<PAGE>
3RD QUARTER
FISCAL 1998
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED DECEMBER 27, 1997
Commission File Number: 0-16002
ADVANCED MARKETING SERVICES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-3768341
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5880 OBERLIN DRIVE, SUITE 400
SAN DIEGO, CALIFORNIA 92121
(Address of principal executive offices)
(Zip Code)
(619) 457-2500
(Registrant's telephone number, including area code)
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
--- --
The number of shares of the Registrant's Common Stock outstanding as of
December 31, 1997 was 5,586,859.
<PAGE>
ADVANCED MARKETING SERVICES, INC.
INDEX TO FORM 10-Q
December 27, 1997
<TABLE>
<CAPTION>
Page
----
PART I. FINANCIAL INFORMATION
<S> <C>
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets (Unaudited)........................................... 3
Consolidated Statements of Income (Unaudited)..................................... 4
Consolidated Statements of Cash Flows (Unaudited)................................. 5
Notes to Consolidated Financial Statements........................................ 6 - 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS............................................... 9 - 11
PART II. OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS............................................................. 11
ITEM 2 - CHANGES IN SECURITIES......................................................... 11
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES............................................... 11
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS ........................ 11
ITEM 5 - OTHER INFORMATION............................................................. 11
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K.............................................. 11
SIGNATURES............................................................................. 12
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (See Notes for Basis of Presentation)
ADVANCED MARKETING SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 27, MARCH 31, DECEMBER 28,
1997 1997 1996
------ ------ ------
<S> <C> <C> <C>
ASSETS (UNAUDITED) (NOTE) (UNAUDITED)
CURRENT ASSETS:
Cash and Cash Equivalents $ 54,857 $ 13,592 $ 9,310
Investments, Available-For-Sale 10,492 9,177 9,318
Accounts Receivable - Trade, Net of Allowances for Uncollectible
Accounts and Sales Returns of $4,217 at December 27, 1997, $3,782
at March 31, 1997 and $5,129 at December 28, 1996 85,141 53,564 66,230
Vendor and Other Receivables 2,249 2,801 3,159
Inventories, Net 84,792 91,745 85,924
Deferred Income Taxes 5,013 5,482 5,840
Prepaid Expenses 1,045 809 1,200
-------- -------- --------
TOTAL CURRENT ASSETS 243,589 177,170 180,981
-------- -------- --------
PROPERTY AND EQUIPMENT, AT COST 10,854 9,206 9,440
Less - Accumulated Depreciation and Amortization 6,277 5,445 5,457
-------- -------- --------
Net Property And Equipment 4,577 3,761 3,983
-------- -------- --------
Investments, Available-For-Sale -- 2,063 1,974
OTHER ASSETS 786 507 588
-------- -------- --------
TOTAL ASSETS $248,952 $183,501 $187,526
-------- -------- --------
-------- -------- --------
LIABILITIES
CURRENT LIABILITIES:
Accounts Payable $172,872 $119,507 $123,109
Accrued Liabilities 7,412 5,318 5,869
Income Taxes Payable 2,515 889 1,579
-------- -------- --------
TOTAL CURRENT LIABILITIES 182,799 125,714 130,557
-------- -------- --------
STOCKHOLDERS' EQUITY
Common Stock, $.001 Par Value, Authorized 20,000,000 Shares,
Issued 6,304,000 Shares at December 27, 1997, 6,228,000 Shares at
March 31, 1997 and 6,199,000 Shares at December 28, 1996 6 6 6
Additional Paid In Capital 26,844 26,319 26,146
Retained Earnings 41,440 33,569 32,905
Unrealized Gain on Investments 25 9 5
Foreign Currency Translation Adjustment (42) (86) (63)
Less: Treasury Stock, 718,000 at December 27, 1997 and 708,000
Shares at March 31, 1997 and December 28, 1996, at Cost (2,120) (2,030) (2,030)
-------- -------- --------
TOTAL STOCKHOLDERS' EQUITY 66,153 57,787 56,969
-------- -------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $248,952 $183,501 $187,526
-------- -------- --------
-------- -------- --------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED BALANCE
SHEETS. NOTE: THE BALANCE SHEET AT MARCH 31, 1997 HAS BEEN DERIVED FROM THE
AUDITED FINANCIAL STATEMENTS AT THAT DATE, BUT DOES NOT INCLUDE ALL OF THE
INFORMATION AND FOOTNOTES REQUIRED BY GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES FOR COMPLETE FINANCIAL STATEMENTS.
3
<PAGE>
ADVANCED MARKETING SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED - AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------- ---------------------------
DECEMBER 27, DECEMBER 28, DECEMBER 27, DECEMBER 28,
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
NET SALES $150,522 $112,965 $332,408 $298,701
Cost of Good Sold 135,000 101,508 297,087 268,878
-------- -------- -------- --------
GROSS PROFIT 15,522 11,457 35,321 29,823
Distribution and Administrative Expenses 8,832 7,122 23,998 21,254
-------- -------- -------- --------
INCOME FROM OPERATIONS 6,690 4,335 11,323 8,569
Interest and Dividend Income 611 209 1,271 641
-------- -------- -------- --------
INCOME BEFORE PROVISION FOR INCOME TAXES 7,301 4,544 12,594 9,210
Provision for Income Taxes 2,738 1,678 4,723 3,418
-------- -------- -------- --------
NET INCOME $ 4,563 $ 2,866 $ 7,871 $ 5,792
-------- -------- -------- --------
-------- -------- -------- --------
NET INCOME PER COMMON AND COMMON SHARE EQUIVALENT:
Primary $ .80 $ .50 $ 1.39 $ 1.01
-------- -------- -------- --------
-------- -------- -------- --------
Fully Diluted $ .80 $ .50 $ 1.38 $ 1.01
-------- -------- -------- --------
-------- -------- -------- --------
NUMBER OF SHARES USED IN CALCULATION:
Primary 5,729 5,692 5,676 5,724
-------- -------- -------- --------
-------- -------- -------- --------
Fully Diluted 5,729 5,697 5,699 5,724
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS.
4
<PAGE>
ADVANCED MARKETING SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED - AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------------
DECEMBER 27, DECEMBER 28,
1997 1996
------ ------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 7,871 $ 5,792
Adjustments to Reconcile Net Income to Net Cash Provided By
Operating Activities:
Depreciation and Amortization 1,057 959
Provision for Uncollectible Accounts and Sales Returns 755 1,352
Provision for Markdown of Inventory 3,596 2,163
Deferred Income Taxes 469 (561)
Changes in Assets And Liabilities:
Increase in Accounts Receivable - Trade (32,332) (10,019)
(Increase) Decrease in Vendor and Other Receivables 552 (945)
(Increase) Decrease in Inventories 3,357 (16,016)
Increase In Prepaid Expenses And Other Assets (515) (932)
Increase in Accounts Payable 53,365 18,775
Increase in Accrued Liabilities 2,094 560
Increase (Decrease) in Income Taxes Payable 1,626 (172)
------- -------
Net Cash Provided By Operating Activities 41,895 956
------- -------
INVESTING ACTIVITIES:
Purchase/Disposal of Property and Equipment, Net (1,873) (1,875)
Purchase of Investments, Available-For-Sale (5,533) (55,110)
Sale and Redemption of Investments, Available-For-Sale 6,297 56,347
Purchase of Treasury Stock (90) --
------- -------
Net Cash Used In Investing Activities (1,199) (638)
------- -------
FINANCING ACTIVITIES:
Proceeds from Exercise of Options and Related Tax Benefits 525 178
------- -------
Net Cash Provided By Financing Activities 525 178
------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 44 108
------- -------
INCREASE IN CASH AND CASH EQUIVALENTS 41,265 604
CASH AND CASH EQUIVALENTS, Beginning of Period 13,592 8,706
------- -------
CASH AND CASH EQUIVALENTS, End of Period $54,857 $ 9,310
------- -------
------- -------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS.
5
<PAGE>
ADVANCED MARKETING SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The financial statements presented herein as of and for the three and nine
months ended December 27, 1997 and December 28, 1996 have been prepared in
accordance with generally accepted accounting principles and with instructions
to Form 10-Q. These financial statements have not been examined by independent
public accountants, but include all adjustments (consisting of normal recurring
adjustments) which are, in the opinion of Management, necessary for a fair
presentation of the financial condition, results of operations and cash flows
for such periods.
The accompanying consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated.
Certain information and footnote disclosures normally included in financial
statements in accordance with generally accepted accounting principles have
been omitted pursuant to requirements of the Securities and Exchange
Commission. Management believes that the disclosures included in the
accompanying interim financial statements and footnotes are adequate to make
the information not misleading. For further information, refer to the
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K for the fiscal year ended March 31, 1997.
The results of operations for the three and nine month periods ended December
27, 1997 are not necessarily indicative of the results to be expected for the
fiscal year ending March 31, 1998. Net sales in the Company's third fiscal
quarter have historically been, and are expected to be, significantly greater
than in any other quarter of the fiscal year due to increased demand during the
holiday season.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. INTERIM ACCOUNTING PERIODS
In accordance with wholesale distribution industry practice, net sales and cost
of goods sold for interim periods are cut off on the Saturday nearest to the
end of an accounting period. The cut-off for the fourth fiscal quarter is
March 31. This practice may result in differences in the number of business
days for which sales and cost of goods sold are recorded both as to quarter-to-
quarter comparisons, and as to comparisons of quarters between years.
6
<PAGE>
3. INVESTMENTS, AVAILABLE-FOR-SALE
"Investments, available-for-sale" consist principally of highly rated corporate
and municipal bonds. The cost and estimated fair market value of investments at
December 27, 1997 and December 28, 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
December 27, 1997
------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Debt Securities Issued by States of The U.S.
And Political Subdivisions of The States $10,467 $ 25 $ -- $10,492
------- ------- ------- -------
------- ------- ------- -------
<CAPTION>
December 28, 1997
------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Debt Securities Issued by States of The U.S.
And Political Subdivisions of The States $11,287 $ 10 $ 5 $11,292
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
As of December 27, 1997, investments in debt securities issued by States of the
U.S. and political subdivisions of the States in the amount of $10,492,000 are
scheduled to mature within one year.
Proceeds from the sale of investments aggregated $2,055,000 for the quarter
ended December 27, 1997. There was a gain of approximately $51,000 realized on
these sales. Proceeds from the sale of investments in the quarter ended
December 28, 1996 totaled $1,038,000. There was a gain of approximately $3,000
realized on these sales. The Company uses the specific identification method
in determining cost on these investments. The net decrease in unrealized gain
on investments was approximately $26,000 for the quarter ended December 27,
1997. The net increase in unrealized gain on investments for the quarter ended
December 28, 1996 was approximately $7,000.
Proceeds from the sale of investments totaled $2,055,000 for the nine months
ended December 27, 1997. Proceeds from sales of investments during the same
period of the previous year totaled $4,438,000. There was a net gain of
approximately $51,000 and a net loss of approximately $400 realized on these
sales, respectively. The increase in unrealized gain on investments was
approximately $16,000 for the nine months ended December 27, 1997. In the nine
months ended December 28, 1996, the decrease in unrealized gain on investments
was approximately $3,000.
4. SALES RETURNS
In accordance with industry practice, a significant portion of the Company's
products are sold to customers with the right of return. The Company has
provided allowances of $2,490,000 as of December 27, 1997, $2,035,000 as of
March 31, 1997 and $2,819,000 as of December 28, 1996 for the gross profit
effect of estimated future sales returns.
7
<PAGE>
5. INVENTORIES
Inventories consist primarily of books and prerecorded audio cassettes
purchased for resale and are stated at the lower of cost (first-in, first-out)
or market.
6. LINE OF CREDIT
The Company had available at December 27, 1997 an unsecured bank line of credit
with a maximum borrowing limit of $10 million. The interest rate on bank
borrowings is based on the prime rate and "Libor" rates. The line of credit
expires July 31, 1999. As of December 27, 1997 and December 28, 1996, there
were no outstanding borrowings on the line of credit.
7. INCOME TAXES
The Company provides currently for taxes on income regardless of when such
taxes are payable. Deferred income taxes result from temporary differences in
the recognition of income and expense for tax and financial reporting purposes.
Income taxes paid in the nine months ended December 27, 1997 totaled
$2,282,000. Income taxes paid during the same period of the previous year
totaled $4,089,000.
8. PER SHARE INFORMATION
Per share information is based on the weighted average number of common shares
and, when applicable, dilutive common share equivalents outstanding during the
periods. The effects of all anti-dilutive common share equivalents are
excluded from the calculation of earnings per share. The Company's only
potential dilutive common share equivalents are stock options.
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per
Share," was issued in February 1997 and becomes effective for the Company's
fiscal year ending March 31, 1998. SFAS No. 128 modifies the way in which
earnings per share ("EPS") is calculated and disclosed. Currently, the Company
discloses primary and fully diluted EPS. Upon adoption of the standard, the
Company will disclose basic and diluted EPS for fiscal 1998 and will restate
all prior period EPS data presented. Basic EPS excludes dilution and is
computed by dividing income available to common stockholders by the weighted-
average number of common shares outstanding for the period. Diluted EPS,
similar to fully diluted EPS, reflects the potential dilution that could occur
if securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock that
then shared in earnings of the entity. If the Company had adopted SFAS No. 128
for the three months ended December 27, 1997, basic EPS would have been $.82
per share versus $.80 reported for primary EPS. Diluted EPS would have been
$.80 per share, unchanged from fully diluted EPS reported for the period. If
the Company had adopted SFAS No. 128 for the nine months ended December 27,
1997, basic EPS would have been $1.42 per share versus $1.39 reported for
primary EPS. Diluted EPS would have been $1.38 per share, unchanged from fully
diluted EPS reported for the period.
9. EMPLOYEE STOCK OPTION PLAN
Nonqualified options to purchase an aggregate of 504,430 shares of common stock
were outstanding as of December 27, 1997. The outstanding options were at
prices ranging from $4.25 to $11.16 per share.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
A. RESULTS OF OPERATIONS
NINE MONTH PERIODS ENDED DECEMBER 27, 1997 AND DECEMBER 28, 1996:
During the nine months ended December 27, 1997, the Company reported net income
of $7,871,000, or $1.38 per share, compared with net income of $5,792,000, or
$1.01 per share, for the first nine months of the prior fiscal year.
Net sales for the nine month period ended December 27, 1997, increased 11
percent to $332,408,000 from $298,701,000 for the comparable period last year.
This increase reflects record levels of gross shipments to core customers in
the quarter ended December 27, 1997 which more than offset the decline in sales
in the first six months of the current fiscal year. The Company also benefited
from a reduction in customer returns rates which dropped to 20 percent in the
first nine months of the current fiscal year compared to 27 percent in the same
period of the prior year. This decline was due, in part, to the Company's
introduction of Vendor Managed Inventory (VMI) programs for its two largest
customers.
During the first nine months of fiscal 1998, gross profit increased 18 percent
to $35,321,000 from $29,823,000 in the first nine months of the previous fiscal
year. Gross profit as a percentage of net sales increased to 10.6 percent from
10.0 percent in the same period in the last fiscal year. This increase was
primarily due to lower sales of higher volume titles earlier in the fiscal
year, which typically carry lower gross margins, as well as modest sales
increases of internally developed or published titles which typically carry
higher gross margins. These improvements to gross margin were offset, in part,
by provisions for inventory markdowns based on analysis of the Company's non-
returnable inventory.
Distribution and administrative expenses for the nine months ended December 27,
1997 increased 13 percent to $23,998,000 and represented 7.2 percent of net
sales compared to $21,254,000, or 7.1 percent of net sales, in the same period
of the previous year. The impact of higher administrative expenses and reduced
cash discount income was partially offset by reductions in certain distribution
costs as a result of reduced customer returns.
Interest and dividend income increased to $1,271,000 in the period from
$641,000 in the corresponding period of the previous year as a result of
increased cash and investment balances.
THREE MONTH PERIODS ENDED DECEMBER 27, 1997 AND DECEMBER 28, 1996:
During the three months ended December 27, 1997, the Company reported net
income of $4,563,000, or $.80 per share, compared with net income of
$2,866,000, or $.50 per share, for the corresponding quarter of the previous
fiscal year.
Net sales for the quarter ended December 27, 1997 increased 33 percent to
$150,522,000 from $112,965,000 for the comparable period last year. The
increase in net sales during the third quarter reflects record levels of gross
shipments to core customers in response to strong holiday sales as well as the
benefit of reduced customer returns. Customer returns rates dropped to 19
percent for the recently
9
<PAGE>
completed quarter from 25 percent for the corresponding quarter last year. This
decline was due, in part, to the Company's introduction of vendor managed
inventory (VMI) programs for its two largest customers.
Gross profit as a percent of sales rose to 10.3 percent for the third quarter
of fiscal 1998 from 10.1 percent for the comparable quarter last year. Strong
sales of basic reference books, children's books and cookbooks offset lower
sales of gift books (art and coffee table books).
Distribution and administrative expenses during the quarter ended December 27,
1997 increased to $8,832,000 and represented 5.9 percent of net sales compared
to $7,122,000, or 6.3 percent of net sales, in the same quarter of the previous
fiscal year. Reductions in certain distribution costs as a result of reduced
customer returns, and the beneficial impact of higher revenues on fixed
operating costs, more than offset the impact of increased administrative
expenses and reduced cash discount income.
Interest and dividend income increased to $611,000 in the quarter from $209,000
in the corresponding period of the previous year as a result of increased cash
and investment balances.
B. LIQUIDITY AND SOURCES OF CAPITAL
For the nine months ended December 27, 1997, $41,895,000 of cash was provided
by operating activities compared to $956,000 in same period of the prior year.
The Company's cash and investments at December 27, 1997 increased by
$44,747,000 compared to December 28, 1996 primarily due to an increase in
accounts payable offset, in part, by an increase in accounts receivable. Trade
accounts receivable increased $18,911,000 compared to one year ago primarily as
a result of increased sales in the month of December 1997. Trade accounts
receivable increased $31,577,000 compared to March 31, 1997 due primarily to
the seasonal increase in sales. Inventories at December 27, 1997 were
relatively consistent compared to December 28, 1996 and decreased $6,953,000
compared to March 31, 1997. Accounts payable at December 27, 1997 increased
$49,763,000 compared to December 28, 1996 and $53,365,000 compared to March 31,
1997 primarily due to increased third quarter purchases and the timing of
payments to publishers.
Working capital was $60,790,000 as of December 27, 1997 which increased from
the March 31, 1997 level of $51,456,000 and from the December 28, 1996 balance
of $50,424,000. The increases compared to March 31, 1997 and December 28, 1996
were primarily a result of increases in cash and other current assets.
Although cash balances rose to $65.3 million at December 27, 1997, it is
anticipated that a significant portion of this cash will be disbursed over the
next two months as the Company makes payments to vendors who supplied product
during the holiday season.
The Company had available at December 27, 1997 an unsecured bank line of credit
with a maximum borrowing limit of $10 million. The interest rate on bank
borrowings is based on the prime rate and "Libor" rates. The line of credit
expires July 31, 1999. As of December 27, 1997, March 31, 1997 and December
28, 1996, there were no outstanding borrowings on the line of credit.
The Company believes that its existing working capital, cash flows from
operations, trade credit traditionally available from its vendors and its $10
million line of credit will be sufficient to finance its current and
anticipated level of operations.
10
<PAGE>
C. IMPACT OF YEAR 2000
During the current year, the Company developed a plan to address anticipated
Year 2000 issues in connection with its data processing and other activities.
It is currently estimated that the net cost for review, analysis, modification
and testing of existing computer programs for both internal and external
software will be between $400,000 and $600,000. The Company has incurred a
portion of such expenses in the current fiscal year and it is anticipated that
a substantial portion of the total estimated cost will be incurred over the
next two years and will be expensed as incurred.
D. STATEMENT OF PURPOSE OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITITES LITIGATION REFORM ACT OF 1995
In December 1995, the Private Securities Litigation Reform Act of 1995 (the
"Act") was enacted. The Act contains amendments to the Securities Act of 1933
and the Securities Exchange Act of 1934 which provide protection from liability
in private lawsuits for "forward-looking" statements made by persons specified
in the Act. The Company desires to take advantage of the "safe harbor"
provisions of the Act.
The Company wishes to caution readers that, with the exception of historical
matters, the matters discussed in this Quarterly Report on Form 10-Q are
forward-looking statements that involve risks and uncertainties. Certain
important factors could cause results to differ materially from those
anticipated by the forward-looking statements, including but not limited to the
impact of changed economic or business conditions, the impact of competition,
the success of existing and new book releases, continuation of favorable trends
associated with the Company's VMI program, other risk factors inherent in the
publishing and retailing industries, and other factors discussed from time to
time in reports filed by the Company with the Securities and Exchange
Commission
PART II. OTHER INFORMATION
ITEMS 1-5.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following exhibits are included herein or incorporated by reference:
(11.0) Statement re Computation of Per Share Earnings
(27.0) Financial Data Schedule
(b) No reports on Form 8-K were filed for the three months ended December 27,
1997.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ADVANCED MARKETING SERVICES, INC.
REGISTRANT
February 11, 1997 By: /s/ Michael M. Nicita
- ------------------------ ---------------------------------------------
Date Michael M. Nicita
Chief Executive Officer
(Principal Executive Officer)
February 11, 1997 By: /s/ Daniel T. Carter
- ------------------------ ---------------------------------------------
Date Daniel T. Carter
Chief Financial and Accounting Officer,
Executive Vice President - Finance
(Principal Financial and Accounting Officer)
12
<PAGE>
Exhibit 11.0
ADVANCED MARKETING SERVICES, INC.
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(UNAUDITED - AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------- ---------------------------
DECEMBER 27, DECEMBER 28, DECEMBER 27, DECEMBER 28,
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net Income $4,563 $2,866 $7,871 $5,792
------ ------ ------ ------
------ ------ ------ ------
Weighted Average Common and Common Share Equivalents:
Weighted Average Common Shares Outstanding 5,577 5,481 5,546 5,473
Weighted Average Common Share
Equivalents-Dilutive Stock Options:
Primary 152 211 130 251
------ ------ ------ ------
Fully Diluted 152 216 153 251
------ ------ ------ ------
Total Weighted Average Common and
Common Equivalent Shares:
Primary 5,729 5,692 5,676 5,724
------ ------ ------ ------
------ ------ ------ ------
Fully Diluted 5,729 5,697 5,699 5,724
------ ------ ------ ------
------ ------ ------ ------
Net Income Per Common and Common Share Equivalent:
Primary $ .80 $ .50 $ 1.39 $ 1.01
------ ------ ------ ------
------ ------ ------ ------
Fully Diluted $ .80 $ .50 $ 1.38 $ 1.01
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
COMMON SHARE EQUIVALENTS (FOR AMS OUTSTANDING STOCK OPTIONS) ARE EXCLUDED FROM
EARNINGS PER SHARE CALCULATIONS WHEN ANTIDILUTIVE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS OF INCOME AND CONSOLIDATED
BALANCE SHEETS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> DEC-27-1997
<CASH> 54,857,000
<SECURITIES> 10,492,000
<RECEIVABLES> 91,607,000
<ALLOWANCES> (4,217,000)
<INVENTORY> 84,792,000
<CURRENT-ASSETS> 243,589,000
<PP&E> 10,854,000
<DEPRECIATION> (6,277,000)
<TOTAL-ASSETS> 248,952,000
<CURRENT-LIABILITIES> 182,799,000
<BONDS> 0
0
0
<COMMON> 26,850,000
<OTHER-SE> 39,303,000
<TOTAL-LIABILITY-AND-EQUITY> 248,952,000
<SALES> 332,408,000
<TOTAL-REVENUES> 332,408,000
<CGS> 297,087,000
<TOTAL-COSTS> 297,087,000
<OTHER-EXPENSES> 23,998,000
<LOSS-PROVISION> 278,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 12,594,000
<INCOME-TAX> 4,723,000
<INCOME-CONTINUING> 7,871,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,871,000
<EPS-PRIMARY> 1.39
<EPS-DILUTED> 1.38
</TABLE>
