85	7	3.00	$3.04	7	$3.04
$6.13 - $9.62	25	5.21	$7.25	25	$7.25
Totals	43	4.51	$5.31	43	$5.31

The aggregate intrinsic values of outstanding options and exercisable options under the Stock Option Plan at January 31, 2009 were $0 and $0, respectively because the exercise price of the options outstanding was higher than the Company’s stock price on January 31, 2009.

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2009 Annual Report 

Other Information

As of January 31, 2009 the Company has $4,780,000 of total unrecognized compensation cost related to non-vested awards granted under our various share-based plans, which it expects to recognize over the following fiscal years:

Fiscal Year	Stock-based Compensation Expense
2010	$ 1,809,000
2011	$ 1,857,000
2012	$ 1,112,000
2013	$ 2,000
Total	$ 4,780,000

The Company received cash from options exercised during the fiscal years 2009, 2008 and 2007 of $0, $1,139,000, and $1,680,000 respectively. The impact of these cash receipts is included in financing activities in the accompanying Consolidated Statements of Cash Flows.

The number of shares of common stock currently reserved under the 2005 Plan for stock-based compensation programs as of January 31, 2009 is 498,544 shares.

Employee Stock Purchase Plan

The Company maintains an employee stock purchase plan under which 400,000 shares of the Company’s common stock are reserved for purchase by employees at 85% of the fair market value of the common stock at the lower of the market value for the Company’s stock as of the beginning of the fiscal year or the end of the fiscal year. Of the total reserved shares, 289,031, 276,732 and 268,167 shares have been purchased as of January 31, 2009, February 2, 2008 and February 3, 2007, respectively.

Executives’ Deferred Compensation Plan

During fiscal 2006, the Board adopted the Books-A-Million, Inc. Executives’ Deferred Compensation Plan (the “Executives’ Deferred Compensation Plan”). The Executives’ Deferred Compensation Plan provides a select group of management or highly compensated employees of the Company and certain of its subsidiaries (the “Participants”) with the opportunity to defer the receipt of certain cash compensation. Each Participant may elect to defer under the Executives’ Deferred Compensation Plan a portion of his or her cash compensation that may otherwise be payable in a calendar year. A Participant’s compensation deferrals are credited to the Participant’s bookkeeping account (the “Account”) maintained under the Executives’ Deferred Compensation Plan. Each Participant’s Account is credited with a deemed rate of interest and/or earnings or losses depending upon the investment performance of the deemed investment option.

With certain exceptions, a Participant’s Account will be paid after the earlier of: (1) a fixed payment date, as elected by the Participant (if any); or (2) the Participant’s separation from service with Company or its subsidiaries. Participants may generally elect that payments be made in a single sum or installments in the year specified by the Participant or upon their separation from service with the Company. Additionally, a Participant may elect to receive payment upon a Change of Control, as defined in, and to the extent permitted by, Section 409A of the Internal Revenue Code of 1986, as amended.

Directors’ Deferred Compensation Plan

During fiscal 2006, the Board adopted the Books-A-Million, Inc. Directors’ Deferred Compensation Plan (the “Directors’ Deferred Compensation Plan”). The Directors’ Deferred Compensation Plan provides the Non-Employee Directors with the opportunity to defer the receipt of certain amounts payable for serving as a member of the Board (the “Fees”). A Non-Employee Director’s Fee deferrals are credited to the Non-Employee Director’s bookkeeping account (the “Account”) maintained under the Directors’ Deferred Compensation Plan. Each participating Non-Employee Director’s Account is credited with a deemed rate of interest and/or earnings or losses depending upon the investment performance of the deemed investment option.

With certain exceptions, a participating Non-Employee Director’s Account will be paid after the earlier of: (1) a fixed payment date, as elected by the participating Non-Employee Director (if any); or (2) the participating Non-Employee Director's separation from service on the Board. The participating Non-Employee Director may generally elect that payments be made in a single sum or installments in the year specified by the participating Non-Employee Director or upon the Non-Employee Director’s separation from service on the Board. Additionally, a participating Non-Employee Director may elect to receive payment upon a Change of Control, as defined in, and to the extent permitted by, Section 409A of the Internal Revenue Code of 1986, as amended.

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2009 Annual Report

6. Related Party Transactions

Certain stockholders and directors (including certain officers) 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:

The Company purchases a substantial portion of its magazines as well as certain seasonal music and newspapers from a subsidiary of Anderson Media Corporation (“Anderson Media”), an affiliate through common ownership. During fiscal 2009, 2008 and 2007, purchases of these items from Anderson Media totaled $22,674,000, $25,514,000 and $24,702,000, respectively. The Company purchases certain of its collectibles, gifts and books from Anderson Press, Inc. (“Anderson Press”), an affiliate through common ownership. During fiscal 2009, 2008 and 2007, such purchases from Anderson Press totaled $1,577,000, $2,284,000 and $1,423,000, respectively. The Company purchases certain of its greeting cards and gift products from C.R. Gibson, Inc., which was an affiliate through common ownership until November 7, 2007. C.R. Gibson, Inc was sold on November 7, 2007, ending its relationship with the Company as a related party. The purchases of these items in fiscal 2008 and 2007 were $346,000 and $447,000, respectively. The Company utilizes import sourcing and consolidation services from Anco Far East Importers Limited (“Anco Far East”), an affiliate through common ownership. The total paid to Anco Far East was $1,863,000, $2,622,000 and $2,391,000 for fiscal 2009, 2008 and 2007, respectively. These amounts paid to Anco Far East included the actual cost of the product, as well as fees for sourcing and consolidation services. All other costs, other than the sourcing and consolidation service fees, were passed through from other vendors. Anco Far East fees, net of the passed-through costs, for fiscal years 2009, 2008 and 2007 were $130,000, $184,000 and $167,000, respectively.

The Company sold books to Anderson Media in the amounts of $1,347,000, $3,653,000 and $2,430,000 in fiscal 2009, 2008 and 2007, respectively.

The Company leases its principal executive offices from a trust, which was established for the benefit of the grandchildren of Mr. Charles C. Anderson, a former member of the Board of Directors. The lease term is month to month. During fiscal 2009, 2008 and 2007, the Company paid rent of $151,000, $141,000, and $137,000, respectively, to the trust under this lease. Anderson & Anderson LLC (“A&A”), which is an affiliate through common ownership, also leases three buildings to the Company. During fiscal 2009, 2008 and 2007, the Company paid A&A a total of $455,000, $428,000, and $448,000, respectively, in connection with such leases. There were no future minimum rental payments on any of the four leases at January 31, 2009. The Company subleases certain property to Hibbett Sports, Inc. (“Hibbett”), a sporting goods retailer in the southeastern United States. One of the Company's directors, Albert C. Johnson, and Terry Finley, President of Books-A-Million, Inc.’s Merchandising Group, are members of Hibbett’s board of directors. Additionally, the Company's Executive Chairman, Clyde B. Anderson, served on Hibbett's board of directors until June 2, 2008. During fiscal 2009, 2008 and 2007, the Company received $208,000, $236,000, and $191,000, respectively, in rental payments from Hibbett.

The Company, A&A, Anderson Promotional Events, Inc. and Anderson Press co-own two airplanes that are used by the Company in its business. The Company owns a 26% interest in each of these airplanes. Prior to July 1, 2008, the Company held a 49.9% interest in one airplane co-owned by the Company and A&A. In an effort to reduce operating and administrative expenses, on July 1, 2008 the Company entered into a like-kind exchange transaction whereby it transferred 23.9% of its interest in the one airplane in exchange for a 26% interest in another airplane co-owned by A&A, Anderson Promotional Events, Inc., Anderson Press and certain other parties (the “Co-Ownership Group”). The value of the airplane interests transferred and received by the Company in this exchange was approximately $1.6 million. No cash traded hands in this exchange. Through June 30, 2008, the Company maintained administrative control and rented the original airplane to other affiliated companies at rates that covered all variable costs and a portion of the fixed costs of operating the airplane. The total amount received from affiliated companies for use of the plane during fiscal 2009 through June 30, 2008 was $486,000. Of that amount, $128,000 was received from Anderson Growth Partners, of which Ms. Sandra Cochran and Mr. Clyde Anderson are partners. From July 1, 2008 to January 31, 2009, the Company was billed $407,000 by the Co-Ownership Group under the new cost sharing arrangement for the Company’s use of the two airplanes. The expenses the Company pays for airplane use covers all of the variable costs attributable to the Company’s use of the plane and a portion of the fixed costs. In addition, the Company paid amounts to other affiliated companies for the Company’s use of their planes in the amount of $233,000.

7. Income or (Loss) from Discontinued Operations

The Company did not close any stores in a market where the Company does not expect another of its existing stores to absorb the closed store customers during fiscal 2009. The Company continues to report in discontinued operations stores closed in prior years where the Company does not expect to retain the closed stores’ customers at another store.

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2009 Annual Report 

The Company closed one store in fiscal 2008 in a market located in Georgia and one store in a market located in Indiana where the Company does not expect another of its existing stores to absorb the closed store customers. The store sales and operating results for fiscal 2008 have not been included in discontinued operations because the impact on the financial statements was immaterial. For fiscal 2008 the closed stores had sales of $1.5 million and pretax operating loss of $382,000.

The Company closed one store in fiscal 2007 in a market located in Georgia where the Company does not expect another of its existing stores to absorb the closed store customers. The store sales and operating results for fiscal 2007 have not been included in discontinued operations because the impact on the financial statements was immaterial. For fiscal 2007 the closed store had sales of $139,000 and pretax operating loss of $90,000.

In November 2004, the Emerging Issues Task Force ("EITF") issued EITF No. 03-13, "Applying the Conditions in Paragraph 42 of FASB No. 144 in Determining Whether to Report Discontinued Operations." EITF No. 03-13 addresses how an ongoing entity should evaluate whether the operations and cash flows of a disposed component have been or will be eliminated from the ongoing operations of the entity and the types of continuing involvement that constitute significant continuing involvement in the operations of the disposed component. EITF No. 03-13 became effective with the fiscal year beginning January 30, 2005. Prior to the effective date of EITF No. 03-13, the Company was already reporting certain closed stores as discontinued operations (see footnote 7). Therefore, adopting this new guidance did not impact the Company’s financial position, results of operations or cash flows.

8. Business Segments

The Company has two reportable segments, as defined by SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information: retail trade and electronic commerce trade.  These reportable operating segments reflect the manner in which the business is managed and how the Company allocates resources and assesses performance internally.

Our chief operating decision maker is our Chairman and Chief Executive Officer.  The Company is primarily a retailer of book merchandise.  The Company's two reportable segments are two distinct business units, one a traditional retailer of book merchandise and the other a seller of book merchandise primarily over the Internet.  The electronic commerce trade segment is managed seperately due to divergent technology and marketing requirements.  The retail trade reportable segment also includes the Company's distribution center operations, which predominantly supplies merchandise to our retail stores.  Through the distribution center operations the Company sells books to outside parties on a wholesale basis.  These sales are not material.

The Company evaluates the performance of the retail trade and electronic commerce trade segments based on profit and loss from operations before interest and income taxes.  Certain intersegment cost allocations have been made based upon consolidated and segment revenues.  Shipping income related to Internet sales is included in net sales, and shipping expense is included in cost of sales.

Both the retail trade and electronic commerce trade reportable segments derive revenues primarily from the sale of book merchandise through sales in our retail stores and over the Internet, respectively.

	Fiscal Year Ended
Segment information (in thousands)	1/31/09	2/2/08	2/3/07
Net Sales
Retail Trade	$508,253	$528,606	$512,967
Electronic Commerce Trade	25,166	26,992	26,048
Intersegment Sales Elimination	(20,148)	(20,470)	(18,599)
Net Sales	$513,271	$535,128	$520,416
Operating Profit
Retail Trade	$18,276	$26,911	$  29,223
Electronic Commerce Trade	1,541	1,462	1,400
Intersegment Elimination of Certain Costs	(927)	(953)	(524)
Total Operating Profit	$18,890	$27,420	$  30,099
Assets
Retail Trade	$277,896	$283,452	$303,110
Electronic Commerce Trade	1,396	1,381	927
Intersegment Sales Elimination	--	--	--
Total Assets	$279,292	$284,833	$304,037

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2009 Annual Report

Sales as a percentage of net sales by merchandise category is as follows:

	Fiscal Year Ended
	1/31/09	2/2/08	2/3/07
Books and Magazines	83.0%	83.9%	83.7%
General Merchandise	8.1%	7.8%	7.6%
Other	8.9%	8.3%	8.7%
Total	100%	100%	100%

General merchandise consists of gifts, cards, collectibles and similar types of products. Other products include café, music, DVD, E-Book and other products.

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

From time to time, the Company enters into certain types of agreements that require the Company to indemnify parties against third party claims. Generally, these agreements relate to: (a) agreements with vendors and suppliers, under which the Company may provide customary indemnification to its vendors and suppliers in respect of actions they take at the Company’s request or otherwise on its behalf, (b) agreements with vendors who publish books or manufacture merchandise specifically for the Company to indemnify the vendors against trademark and copyright infringement claims concerning the books published or merchandise manufactured on behalf of the Company, (c) real estate leases, under which the Company may agree to indemnify the lessors for claims arising from the Company’s use of the property, and (d) agreements with the Company’s directors, officers and employees, under which the Company may agree to indemnify such persons for liabilities arising out of their relationship with the Company. The Company has Directors and Officers Liability Insurance, which, subject to the policy’s conditions, provides coverage for indemnification amounts payable by the Company with respect to its directors and officers up to specified limits and subject to certain deductibles.

The nature and terms of these types of indemnities vary. The events or circumstances that would require the Company to perform under these indemnities are transaction and circumstance specific. The overall maximum amount of obligations cannot be reasonably estimated. Historically, the Company has not incurred significant costs related to performance under these types of indemnities. No liabilities have been recorded for these obligations on the Company’s balance sheet at each of January 31, 2009 and February 2, 2008, as such liabilities are considered de minimis.

10. Cash Dividend

On March 19, 2009, the Board of Directors declared a quarterly dividend of $0.05 per share to be paid on April 16, 2009 to stockholders of record at the close of business on April 2, 2009. The Company intends to pay quarterly dividends in the future, subject to availability of funds and Board approval.

11. Accrued Expenses

Accrued expenses consist of the following (in thousands):

	As of 1/31/09	As of 2/2/08
Accrued expenses:
Salaries, wages and employee benefits	$5,705	$7,756
Giftcard liabilities to customers	9,730	10,273
Deferred club card income	6,550	6,623
Taxes, other than income	4,698	5,734
Rent	2,263	2,237
Other	6,608	8,916
	$35,554	$41,539

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2009 Annual Report 

12. Summary of Quarterly Results (Unaudited)

The following tables set forth certain unaudited financial data for the quarters indicated:

	Fiscal Year Ended January 31, 2009
	First	Second	Third	Fourth		Total
(In thousands, except per share amounts)	Quarter	Quarter	Quarter	Quarter		Year
Net revenue	$115,481	$122,803	$110,952	$164,035		$513,271
Gross profit	33,924	35,089	29,075	53,249		151,337
Operating profit (loss)	2,018	1,580	(2,858)	18,150		18,890
Net income (loss)	907	645	(2,187)	11,209		10,574
Net income (loss) per share – basic	0.06	0.04	(0.14)	0.74		0.70
Net income (loss) per share – diluted	0.05	0.04	(0.14)	0.73		0.68
	Fiscal Year Ended February 2, 2008
	First	Second	Third	Fourth	Total
(In thousands, except per share amounts)	Quarter	Quarter	Quarter	Quarter	Year
Net revenue	$116,318	$132,802	$117,696	$168,312	$535,128
Gross profit	33,759	37,692	32,095	55,002	158,548
Operating profit (loss)	3,454	4,865	(524)	19,625	27,420
Net income (loss)	2,111	3,100	(555)	11,866	16,522
Net income (loss) per share – basic	0.13	0.19	(0.03)	0.77	1.03
Net income (loss) per share – diluted	0.13	0.19	(0.03)	0.76	1.01

13. Fair Value Measurements

Effective February 3, 2008, the Company adopted SFAS No. 157, which defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. SFAS No. 157 establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. As of January 31, 2009 the Company had no assets or liabilities which are required to be disclosed under the provisions of SFAS No. 157.

Therefore, there was no cumulative effect of adoption related to SFAS No. 157, and the adoption did not have an impact on the Company’s financial position, results of operations, or cash flows.

The carrying amounts of other financial instruments reported in the balance sheet for current assets and current liabilities approximate their fair values because of the short maturity of these instruments.

At January 31, 2009, there was $15,760,000 outstanding under our revolving line of credit agreement and $6,720,000 outstanding under our long-term debt agreement.  The borrowings under our revolving line of credit agreement and our long-term debt agreement bear interest at the variable rate described in Note 3 and therefore approximate fair value at January 31, 2009.

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2009 Annual Report

DIRECTORS AND CORPORATE OFFICERS

Board of Directors	Corporate Officers
Clyde B. Anderson	Clyde B. Anderson
Chairman and Chief Executive Officer	Chairman and Chief Executive Officer
Terry C. Anderson	Terrance G. Finley
Chief Executive Officer and President,	President, Books-A-Million, Inc. Merchandising Group
American Promotional Events, Inc.
	Brian W. White
Ronald G. Bruno	Interim Chief Financial Officer*
President,
Bruno Capital Management Corporation
Albert C. Johnson
Independent Financial Consultant and Retired Partner, Arthur Andersen LLP
Dr. J. Barry Mason,
Dean, Culverhouse College of Commerce
The University of Alabama
William H. Rogers, Jr.	* Mr. White is serving as the Company’s Interim Chief
President,	Financial Officer during the military deployment of
SunTrust Banks, Inc.	Douglas G. Markham.  Mr. Markham will resume the duties    of Chief  Financial Officer upon his return to Birmingham,     Alabama from his military deployment.

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2009 Annual Report 

CORPORATE INFORMATION

Corporate Office

Books-A-Million, Inc.

402 Industrial Lane

Birmingham, Alabama 35211

(205) 942-3737

Transfer Agent

Wells Fargo Shareowner Services

(800) 468-9716

Stockholder Inquiries Address:

161 North Concord Exchange

South St. Paul, Minnesota 55075

E-Mail address: stocktransfer@wellsfargo.com

Wells Fargo Stock Transfer Website: www.wellsfargo.com/com/shareowner_services/index

Certificates for Transfer and Address Changes to:

Shareowner Services

Post Office Box 64854

St Paul, Minnesota 55164-0854

Fax: (651) 450-4033

Independent Registered Public Accounting Firm

Grant Thornton LLP

Atlanta, Georgia

Form 10-K and Investor Contact

A copy of the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2009, as filed with the Securities and Exchange Commission, as well as key committee charters and code of conduct, are available without charge to stockholders upon written request. Such requests and other investor inquiries should be directed to Brian White, the Company’s Interim Chief Financial Officer, or you can view those items at www.booksamillioninc.com.

Market and Dividend Information

Common Stock

The Common Stock of Books-A-Million, Inc., is traded in the NASDAQ Global Select Market under the symbol BAMM. The chart below sets forth the high and low stock prices for each quarter of the fiscal years ending January 31, 2009 and February 2, 2008.

Quarter Ended	High	Low	Dividends Declared
January 2009	$3.16	$1.70	$0.05
October 2008	7.37	2.64	0.05
July 2008	8.80	5.05	0.09
April 2008	10.76	7.55	0.09
January 2008	13.72	10.05	0.09
October 2007	14.78	11.95	0.09
July 2007	20.37	15.03	3.09
April 2007	19.04	13.88	0.09

The closing price on March 27, 2009 was $4.55. As of that date Books-A-Million, Inc. had approximately 6,737 stockholders based on the number of individual participants represented by security position listings.

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2009 Annual Report

COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN*

Among Books-A-Million, Inc., The NASDAQ Composite Index and The NASDAQ Retail Trade Stock Index

The following indexed line graph indicates the Company’s total return to stockholder’s from January 30, 2004 to January 30, 2009, the last trading day prior to the Company’s 2009 fiscal year end, as compared to the total return for the NASDAQ Composite Index and the NASDAQ Retail Trade Stock Index for the same period.

	Jan 30,	Jan 28,	Jan 27,	Feb 2,	Feb 1,	Jan 30,
	2004	2005	2006	2007	2008	2009
Books-A-Million, Inc.	$100	$144	$175	$288	$166	$36
NASDAQ Composite Index	$100	$99	$113	$121	$117	$58
NASDAQ Retail Trade Stocks	$100	$120	$130	$141	$126	$81

  

This graph is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section. This graph shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except as otherwise noted in such filing.

ANNUAL MEETING OF STOCKHOLDERS

The annual meeting of stockholders will be held on May 21, 2009, at 10:00 a.m. central time, at the West Park corporate offices of the company, 127 West Park Drive, Birmingham, Alabama 35211. Stockholders of record as of March 27, 2009, are invited to attend this meeting.

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2009 Annual Report 

402 Industrial Lane

Birmingham, Alabama 35211

www.booksamillioninc.com

43

EX-10

Exhibit 10.21

Certain portions of this Exhibit have been omitted pursuant to a request for confidential treatment. The non-public information has been filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. The omitted portions of this Exhibit are indicated by the following: [****].

SUPPLY AGREEMENT

Books-A-Million, Inc. (“BAM”) and Msolutions, LLC d.b.a. Media Solutions hereby agree that Media Solutions and/or its designed agents shall be the preferred distributor of magazines to BAM with offices located in Birmingham, AL. In this supply agreement, we will sometimes refer to Media Solutions as “we”, “us”, and “our”, and will sometimes refer to BAM as “you” and “your”. This agreement between BAM and Media Solutions shall reflect the following terms of doing business:

1. Basis of Agreement: During the term of this agreement, Media Solutions will be the provider of magazines and comics (the “Merchandise”) to the 211 Stores (the “Stores”) operated by BAM. New BAM Stores opened in “the Territory” and Stores acquired by you in the Territory will also be subject to this agreement. You will purchase Merchandise from us in accordance with the procedures that we both agree upon from time to time during the term.

2. Pricing: During the term, the price to be charged by us for the Merchandise will be determined as described in Exhibit A.

3. Term: This agreement will be for three (3) years, (retroactive to November 4, 2007), unless the agreement is terminated as allowed in Paragraph 8 before the end of the 3 year period.

4. Payment: Payment terms are 60 days. An additional incentive for timely payment is also available and is outlined in “Exhibit B”. Upon implementation of “pay on scan” timely payment incentive no longer applies.

5. Returns: All or any part of the Merchandise purchased from Media Solutions will be returnable by you for full credit (the “Return Credit”).

6. Exclusivity: During this agreement, you agree to purchase all magazines, for all stores locations, distributed by Media Solutions unless we mutually agree that the magazine is not available through Media Solutions in which case this magazine title will be excluded from this agreement. BAM must provide Media Solutions with a current list of titles purchased from other suppliers and BAM must notify Media Solutions in writing of any future additions.

7. Insurance: Distributor shall carry worker's compensation insurance with respect to it’s employees. Distributor shall at all times during the term of this Agreement maintain and pay for comprehensive general liability insurance affording protection to BAM and Distributor, naming BAM as an additional insured, for a combined bodily injury and property damage limit or liability of not less than $1 million for each occurrence. Distributor shall deliver to BAM a certificate of insurance for such policies containing a

clause requiring the insurer to give BAM at least ten (10) days written notice of cancellation of such policies.

8. Termination: The Term may be terminated by either BAM or by Media Solutions only “For Cause”, as follows:

(1) You will be permitted to terminate this Agreement for Cause if:

(a) We fail to service the Stores in accordance with this agreement and we fail to cure any problems that you identify to us in writing within thirty (30) days after we receive the notice of the problems, or

(b) We breach any other material provision of this letter agreement and we fail to cure any breach that you identify to us in writing within thirty (30) days after we receive the notice of the breach, or

(c) We file for bankruptcy protection.

(2) We will be permitted to terminate this Agreement for Cause if:

(a) You fail to make any payment within fifteen (15) days after receiving written notice from us that your payment is late, or

(b) You breach any other material provision of this letter agreement and you fail to cure any breach that we identify to you in writing within thirty (30) days after you receive the notice of the breach, or

(c) You file for bankruptcy protection.

9. Dispute Resolution: We expect our relationship to continue to be mutually beneficial; however, if a dispute should arise, it is our goal to have the dispute resolved as expeditiously and cost-effectively as possible. Therefore, we both agree that if any dispute arises under our agreement, we both will submit the dispute to binding arbitration (i) with an arbitrator selected by the American Arbitration Association (AAA); (ii) under the Commercial Arbitration Rules of the AAA; and (iii) with the arbitration located in Birmingham AL. We both agree to resort to the court system only to enforce an arbitration award or decree.

10. Confidentiality: Media Solutions and BAM agree to maintain the confidentiality of this agreement and the pricing structure, and not to disclose it to anyone other than legal advisors, accountants and consultants who agree to maintain its confidentiality, or under court order or otherwise required by law.

11. Force Majeure: Neither of us will be liable to the other by reason of any failure in performances of this agreement if the failure arises out of acts of God, acts of the other party, acts of governmental authority, fires, strikes, delays in transportation, riots, war, or any cause beyond the reasonable control of that party. If any such event delays performance, the time allowed for each performances will be appropriately extended.

2

12. Miscellaneous: All of the terms and conditions of this agreement will be binding on our and your successors and assigns. The agreement will be governed by the laws of the State of Alabama without reference to the choice of law doctrine of that state. This letter reflects the entire agreement of Media Solutions and BAM regarding the subject matter of this letter. If either you or we desire to waive any breach of the agreement, the waiver must be in writing and be signed by the party granting the waiver.

13. Pay on Scan: It is agreed to by both parties that this agreement will remain in force until such time that Pay on Scan (POS) relationship is implemented at which time the agreement will convert to a Pay On Scan agreement covering the same term. It is also acknowledged that before the parties implement Pay On Scan or convert this agreement to a Pay On Scan agreement, both parties must meet certain technological and financial requirements listed below but not limited to:

• A one time inventory will be taken at the time of conversation

• 100% of the shrink will be passed to the publisher

• Conversion plan will be finalized by January 31^st 2008

• BAM will maintain ownership of the inventory, and only pay for merchandise sold through point of sale

• BAM will take ownership of inventory upon pick-up by a BAM or AWBC truck at the Media Solutions Warehouse or upon delivery of product to the AWBC warehouse by Media Solutions arranged transportation. For Inventory delivered directly to BAM stores by a common carrier or any carrier other than a BAM/AWBC truck, BAM will take ownership of inventory upon receipt

• A/R Reconciliation of current items will occur prior to conversion

• Front end processes will be reviewed

• Loss prevention measures will be reviewed

• Invoicing by Media Solutions will be weekly and will be based on POS transactions of BAM sales. BAM will transmit POS sales to Media Solutions daily

• Payment will be net 7 from the date of invoice transmission by Media Solutions and will be paid by ACH transfer

• Exit from POS strategy

• All transactions will utilize standard EDI transaction sets.

• Maintain the industry standard version of EDI. Current version is 4030.

• Retailer must accurately scan all issue codes.

• Item/Price File Maintenance.

o EDI 832 or EDI 879 and 888.

o EDI 878 Title Authorization.

o Minimum sync rate of 99% to stores within 24 hours.

• Invoice Advance Ship Notice (ASN).

o EDI 856 and EDI 861 or EDI 894 and EDI 895.

o Identify 100% of shipments.

• Secured Returns – Reverse ASN

o EDI 856 or EDI 895 Box level summary.

o Identify 100% of returns.

3

• Point of Sale (POS)

o EDI 852.

o Captured and transmitted daily.

• Financial Transactions

o Electronic Funds Transfer (EFT).

o EDI 810, 812 and 820.

o POS, invoice and payment amounts must be linked and balance.

The targeted time line for such conversion will be:

January 15, 2008 – Agreement on and implementation of technical prerequisites.

April 1, 2008 – 25 store parallel test begins

May 1, 2008 – Rollout begins

To indicate your agreement to the terms set forth in this agreement; please sign below.

BAM agrees to the terms of this agreement, this 25^th day of February, 2008.

BOOKS-A-MILLION     By:       /s/ Sandra B. Cochran Name: Sandra B. Cochran Title:    President, CEO MSOLUTIONS, LLC     By:       /s/ John Franznick Name: John Franznick Title:    President

4

EXHIBIT A

Media Solutions

Pricing

Magazines Discounts

Domestic Retail Less [****]

Imports Retail Less [****]

Weeklies Retail Less [****]

Comic Magazines Retail Less [****]

All traditional RDA money collected will be granted Media Solutions where applicable.

Transportation Allowance

Media Solutions will provide Books-A-Million with a [****] freight allowance to ship all product via AWBC. Media Solutions will however, ship as directed by Books-A-Million as necessary. All billing (sales) related to any product commercially shipped will be excluded from net billing prior to payment of transportation allowance. Allowance will be paid monthly.

Promotional Allowances

Media Solutions will provide sales, billing and management of the various Books-A-Million promotional programs. Additionally Media Solutions will guarantee a additional [****] promotional allowance.

EXHIBIT B

Media Solutions

Incentives

Volume Incentive

Media Solutions will offer Books-A-Million a volume incentive program. This incentive will be paid for the life of the agreement. Payment will be made on a quarterly basis in the amount of [****]. Books-A-Million must be in compliance with all other articles and Exhibits of this agreement in order to receive this payment.

Timely Payment Incentive

Media Solutions will offer Books-A-Million a timely payment incentive program. This incentive will apply if Books-A-Million pays Media Solutions invoices in 30 days. This incentive may be deducted at time of payment in the amount of [****]. This incentive only applies to the traditional business relationship. Upon implementing pay on scan this incentive no longer applies.

EX-21

Exhibit 21

SUBSIDIARIES OF BOOKS-A-MILLION, INC.

Name of Subsidiary	State of Organization
American Wholesale Book Company, Inc.	Alabama
Booksamillion.com, Inc.	Alabama
BAM Card Services, LLC	Virginia

EX-23

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 

We have issued our reports dated April 14, 2009, with respect to the consolidated financial statements, schedule and internal control over financial reporting included in the Annual Report of Books-A-Million, Inc. (the “Company”) on Form 10-K for the year ended January 31, 2009. We hereby consent to the incorporation by reference of said reports in the Registration Statements of the Company on Forms S-8 (File No. 333-135719, File No. 333-126008, File No. 333-116831, File No. 333-84822, File No. 333-34384, File No. 333-58619, File No. 33-72812 and File No. 33-86980).

/s/ GRANT THORNTON LLP

Atlanta, Georgia

April 14, 2009

EX-31

Exhibit 31.1

CERTIFICATIONS

I, Clyde B. Anderson, certify that:

1. I have reviewed this report on Form 10-K of Books-A-Million, Inc.;

2.          Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.          Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.

4.          The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.          The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: April 16, 2009

_/s/ Clyde B. Anderson  

Clyde B. Anderson

Chairman and Chief Executive Officer

EX-31

Exhibit 31.2

CERTIFICATIONS

I, Brian W. White, certify that:

1. I have reviewed this report on Form 10-K of Books-A-Million, Inc.;

2.          Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.         Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.

4.         The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.          The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: April 16, 2009

_/s/ Brian W. White

Brian W. White

Interim Chief Financial Officer

EX-32

Exhibit 32.1

CERTIFICATION OF CHAIRMAN AND CHIEF EXECUTIVE OFFICER

          Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Books-A-Million, Inc. (the “Company”) hereby certifies, to the best of such officer’s knowledge, that:

    (i)          the accompanying Annual Report on Form 10-K of the Company for the fiscal year ended January 31, 2009 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

    (ii)         the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: April 16, 2009 /s/ Clyde B. Anderson  

Clyde B. Anderson

Chairman and Chief Executive Officer

EX-32

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

          Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Books-A-Million, Inc. (the “Company”) hereby certifies, to the best of such officer’s knowledge, that:

    (i)          the accompanying Annual Report on Form 10-K of the Company for the fiscal year ended January 31, 2009 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

    (ii)         the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: April 16, 2009 /s/ Brian W. White  

Brian W. White

Interim Chief Financial Officer