<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
/X/ Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
ADVANCED MARKETING SERVICES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
ADVANCED MARKETING SERVICES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 25, 1996
To the Stockholders of
Advanced Marketing Services, Inc.
The Annual Meeting of Stockholders of Advanced Marketing Services, Inc.
will be held on Thursday, July 25, 1996, at 10:00 a.m., P.D.T., at 5880 Oberlin
Drive, Suite 400, San Diego, California 92121 for the following purposes:
1. To elect three Class C Directors to serve for three-year terms; and
2. To transact any other business which may properly come before the
meeting and any adjournments or postponements thereof.
A proxy statement containing information for stockholders is annexed hereto
and a copy of the Annual Report of the Company for the fiscal year ended March
31, 1996 is enclosed herewith.
The Board of Directors has fixed the close of business, June 14, 1996, as
the record date for the determination of stockholders entitled to notice of and
to vote at the meeting.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON, PLEASE DATE AND
SIGN THE ACCOMPANYING PROXY CARD AND RETURN IT PROMPTLY IN THE ENVELOPE ENCLOSED
FOR THAT PURPOSE.
By the order of the Board of Directors
Charles C. Tillinghast, III
Chairman & Chief Executive Officer
San Diego, California
June 21, 1996
<PAGE> 3
ADVANCED MARKETING SERVICES, INC.
5880 OBERLIN DRIVE
SAN DIEGO, CALIFORNIA 92121
(619) 457-2500
PROXY STATEMENT
GENERAL INFORMATION
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Advanced Marketing Services, Inc. ("AMS" or
the "Company"), a Delaware corporation, for use only at its Annual Meeting of
Stockholders to be held on Thursday, July 25, 1996, and any adjournments or
postponements thereof (the "Annual Meeting").
Shares may not be voted unless the signed proxy card is returned or other
specific arrangements are made to have shares represented at the meeting. Any
stockholder of record giving a proxy may revoke it at any time before it is
voted by filing with the Secretary of AMS a notice in writing revoking it, by
duly executing a proxy bearing a later date, or by attending the Annual Meeting
and expressing a desire to revoke the proxy and vote the shares in person.
Stockholders whose shares are held in street name should consult with their
brokers or other nominees concerning procedures for revocation. Subject to such
revocation, all shares represented by a properly executed proxy card will be
voted as directed by the stockholder on the proxy card. IF NO CHOICE IS
SPECIFIED, PROXIES WILL BE VOTED FOR THE PERSONS NOMINATED BY THE BOARD OF
DIRECTORS FOR ELECTION AS DIRECTORS.
In addition to soliciting proxies by mail, Company directors, officers and
other regular employees, without additional compensation, may solicit proxies
personally or by other appropriate means. The total cost of solicitation of
proxies will be borne by AMS. Although there are no formal agreements to do so,
it is anticipated that AMS will reimburse banks, brokerage houses and other
custodians, nominees and fiduciaries for their reasonable expenses in forwarding
any proxy soliciting materials to their principals.
Only stockholders of record at the close of business on Friday, June 14,
1996 are entitled to receive notice of and to vote at the Annual Meeting. On
June 14, 1996, AMS had outstanding 5,468,199 shares of common stock (the "Common
Stock"), which constituted all of the outstanding voting securities of AMS,
excluding 707,511 shares of the Common Stock held in treasury and not permitted
to be voted at the Annual Meeting. Each share is entitled to one vote. A
majority of the outstanding shares of Common Stock will constitute a quorum.
Abstentions and broker non-votes are counted for purposes of determining the
presence or absence of a quorum for the transaction of business but will not be
counted for purposes of determining whether a proposal has been approved, and
thus will have the effect of a "No" vote. Directors are elected by a plurality
of votes cast. Stockholders may not cumulate their votes for any one or more
nominees for election. The affirmative vote of a majority of the shares present
is required for any other items which might be submitted to the stockholders for
consideration at the Annual Meeting.
It is anticipated that this proxy statement and accompanying proxy card
will first be mailed to stockholders on or about June 21, 1996.
ELECTION OF DIRECTORS
NOMINEES AND VOTING
Pursuant to the Company's Articles of Incorporation, the Board of Directors
of the Company is divided into three classes of directors, each class to be as
nearly equal in number as possible. Directors are elected to serve for
three-year terms, with the elections staggered by class. The Board is currently
composed of eight directors; three of whom are Class A directors, two of whom
are Class B directors and three of whom are
<PAGE> 4
Class C directors. At the Annual Meeting, three Class C directors are to be
elected to a three-year term until the Annual Meeting of Stockholders to be held
in 1999 and until their successors are duly elected and qualified. The Board of
Directors has nominated each of the following incumbent Class C directors for
reelection as a Class C director:
Robert F. Bartlett
Lynn S. Dawson
Trygve E. Myhren
Information concerning the nominees for election as Class C directors is
set forth under the caption "Management -- Directors and Executive Officers."
The Board of Directors has no reason to believe that its nominees will be
unable or unwilling to serve if elected. However, should the nominee named
herein become unable or unwilling to accept nomination or election, the Board's
proxies will vote instead for such other person as the Board of Directors may
recommend.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" ELECTION OF THE
ABOVE MENTIONED NOMINEES AS DIRECTORS.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of June 14, 1996 with
regard to beneficial ownership of the Common Stock by (i) persons known by the
Company to be beneficial owners of more than five percent of the Common Stock,
(ii) the directors of the Company, (iii) the executive officers named in the
Summary Compensation Table below and (iv) all executive officers and directors
as a group.
<TABLE>
<CAPTION>
COMMON STOCK PERCENT OF
NAME (AND ADDRESS(1)) BENEFICIALLY OUTSTANDING
OF BENEFICIAL OWNER OWNED COMMON STOCK
------------------------------------------------ ------------ ------------
<S> <C> <C>
Charles C. Tillinghast, III..................... 912,300(2) 16.6%
Loren C. Paulsen................................ 921,500(3) 16.8%
Grace & White, Inc.............................. 668,485 12.2%
Kahn Brothers & Co., Inc........................ 573,450 10.5%
Dimensional Fund Advisors, Inc.................. 279,400 5.1%
Jon S. Fish..................................... 60,500(4) 1.1%
Michael M. Nicita............................... 30,511(5) *
Kevan M. Lyon................................... 22,700(6) *
James A. Leidich................................ 37,300(7) *
E. William Swanson.............................. 24,400(8) *
Trygve E. Myhren................................ 22,400(9) *
Robert F. Bartlett.............................. 4,000(10) *
Lynn S. Dawson.................................. 4,000(10) *
All executive officers and directors
as a group (14 persons)....................... 2,049,161(11) 36.2%
</TABLE>
- ---------------
* less than 1%.
(1) The address of Messrs. Tillinghast and Paulsen is c/o Advanced Marketing
Services, Inc., 5880 Oberlin Drive, San Diego, CA 92121. The address of
Grace & White, Inc. is 515 Madison Avenue, New York, NY 10027. The address
of Kahn Brothers & Co., Inc. is 55 Broadway, New York, NY 10006. The
address of Dimensional Fund Advisors, Inc. is 1299 Ocean Avenue, Santa
Monica, CA 90401.
(2) Mr. Tillinghast's shares are held of record by a Revocable Trust dated
April 7, 1988 of which Mr. and Mrs. Tillinghast are trustees. This amount
also includes 12,800 shares subject to options exercisable within 60 days
held by Cynthia B. Tillinghast, Assistant Secretary and a General Marketing
Manager of
2
<PAGE> 5
the Company and the wife of Mr. Tillinghast. Mr. Tillinghast disclaims
beneficial ownership of such 12,800 shares.
(3) Of Mr. Paulsen's shares, 862,540 are held of record by a Revocable Trust
dated May 13, 1987, the trustees of which are Mr. Paulsen and his wife, and
58,960 are held of record by an Irrevocable Trust dated August 22, 1988,
the beneficiaries of which are Mr. Paulsen's children and the trustees of
which are unrelated to Mr. Paulsen. Mr. Paulsen disclaims beneficial
ownership of the 58,960 shares held by this Irrevocable Trust.
(4) Includes 59,000 shares subject to options which are exercisable within 60
days.
(5) Includes 30,000 shares subject to options which are exercisable within 60
days.
(6) Includes 22,000 shares subject to options which are exercisable within 60
days.
(7) Includes 1,000 shares held by Mr. Leidich's wife as trustee for their son
and 20,000 shares subject to options which are exercisable within 60 days.
(8) Mr. Swanson's shares are held of record by F.W. Cygnet Pension Plan, of
which Mr. Swanson is a trustee. This amount also includes 14,400 shares
subject to options which are exercisable within 60 days.
(9) Includes 1,000 shares held of record by Mr. Myhren's wife and 14,400 shares
subject to options which are exercisable within 60 days.
(10) Includes 4,000 shares subject to options which are exercisable within 60
days.
(11) Includes 190,150 shares subject to options which are exercisable within 60
days.
3
<PAGE> 6
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following sets forth certain information as of June 16, 1996 with
regard to (i) each director, including the three nominees (who currently serve
as directors), and (ii) each executive officer of the Company who is neither a
director nor a nominee.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------- --- -----------------------------------------
<S> <C> <C>
Charles C. Tillinghast, III 59 Chief Executive Officer and Chairman of
the Board of Directors(1)
Michael M. Nicita 43 President, Chief Operating Officer and
Director
Loren C. Paulsen 46 Executive Vice President -- Operations
and Director(1)
Robert F. Bartlett 51 Director(2)
Lynn S. Dawson 45 Director(2)
James A. Leidich 53 Director(2)
Trygve E. Myhren 59 Director(2)
E. William Swanson 60 Director(2)
Jon S. Fish 51 Executive Vice President -- Finance and
Chief Financial Officer
Kenneth C. Hayes 50 Vice President -- Information Systems
Alisa R. Judge 40 Vice President -- Human Resources
Kevan M. Lyon 37 Vice President -- Merchandising
John S. McGee 34 Vice President -- Operations
Adam R. Zoldan 43 Vice President -- Marketing
</TABLE>
- ---------------
(1) Member of the Stock Option Committee.
(2) Member of the Compensation and Audit Committees.
Mr. Tillinghast has served as Chairman of the Board of Directors and Chief
Executive Officer of the Company since November 1994; prior thereto, Mr.
Tillinghast served as President, Chief Executive Officer and as a Director of
the Company since its inception in 1982. He served as President of Oak Tree
Publications, Inc. from 1976 until 1981 and as President of CRM, a diversified
publishing company, from 1971 through 1975. Mr. Tillinghast was employed by
Boise Cascade Corporation for 10 years, where he served in various management
positions, including Senior Vice President from 1971 to 1973.
Mr. Nicita has served as President, Chief Operating Officer and a Director
of the Company since November 1994. From 1978 to November 1994, he served in
various capacities at Golden-Lee Book Distributors, including MIS Director,
Controller and General Manager. In August 1995, Golden-Lee Book Distributors
filed for protection under the bankruptcy laws. Mr. Nicita was employed by
Barnes & Noble Book Stores, Inc. from 1977 to 1978. Mr. Nicita is the co-author
of two books on microcomputers and has also been a columnist for a national
microcomputer consumer magazine.
Mr. Paulsen has served as Executive Vice President -- Operations since
December 1989 and a Director of the Company since its inception in 1982. From
1982 to December 1989, Mr. Paulsen served as Vice President -- Operations of the
Company. Prior thereto, he was employed by Fed Mart Corp., a discount retail
chain, for 17 years in various capacities, including sundries and book buyer.
Mr. Bartlett was elected Director in April 1994 by the Board of Directors.
He is presently Executive Vice President of Combined Resources International, a
wood manufacturing firm. Mr. Bartlett has many years of experience in the
warehouse club industry, having served as Vice President, Divisional Manager of
Anderson Chamberlain, a warehouse club manufacturer's representative firm
(1993-1995); Senior Vice President of Merchandising, Operations, Traffic and
Distribution, SourceClub, Inc. (1991-1993); Executive Vice Presi-
4
<PAGE> 7
dent of Merchandising and Distribution, The Wholesale Club, Inc. (1990-1991);
and Executive Vice President of Merchandising, Traffic and Distribution, The
Price Club (1981-1989).
Ms. Dawson was appointed Director in April 1994 by the Board of Directors.
She is presently employed as Vice President and National Sales Manager for B.H.
Smith/Samsonite. Ms. Dawson has many years of experience in department store
operations, having served in a variety of positions including Vice President,
Divisional Merchandise Manager with Foley's Department Store (1990-1991); Senior
Vice President, Broadway Department Store (1978-1990) and Buyer and Store
Manager, May Company Department Store (1972-1978).
Mr. Leidich was first elected a Director of the Company in November 1986.
He has served as President of Graywave, Inc., a management consulting firm,
since 1983. Since July of 1994 he has served as Chairman and Chief Executive
Officer of Bright Start, Inc., which operates child care centers. Mr. Leidich
serves on the boards of numerous privately held companies. From November 1989 to
May 1993, he served as an officer and partner in Colorado Venture Management,
Inc., a venture capital firm. Mr. Leidich was the Chairman and Treasurer of
Children's World, Inc., a national chain of child care centers, from 1975 to
1983. From 1980 to 1983, Mr. Leidich was Executive Vice President of The Parker
Pen Company.
Mr. Myhren was first elected a Director of the Company in February 1989.
From December 1990 to March 1996, he has served as President and a Director of
the Providence Journal Company, a diversified media company. Mr. Myhren also
served as President and CEO of King Broadcasting Corporation, during this
period. He is now President of Myhren Media, Inc., a media investment and
consultation firm as well as a general partner of Saguaro Cable Investors, L.P.
His other directorships include Continental Cablevision, Inc., Peapod, Ltd.,
Cablelabs, Inc., Citizens Bank Corporation and The Providence Journal Company.
From 1975 until establishing Myhren Media, Inc., he served as President and then
Chairman and Chief Executive Officer of American Television and Communications
Corporation, a publicly traded subsidiary of Time, Inc. and known today as
Time/Warner Cable. Prior thereto, Mr. Myhren served in various capacities with
CRM, Marketing Continental, Glendinning Companies and Procter and Gamble. From
1981 to 1991, Mr. Myhren served as a Director of the National Cable Television
Association and was its Chairman from 1986 to 1987. He has previously served as
a Director of Turner Broadcasting Systems; American TV & Communications, Inc.,
and on Time's internal boards for Home Box Office, Temple-Eastex and Time
Magazine Group; and on the Federal Communications Commission's Advisory
Committee on High Definition Television.
Mr. Swanson was first elected a Director of the Company in April 1988. He
has served as President of F.W. Cygnet, Inc., an investment management firm,
since 1986. Mr. Swanson was the President and Chief Executive Officer from 1982
to 1986 of St. Francis Associates, a private investment management firm in San
Francisco. From 1975 through 1982, he was employed by The Parker Pen Company,
serving in various capacities, including President, Chief Executive Officer and
Chief Operating Officer.
Mr. Fish joined the Company in April 1990 as Vice President -- Finance and
Chief Financial Officer. In July 1991, he was elected Executive Vice
President -- Finance. From 1988 to April 1990, he served as Vice
President -- Treasurer and Administration for Magma Power Company, a geothermal
power company. Prior to 1988, he served as Vice President -- Finance of United
Publishers for six years and in various positions including Vice
President -- Treasurer for the Wickes Companies between 1972 and 1982.
Mr. Hayes joined the Company in 1986 as Director of Management Information
Systems. He was promoted to Vice President -- Information Systems in July 1991.
From 1982 until 1986, he served as Data Processing Manager for Spectragraphics
Corporation, a computer graphics manufacturing company. Prior to 1982, Mr. Hayes
served in various technical and management positions with McDonnell Douglas
Automation, San Diego Data Processing Corporation and National Semiconductor.
Ms. Judge joined the Company in May 1991 as Manager of Human Resources. She
was promoted to Director of Human Resources in October 1992 and to Vice
President -- Human Resources in July 1994. From 1986 to 1991, she worked for the
Eastridge Group, an employment/temporary agency in a variety of management
positions.
5
<PAGE> 8
Ms. Lyon joined the Company in 1988 as Marketing Director. In December
1989, Ms. Lyon was named Vice President -- Marketing with responsibility for
leading the sales and marketing efforts with respect to the Company's major
customers. In September 1994, Ms. Lyon became Vice President of Merchandising
and has responsibility for the Company's buying activities. From 1983 through
1988, she worked for Allergan, Inc., a pharmaceutical company, in various sales
and product management positions.
Mr. McGee joined the Company in April 1994 as Distribution Center Manager
and was promoted to Vice President -- Operations in February 1996. From February
1984 until April 1994 he held a variety of positions, including Director of
Operations and Divisional General Manager with Bindagraphics, Inc., a book
bindery company.
Mr. Zoldan joined the Company in January 1995 as Vice
President -- Marketing and has responsibility for sales and relations with the
Company's major customers. From 1988 to 1995, Mr. Zoldan was General Sales
Manger for Eastman, a division of Office Depot. Prior to 1988, he served as
General Sales Manager for Office Club (now Office Depot) (1984-1986) and
District Sales Manager for McKesson Office Products (1981-1984).
Officers serve at the discretion of the Board of Directors.
BOARD OF DIRECTORS AND COMMITTEES
Directors are elected to serve staggered three-year terms and until their
successors are duly elected and qualified. Each director who is not otherwise
employed by the Company receives an annual director's fee of $10,000 plus $1,000
for each regular Board meeting attended. In addition, each outside director is
paid $500 for attendance at each special Board and Audit, Compensation or Stock
Option Committee meeting held on dates other than the regularly scheduled Board
meetings. The Company reimburses each director for reasonable out-of-pocket
expenses incurred in his capacity as a member of the Board of Directors. No
payments are made for participation in telephone meetings of the Board of
Directors or actions taken in writing. Each director attended at least 75% of
the total number of meetings of the Board of Directors and all committees
thereof on which such director served held during the year ended March 31, 1996.
The members of the Audit Committee of the Board of Directors are Messrs.
Bartlett, Leidich, Myhren and Swanson and Ms. Dawson. The Audit Committee held
one meeting during fiscal 1996. The functions of the Audit Committee are
primarily to recommend the selection of the Company's independent public
accountants, discuss with them the scope of the audit, consider matters
pertaining to the Company's accounting policies and internal controls and
provide a means for direct communication between the independent public
accountants and the Board of Directors.
The members of the Compensation Committee of the Board of Directors are
Messrs. Bartlett, Leidich, Myhren and Swanson and Ms. Dawson. The Compensation
Committee held three meetings during fiscal 1996. The functions of the
Compensation Committee are to review and recommend changes in salaries and
bonuses of key employees and to review periodically, and make recommendations
with respect to, the compensation structure of the Company.
The members of the Stock Option Committee of the Board of Directors are
Messrs. Tillinghast and Paulsen. The Stock Option Committee is responsible for
administering the Company's 1987 and 1995 Stock Option Plans. The Stock Option
Committee held two meetings during fiscal 1996.
The Company has no nominating committee or committee performing similar
functions.
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEES
The Compensation Committee is composed of five outside directors. The
Compensation Committee is responsible for determining executive officer salary
and bonus compensation and determining annual contributions to the Company's
profit sharing plan. Stock option grants are determined by the Stock Option
6
<PAGE> 9
Committee, consisting of two employee directors who are not eligible for grants,
in consultation with the Compensation Committee. The following is a report of
the Compensation Committee and, as it relates to stock options, the Stock Option
Committee, concerning their policies and actions in fiscal 1996 concerning
executive compensation.
The Company's compensation programs are designed to (a) link executive
compensation to the performance of the Company and to stockholder value as
measured by the long-term price appreciation of the Company's common stock and
(b) attract, retain and motivate employees by providing for the vesting of
certain components of compensation over a number of years.
The Company's compensation of executive officers, including its Chief
Executive Officer, consists principally of two components: (a) annual cash
compensation, generally consisting of base salary and a bonus, and (b)
long-term, stock-based compensation. The policies governing these components, as
well as the basis for determining the compensation payable to the Chief
Executive Officer, are described below.
Annual Salary and Bonus Compensation. The salaries of executive officers
are determined on the basis of, in no particular order of importance, the
responsibilities of the position held, the prior experience and compensation of
the officer, the compensation practices of competitors, as determined from
publicly available information, discussions with knowledgeable consultants and
participants in the publishing and distribution industries and other marketplace
factors such as housing and relocation requirements. The Compensation Committee
also strives to compensate each executive officer at a level which is
appropriate in relation to the compensation of other executive officers of the
Company. Annual salary adjustments, if any, are determined largely by the
Company's net income performance. Because two officers of the Company hold
significant equity positions as founders, their salaries are set, with their
concurrence, at levels believed to be somewhat lower than that paid for
comparable positions in the industry generally.
Under the Company's bonus plan, cash bonuses are earned if a minimum
targeted level of net income is attained. Bonus amounts increase if higher
target net income levels are attained. The Company's net income objectives are
established by the Compensation Committee at the commencement of each fiscal
year. For fiscal 1996, payments under the Company's bonus plan to each executive
officer were based principally upon the Company exceeding the targeted net
income objective.
Long-Term Stock Option Compensation. The Company grants stock options to
its executive officers and other employees pursuant to its 1987 Stock Option
Plan and the 1995 Stock Option Plan. The Company believes that such options help
to more closely align the interests of its management employees with the long-
term interests of its stockholders by providing an incentive for increasing
stockholder value. Moreover, such options are believed to be instrumental in
retaining employees over the longer term, since full benefits of appreciated
options cannot be realized until the end of the applicable vesting period, which
is usually five years.
During fiscal 1996, the Stock Option Committee, in consultation with the
Compensation Committee, approved the grant of options to purchase 10,000 shares
of Common Stock to Mr. John S. McGee in connection with his appointment as an
officer. The Stock Option Committee also approved the grant of options to
purchase 10,000, 3,000, 4,000, 5,000 and 5,000 shares of Common Stock to Mr. Jon
S. Fish, Mr. Kenneth C. Hayes, Ms. Alisa R. Judge, Ms. Kevan M. Lyon and Mr.
Adam R. Zoldan, respectively. The Stock Option Committee concluded that stock
options previously granted to Mr. Michael M. Nicita adequately provide
appropriate long-term incentives and, therefore, determined not to grant
additional options to him in fiscal 1996. Messrs. Tillinghast and Paulsen, who
are founders of the Company, are not eligible to receive grants of options, but
their significant equity positions in the Company are believed to provide them
with substantial incentive to enhance stockholder value.
CEO Compensation. The Compensation Committee establishes the base salary
and bonus, if any, payable to Mr. Charles C. Tillinghast, III, the Company's
Chief Executive Officer, based on the same factors applicable to executive
officer compensation generally.
In March 1995, the Compensation Committee reviewed Mr. Tillinghast's salary
and determined that his salary would be increased to $250,000 for fiscal 1996.
Mr. Tillinghast's salary is believed to be below the
7
<PAGE> 10
median of salaries paid to chief executive officers of companies which have
comparable sales volumes. In fiscal 1996, Mr. Tillinghast earned a bonus of
$67,350 based upon the Company's performance against the net income objectives
established by the Compensation Committee.
Internal Revenue Code Section 162(m). Internal Revenue Code Section 162(m),
enacted in 1993, provides that a public corporation generally may not deduct
compensation in excess of $1,000,000 payable to its chief executive officer or
any of its other four most highly compensated officers. Certain
performance-based compensation is specifically exempted. Since the Compensation
Committee currently does not anticipate that any executive officer of the
Company will receive compensation in excess of the deduction limitation in
fiscal 1997, it has not yet established a policy with respect to Section 162(m).
In future years, the Compensation Committee intends to take into account the
effect of Section 162(m) if the compensation payable to an executive officer
approaches $1,000,000. However, the provisions of Section 162(m) are not
expected to preclude the award of compensation believed to be merited, even if
in excess of $1,000,000.
The tables that follow reflect the decisions included in this report.
<TABLE>
<CAPTION>
THE STOCK OPTION COMMITTEE THE COMPENSATION COMMITTEE
<S> <C>
Charles C. Tillinghast, III James A. Leidich, Chairman
Loren C. Paulsen Robert F. Bartlett
Lynn S. Dawson
Trygve E. Myhren
E. William Swanson
</TABLE>
SUMMARY OF CASH AND OTHER COMPENSATION
The following table sets forth information concerning the annual and
long-term compensation for services rendered in all capacities to the Company
for the fiscal years ended March 31, 1996, 1995 and 1994 of those persons who
were, at March 31, 1996, the Chief Executive Officer and the four other most
highly paid executive officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ------------ ALL OTHER
NAME AND CAPACITY FISCAL --------------------------- OPTIONS/ COMPENSATION
IN WHICH SERVED YEAR SALARY($)(1) BONUS($)(1) SARS(#) ($)(2)(3)
- ------------------------------------ ------ ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Charles C. Tillinghast, III, 1996 250,010 67,350 1,000(4) 9,879
Chief Executive Officer and 1995 190,008 28,000 0 7,346
Chairman 1994 188,757 0 0 1,650
Michael M. Nicita, Chief Operating 1996 235,003 68,475 0 2,532
Officer and President 1995 90,436 14,000 150,000 32,612
1994 -- -- -- --
Loren C. Paulsen, Executive 1996 172,965 57,975 0 10,346
Vice President -- Operations 1995 168,006 28,000 0 9,286
1994 167,256 0 0 1,463
Jon S. Fish, Executive Vice 1996 170,006 58,350 10,000 9,636
President -- Finance and Chief 1995 158,006 28,000 0 8,416
Financial Officer 1994 156,648 0 0 1,580
Kevan M. Lyon, Vice President -- 1996 130,005 43,181 5,000 9,241
Merchandising 1995 113,755 20,000 10,000 6,362
1994 101,193 0 0 1,012
</TABLE>
- ---------------
(1) Amounts shown include cash compensation earned and received by executive
officers as well as amounts earned and accrued but not yet paid, including
salary amounts deferred at their election under the Company's 401(k) plan
and deferred compensation plan.
(2) The amounts indicated for fiscal 1996 include, for Messrs. Tillinghast,
Nicita, Paulsen and Fish and Ms. Lyon respectively: profit sharing
contributions of $5,816, $0, $7,500, $7,500 and $7,438 (excluding the
allocable portion of accrued interest); Company matching 401(k) plan
contributions of $2,063, $588,
8
<PAGE> 11
$1,606, $1,021 and $958; and matching contributions of $2,000, $1,944,
$1,240, $1,115 and $845 under the Company's recently adopted deferred
compensation plan. The deferred compensation plan permits an eligible
employee to defer up to 50% of base salary and 100% of any bonus. The
Company is obligated to contribute an amount equal to an employee's deferral
up to a stated maximum and may, at its discretion, make additional
contributions. Company contributions generally vest over a five-year period
beginning on the date of an employee's entry into the plan.
(3) The Company has determined that it is more appropriate to disclose the full
amount of the Company's matching contributions under its 401(k) plan (in the
past the Company has disclosed vested portions only) and has restated prior
year amounts accordingly.
(4) Represents options held by Cynthia B. Tillinghast, Assistant Secretary and a
General Marketing Manager of the Company. Mrs. Tillinghast is the wife of
Mr. Tillinghast.
OPTION GRANTS
The following table sets forth with respect to the Named Executive Officers
certain information concerning grants of stock options in fiscal 1996. No stock
appreciation rights were granted in fiscal 1996.
OPTION GRANTS IN FISCAL 1996
<TABLE>
<CAPTION>
POTENTIAL REALIZED VALUE
% OF TOTAL AT
NUMBER OF OPTIONS ASSUMED ANNUAL RATES OF
SECURITIES GRANTED TO EXERCISE GRANT DATE STOCK PRICE APPRECIATION
UNDERLYING EMPLOYEES OR BASE MARKET FOR OPTION TERM(1)
OPTIONS IN PRICE PRICE EXPIRATION --------------------------
GRANTED($) FISCAL YEAR ($/SH) ($/SH) DATE 0%($) 5%($) 10%($)
----------- ------------ --------- ----------- ----------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Charles C. Tillinghast,
III(2)........................ 1,000 0.8 11.16 13.13 3/21/06 1,969 10,226 22,894
Michael M. Nicita............... 0 -- -- -- -- -- -- --
Loren C. Paulsen................ 0 -- -- -- -- -- -- --
Jon S. Fish..................... 10,000 8.2 11.16 13.13 3/21/06 19,694 102,264 228,943
Kevan M. Lyon................... 5,000 4.1 11.16 13.13 3/21/06 9,847 51,132 114,472
</TABLE>
- ---------------
(1) Amounts shown represent the potential value of granted options if the
assumed annual rates of stock appreciation are maintained over the 10-year
terms of the granted options. The assumed rates of appreciation are
established by regulation and are not intended to be a forecast of the
Company's performance or to represent management's expectations with respect
to the appreciation, if any, of the Common Stock.
(2) Options granted to Ms. Cynthia B. Tillinghast, Assistant Secretary and a
General Marketing Manager of the Company. Mrs. Tillinghast is the wife of
Mr. Tillinghast.
OPTION EXERCISES AND HOLDINGS
The following table sets forth with respect to the Named Executive Officers
information concerning the exercise of stock options during fiscal 1996 and
unexercised options held as of the end of each fiscal year. The Company has
never granted stock appreciation rights.
AGGREGATED OPTION EXERCISES AND
FISCAL 1996 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER VALUE OF
OF UNEXERCISED UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
SHARES VALUE FISCAL YEAR END(#) FISCAL YEAR END($)(1)
ACQUIRED ON REALIZED ----------------------------- -----------------------------
EXERCISE(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------ --------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Charles C. Tillinghast(2).............. 0 0 12,600 1,400 96,582 4,778
Michael M. Nicita...................... 0 0 30,000 120,000 219,900 879,600
Loren C. Paulsen....................... 0 0 0 0 0 0
Jon S. Fish............................ 8,000 31,840 59,000 10,000 556,070 127,500
Kevan M. Lyon.......................... 1,000 7,100 22,000 12,000 168,860 53,270
</TABLE>
9
<PAGE> 12
- ---------------
(1) Before taxes. The dollar value indicated is based on the difference between
the exercise price of the outstanding option and the closing market price of
the Common Stock on March 29, 1996 ($12.75 per share).
(2) Represents options held by Cynthia B. Tillinghast, Assistant Secretary and a
General Marketing Manager of the Company. Mrs. Tillinghast is the wife of
Mr. Tillinghast.
PERFORMANCE GRAPH
The following graph presents a comparison of the Company's stock
performance with the broad-based Nasdaq Market Index and with the Dow Jones
Industry Group OTS-Other Specialty Retailers Index, an index compiled by Media
General Financial Services which currently covers approximately 235 specialty
retail companies (including the Company).
<TABLE>
<CAPTION>
ADVANCED MARKET-
MEASUREMENT PERIOD ING SERVICES, DOW JONES INDUS-
(FISCAL YEAR COVERED) INC. TRY GROUP OTS NASDAQ
<S> <C> <C> <C>
4/1/91 100.00 100.00 100.00
4/1/92 312.90 130.03 105.40
4/1/93 354.84 155.03 117.95
4/1/94 264.52 158.48 136.32
4/1/95 316.13 148.69 144.62
4/1/96 606.45 169.60 194.52
</TABLE>
The graph assumes $100 invested on April 1, 1991 in the Company's Common
Stock and $100 invested at that time in each of the indexes shown. The
comparison assumes that all dividends are reinvested.
COMPLIANCE WITH SECTION 16(A) OF EXCHANGE ACT
Based solely upon a review of Forms 3, 4 and 5 (and amendments thereto)
furnished to the Company during or with respect to fiscal 1996, no person who at
any time during fiscal 1996 was a director, officer, beneficial owner of more
than 10 percent of the Common Stock, failed to file on a timely basis, as
disclosed in the above Forms, reports required by Section 16(a) of the
Securities Exchange Act, as amended, during fiscal 1996 or prior fiscal years,
except as provided herein. Through clerical oversight, Mr. Zoldan failed to file
a timely Form 5 with respect to fiscal 1996 to report a grant of options by the
Company to purchase 5,000 shares of Common Stock. In addition, a Form 4
reporting the sale by Mr. Paulsen of 25,000 shares of Common Stock was filed one
day late.
10
<PAGE> 13
FORM 10-K
AMS will furnish without charge to each stockholder, upon written request
addressed to The Investor Relations Department of AMS at 5880 Oberlin Drive,
Suite 400, San Diego, California 92121, a copy of its Annual Report on Form 10-K
for the fiscal year ended March 31, 1996 (excluding the exhibits thereto), as
filed with the Securities and Exchange Commission.
CERTAIN TRANSACTIONS
All transactions between the Company and its officers, directors or any
affiliate of any such person have been, and all such future transactions will
be, on terms no less favorable to the Company than could be obtained from
unaffiliated parties. In connection with his relocation to San Diego, CA., on
May 28, 1996 the Company loaned $25,000 at five percent (5%) annual interest
secured by his house located in Baltimore, MD to Mr. John McGee. On the same
date the Company loaned McGee $50,000 at five percent (5%) annual interest
secured by his newly purchased house in San Diego, CA. Upon the sale of his
house in Baltimore, the Company plans to combine these loans into a single
$75,000 loan bearing interest at five percent (5%) and secured by the San Diego
house.
FUTURE STOCKHOLDER PROPOSALS
Any stockholder proposal intended to be presented at the 1997 Annual
Meeting of Stockholders must be submitted sufficiently far in advance so that it
is received by AMS not later than April 23, 1997.
OTHER MATTERS
The Company's independent public accountants for the fiscal year ended
March 31, 1996 were Arthur Andersen LLP, which firm has been appointed to serve
in such capacity for the current fiscal year. A representative of Arthur
Andersen LLP is expected to be present at the meeting with the opportunity to
make a statement if he or she so desires and to respond to appropriate
questions.
Neither the Company nor any of the persons named as proxies knows of
matters other than those stated above to be voted on at the Annual Meeting.
However, if any other matters are properly presented at the meeting, the persons
named as proxies are empowered to vote in accordance with their discretion on
such matters.
The Annual Report of AMS for the fiscal year ended March 31, 1996
accompanies this proxy statement, but it is not to be deemed a part of the proxy
soliciting material.
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY.
ADVANCED MARKETING SERVICES, INC.
By order of the Board of Directors
Charles C. Tillinghast, III
Chief Executive Officer and Chairman
San Diego, California
June 21, 1996
11
<PAGE> 14
REVOCABLE PROXY
ADVANCED MARKETING SERVICES, INC.
ANNUAL MEETING OF STOCKHOLDERS -- JULY 25, 1996
The undersigned stockholder(s) of Advanced Marketing Services, Inc. (the
"Company") hereby nominates, constitutes and appoints Charles C. Tillinghast,
III and James A. Leidich, and each of them, the attorney, agent and proxy of the
undersigned, with full power of substitution, to vote all stock of Advanced
Marketing Services, Inc. which the undersigned is entitled to vote at the Annual
Meeting of Stockholders of the Company to be held at 5880 Oberlin Drive, Suite
400, San Diego, California 92121 at 10:00 a.m., P.D.T., and any and all
adjournments or postponements thereof, with respect to the matters described in
the accompanying Proxy Statement, and in their discretion, on such other matters
which properly come before the meeting, as fully and with the same force and
effect as the undersigned might or could do if personally present thereat, as
follows:
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS / / AUTHORITY GIVEN / /WITHHOLD AUTHORITY
to vote for the nominees listed below to vote for the nominees.
(except as indicated to the contrary below).
</TABLE>
(INSTRUCTIONS: To withhold authority to vote for any nominee, strike a line
through such nominee's name below.)
Class C: Robert F. Barlett; Lynn S. Dawson; Trygve E. Myhren
2. To transact such other business as may properly come before the Meeting and
any adjournments or postponements thereof. Management presently knows of no
other business to be presented by or on behalf of the Company or its Board of
Directors at the Meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND MAY BE REVOKED
PRIOR TO ITS EXERCISE.
PLEASE SIGN AND DATE ON REVERSE SIDE.
<PAGE> 15
THE BOARD OF DIRECTORS RECOMMENDS A VOTE OF "AUTHORITY GIVEN" FOR THE
ELECTION OF DIRECTORS. THE PROXY CONFERS AUTHORITY TO AND SHALL BE VOTED
"AUTHORITY GIVEN" FOR THE ELECTION OF DIRECTORS UNLESS OTHER INSTRUCTIONS ARE
INDICATED, IN WHICH CASE THE PROXY SHALL BE VOTED IN ACCORDANCE WITH SUCH
INSTRUCTIONS.
IF ANY OTHER BUSINESS IS PRESENTED AT THE MEETING, THIS PROXY SHALL BE VOTED
IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS.
Dated:
-------------------------
(Please print name)
-------------------------
(Signature of
Stockholder)
-------------------------
(Please print name)
-------------------------
(Signature of
Stockholder)
(Please date this Proxy
and sign your name as it
appears on your stock
certificates. Executors,
administrators, trustees,
etc., should give their
full titles. All joint
owners should sign.)
I (We) do / / do not /
/ expect to attend the
Meeting.
Number of Persons
