<PAGE>
- ------------------------
1ST QUARTER
FISCAL 2000
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 JULY 3, 1999
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
SAN DIEGO, CALIFORNIA 92121
(Address of principal executive offices)
(Zip Code)
(858) 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 July
30, 1999 was 8,538,863
<PAGE>
ADVANCED MARKETING SERVICES, INC.
INDEX TO FORM 10-Q
July 3, 1999
<TABLE>
<CAPTION>
Page
----
PART I. FINANCIAL INFORMATION
<S> <C>
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets (Unaudited).....................................................3
Consolidated Statements of Income and Comprehensive Income (Unaudited)......................4
Consolidated Statements of Cash Flows (Unaudited)...........................................5
Notes to Consolidated Financial Statements (Unaudited)....................................6-9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS......................................................10-12
PART II. OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS ..........................................................................13
ITEM 2 - CHANGES IN SECURITIES ......................................................................13
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES ............................................................13
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.........................................13
ITEM 5 - OTHER INFORMATION...........................................................................13
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K............................................................13
SIGNATURES...........................................................................................13
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (See Note 1 for Basis of Presentation)
ADVANCED MARKETING SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JULY 3, MARCH 31, JUNE 27,
1999 1999 1998
---------- ---------- -----------
ASSETS (UNAUDITED) (NOTE) (UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and Cash Equivalents $ 24,969 $ 27,189 $ 16,997
Investments, Available-For-Sale 5,140 4,653 13,805
Accounts Receivable - Trade, Net of Allowances for Uncollectible Accounts
and Sales Returns of $3,803 at July 3, 1999, $3,674 at March 31, 1999
and $3,720 at June 27, 1998 82,032 74,179 58,230
Vendor and Other Receivables 3,530 3,739 4,009
Inventories, Net 110,362 106,060 91,624
Deferred Income Taxes 6,026 5,997 4,937
Prepaid Expenses 1,944 1,459 1,445
--------- --------- ---------
TOTAL CURRENT ASSETS 234,003 223,276 191,047
--------- --------- ---------
PROPERTY AND EQUIPMENT, AT COST 16,675 15,311 12,387
Less: Accumulated Depreciation and Amortization 9,232 8,721 6,861
--------- --------- ---------
Net Property And Equipment 7,443 6,590 5,526
--------- --------- ---------
Investments, Available-For-Sale 1,484 1,214 --
Goodwill and Other Assets 7,741 7,316 6,806
--------- --------- ---------
TOTAL ASSETS $ 250,671 $ 238,396 $ 203,379
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable $ 157,999 $ 146,972 $ 125,910
Accrued Liabilities 7,336 10,033 6,657
Income Taxes Payable 2,278 989 1,374
--------- --------- ---------
TOTAL CURRENT LIABILITIES 167,613 157,994 133,941
--------- --------- ---------
STOCKHOLDERS' EQUITY:
Common Stock, $.001 Par Value, Authorized 20,000,000 Shares, Issued
9,611,000 Shares at July 3, 1999, 9,572,000 Shares at March 31, 1999
and 9,515,000 Shares at June 27, 1998 10 8 8
Additional Paid In Capital 28,132 27,765 27,274
Retained Earnings 56,966 54,664 44,229
Unrealized Gain on Investments 2 7 53
Foreign Currency Translation Adjustment 68 78 (6)
Less: Treasury Stock, 1,076,000 shares, at Cost (2,120) (2,120) (2,120)
--------- --------- ---------
TOTAL STOCKHOLDERS' EQUITY 83,058 80,402 69,438
--------- --------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 250,671 $ 238,396 $ 203,379
========= ========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED BALANCE SHEETS.
NOTE: THE BALANCE SHEET AT MARCH 31, 1999 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.
</TABLE>
3
<PAGE>
ADVANCED MARKETING SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(UNAUDITED - AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------
JULY 3, JUNE 27,
1999 1998
-------- --------
<S> <C> <C>
NET SALES $130,782 $ 96,810
Cost of Goods Sold 115,139 84,929
--------- --------
GROSS PROFIT 15,643 11,881
Distribution and Administrative Expenses 11,928 9,488
--------- --------
INCOME FROM OPERATIONS 3,715 2,393
Interest and Dividend Income, Net 371 314
--------- --------
INCOME BEFORE PROVISION FOR INCOME TAXES 4,086 2,707
Provision for Income Taxes 1,614 1,056
--------- --------
NET INCOME $ 2,472 $ 1,651
--------- --------
COMPONENTS OF COMPREHENSIVE INCOME:
Foreign Currency Translation Adjustments (10) 3
Unrealized Gain (Loss) on Investments (5) 45
--------- --------
COMPREHENSIVE INCOME $ 2,457 $ 1,699
========= ========
NET INCOME PER SHARE:
Basic $ .29 $ .20
========= ========
Diluted $ .28 $ .19
========= ========
WEIGHTED AVERAGE SHARES USED IN CALCULATION:
Basic 8,514 8,420
========= ========
Diluted 8,800 8,729
========= ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS.
</TABLE>
4
<PAGE>
ADVANCED MARKETING SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED - AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------
JULY 3, JUNE 27,
1999 1998
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 2,472 $ 1,651
Adjustments to Reconcile Net Income to Net Cash Used in
Operating Activities:
Depreciation and Amortization 601 519
Provision for Uncollectible Accounts and Sales Returns 346 289
Provision for Markdown of Inventory 551 1,147
Deferred Income Taxes (29) (15)
Changes in Assets And Liabilities:
(Increase) Decrease in Accounts Receivable - Trade (8,301) 3,295
(Increase) Decrease in Vendor and Other Receivables 203 (1,540)
(Increase) Decrease in Inventories (4,923) 6,771
(Increase) in Other Assets (910) (174)
Increase (Decrease) in Accounts Payable 11,198 (16,521)
(Decrease) in Accrued Liabilities (2,693) (1,478)
Increase in Income Taxes Payable 1,290 987
--------- ---------
Net Cash Used In Operating Activities (195) (5,069)
--------- ---------
INVESTING ACTIVITIES:
Purchase of Property and Equipment, Net (1,452) (1,115)
Purchase of Investments, Available-For-Sale (1,830) (17,631)
Sale and Redemption of Investments, Available for Sale 1,068 11,939
--------- ---------
Net Cash Used In Investing Activities (2,214) (6,807)
--------- ---------
FINANCING ACTIVITIES:
Proceeds from Exercise of Options and Related Tax Benefits 369 131
Dividends Paid (170) (140)
--------- ---------
Net Cash Provided by (Used In) Financing Activities 199 (9)
--------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (10) (100)
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (2,220) (11,985)
CASH AND CASH EQUIVALENTS, Beginning of Period 27,189 28,982
--------- ---------
CASH AND CASH EQUIVALENTS, End of Period $ 24,969 $ 16,997
========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS.
</TABLE>
5
<PAGE>
ADVANCED MARKETING SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The consolidated financial statements presented herein as of and for the
three months ended July 3, 1999 and June 27, 1998 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, 1999.
The results of operations for the three month period ended July 3, 1999 are
not necessarily indicative of the results to be expected for the fiscal year
ending March 31, 2000. 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 the calendar month. 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.
The first quarter of the current fiscal year included an additional four days
of net sales compared to the first quarter of the prior fiscal year (See
Management's Discussion and Analysis of Financial Condition in Item 2 of this
Form 10-Q).
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 July 3, 1999, March 31, 1999 and June 27, 1998 are as follows
(in thousands):
<TABLE>
<CAPTION>
July 3, 1999
----------------------------------------------------------------
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 $ 6,622 $ 10 $ 8 $ 6,624
========= ========== ========== =========
March 31, 1999
----------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------------------------------------------------------------
Debt Securities Issued by States of The U.S.
And Political Subdivisions of The States $ 5,860 $ 10 $ 3 $ 5,867
========= ========== ========== =========
June 27, 1998
----------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------------------------------------------------------------
Debt Securities Issued by States of The U.S.
And Political Subdivisions of The States $ 13,752 $ 53 $ -- $ 13,805
========= ========== ========== =========
</TABLE>
As of July 3, 1999, investments in debt securities issued by States of the
U.S. and political subdivisions of the States in the amount of $5,140,000 are
scheduled to mature within one year and approximately $1,484,000 are
scheduled to mature within two years. Proceeds from the sale of investments
aggregated $1,060,000 for the quarter ended July 3, 1999. There was a gain of
approximately $4,000 realized on these sales. Proceeds from the sale of
investments during the same period of the previous year totaled approximately
$5,865,000 on which a net gain of approximately $3,000 was realized. The
Company uses the specific identification method in determining cost on these
investments. The net decrease in unrealized gain on investments was
approximately $5,000 for the quarter ended July 3, 1999. The net increase in
unrealized gain on investments for the quarter ended June 27, 1998 was
approximately $45,000.
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 $2,433,000 as of July 3, 1999, $2,302,000 as of March
31, 1999 and $2,186,000 as of June 27, 1998 for the gross profit effect of
estimated future sales returns after considering historical results and
evaluating current conditions.
7
<PAGE>
5. INVENTORIES
Inventories consist primarily of books and, to a lesser extent, music CDs,
CD-ROMs 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 July 3, 1999 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, 2000. As of July 3, 1999, March 31, 1999 and June 27, 1998,
there were no outstanding borrowings on the Company's line of credit.
7. INCOME TAXES
The Company provides currently for taxes on income regardless of when such
taxes are payable in accordance with SFAS No, 109 "Accounting for Income
Taxes". 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 three months ended July 3, 1999 totaled $128,535.
Income taxes paid during the same period of the previous year totaled $85,875.
8. PER SHARE INFORMATION
Basic earnings per share information is based on the weighted average number
of common shares and diluted earnings per share includes potentially dilutive
securities outstanding during the periods. The effects of all anti-dilutive
securities are excluded from the calculation of earnings per share. The
Company's only potentially dilutive securities are stock options.
On January 21, 1999, the Board of Directors approved the declaration of a
three for two stock split. Accordingly, all references to shares and earnings
per share amounts have been restated to reflect the stock split.
The following financial data summarizes information relating to the
per share computations (in thousands, except per share data)
<TABLE>
<CAPTION>
Period Ended
------------------------------------------
July 3, 1999 June 27, 1998
<S> <C> <C>
Net Income $ 2,472 $ 1,651
============ =============
Weighted Average Common Shares Outstanding 8,514 8,420
Basic Earnings Per Share $ .29 $ .20
============ =============
Weighted Average Common Shares Outstanding 8,514 8,420
Dilutive Common Stock Options 286 309
------------ -------------
Total Diluted Weighted Average Common Shares 8,800 8,729
------------ -------------
Diluted Earnings Per Share $ .28 $ .19
============ =============
</TABLE>
8
<PAGE>
9. COMPREHENSIVE INCOME
In June 1997, SFAS No. 130, "Reporting Comprehensive Income," was issued and
established standards for reporting and display of comprehensive income and
its components in a full set of general-purpose financial statements. The
Company adopted SFAS No. 130 for its fiscal year ended March 31, 1999, and in
connection with the adoption has presented prior periods to show the
components of comprehensive income.
10. INDUSTRY SEGMENT AND GEOGRAPHICAL DATA
In June 1997, SFAS No. 131, "Disclosure about Segments of an Enterprise and
Related Information," was issued, which, based on the management approach to
segment reporting, establishes requirements to report entity-wide disclosures
about products and services, major customers and material countries in which the
entity holds assets and reports revenue. The Company adopted SFAS No. 131 for
its fiscal year ended March 31, 1999. The Company operates in one industry
segment and in several geographic regions.
Net sales by geographic region are as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------------
July 3, 1999 June 27, 1998
<S> <C> <C>
United States $ 121,855 $ 89,570
United Kingdom 8,049 6,522
Mexico 878 718
------------ --------------
$ 130,782 $ 96,810
============ =============
</TABLE>
Net identifiable assets of the Company's operations in different
geographic areas are as follows (in thousands):
<TABLE>
<CAPTION>
As of
--------------------------------------------------------------------
July 3, 1999 March 31, 1999 June 27, 1998
<S> <C> <C> <C>
United States $ 225,977 $ 217,584 $ 183,027
United Kingdom 22,217 19,066 18,047
Mexico 2,477 1,746 2,305
------------ -------------- -------------
$ 250,671 $ 238,396 $ 203,379
============ ============== =============
</TABLE>
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
A. RESULTS OF OPERATIONS
THREE MONTH PERIOD ENDED JULY 3, 1999 AND JUNE 27, 1998:
During the three months ended July 3, 1999, the Company reported net income
of $2,472,000, or $.28 per diluted share, compared with net income of
$1,651,000, or $.19 per diluted share, for the first three months of the
prior fiscal year.
Net sales for the three months ended July 3, 1999 increased 35 percent to
$130,782,000 from $96,810,000 for the comparable period last year. The first
three months of fiscal 2000 included an additional four days in net sales as
compared to fiscal 1999, which accounted for approximately $7.5 million of
net sales. If the additional four days were excluded, the increase in net
sales would have been 27 percent from the comparable period last year. The
growth in first quarter net sales can be attributed to strong increases in
product shipments to core customers, and, to a lesser extent, sales to new
customers and improved performance by the Company's international
subsidiaries. Customer return rates increased to 24 percent in the first
quarter of fiscal 2000 from 22 percent for the corresponding quarter last
year due to realignment of inventory levels at key customers.
During the first three months of fiscal 2000, gross profit increased 32
percent to $15,643,00 from $11,881,000 in the first three months of the
previous fiscal year. Gross profit as a percentage of net sales decreased to
12.0 percent from 12.3 percent in the same period in the last fiscal year.
This decrease was primarily due to increased sales volume in the best seller
and mass market categories, which typically achieve lower margins.
Distribution and administrative expenses for the three months ended July 3,
1999 increased 26 percent to $11,928,000 and represented 9.1 percent of net
sales compared to $9,488,000, or 9.8 percent of net sales, in the same period
of the previous year. Increases in distribution and administrative expenses,
primarily those associated with broadening the Company's domestic and
international customer base, were more than offset by increased sales volume.
Interest and dividend income increased to $371,000 in the first three months
of fiscal 2000 from $314,000 in the same period of the previous fiscal year
as a result of higher cash balances.
<PAGE>
B. LIQUIDITY AND SOURCES OF CAPITAL
For the three months ended July 3, 1999, $195,000 of cash was used in
operating activities. Net cash used in operating activities in the same
period of the prior fiscal year was $5,069,000. The Company's cash and
investments at July 3, 1999 increased by $791,000 compared to June 27, 1998
primarily due to an increase in accounts payable, offset by an increase in
accounts receivable and net investment in inventories. Trade accounts
receivable increased $23,802,000 compared to June 27, 1998 and $7,853
compared to March 31, 1999 primarily as a result of increased net sales.
Inventories at July 3, 1999 increased by $18,738,000 compared to June 27,
1998 and $4,302,000 compared to March 31, 1999 primarily to support sales
growth and further development of specialty retailer distribution programs as
well as the timing of returns to publishers of certain titles. This increase
was more than offset by an increase in accounts payable of $32,089,000
compared to June 27, 1998 and $11,027,000 compared to March 31, 1999.
Working capital was $66,390,000 as of July 3, 1999, which increased from the
March 31, 1999 level of $65,282,000 and from the June 27, 1998 balance of
$57,106,000. The increases compared to March 31, 1999 and June 27, 1998 were
primarily a result of net operating income.
The Company had available at July 3, 1999 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, 2000. As of July 3, 1999, March 31, 1999 and June 27, 1998,
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. Although the Company has no commitments to
do so at the present time, the Company may consider additional strategic
acquisitions where deemed appropriate. Such acquisitions, if any, could
affect the Company's liquidity and capital resources.
C. COMPUTER OPERATIONS AND THE YEAR 2000
During fiscal 1998 and fiscal 1999, the Company developed a plan to
address anticipated Year 2000 issues in connection with its data processing
and other activities, including non-information technology based systems. The
cost for review, analysis, modification and testing of existing computer
programs for both internal and external software approximated $650,000 and
was expensed as incurred. Due to the fact that the Company has primarily
employed outside consultants for Year 2000 related work, there has not been
any deferral of other information technology related projects, nor has there
been a requirement to hire additional personnel solely for Year 2000
compliance issues.
The Company completed the remediation portion of the Year 2000
project and began its internal testing phase in the fourth quarter of fiscal
1999. It is expected that the final testing phase of the Year 2000 project
will be completed by August 1999. Although there can be no assurances,
management believes that the Year 2000 Project, including a documented
contingency plan, will be completed by September 1999.
In contemplation of the possibility that the Company's vendors and
customers may experience Year 2000 related difficulties that may affect the
Company's operations, a committee of information technology and
11
<PAGE>
other departmental managers has been formed to consider and develop a
contingency plan. This committee began its development of a contingency plan
in the fourth quarter of fiscal 1999, and it is expected that the
documentation of such a plan will be completed in the second quarter of
fiscal 2000. Although, based on a review of its data processing, operating,
and other computer-based systems, the Company does not currently believe that
it will experience any significant adverse effects or material unbudgeted
costs resulting therefrom, there can be no assurance in that regard.
The failure to correct a material Year 2000 problem could result in an
interruption in or a failure of certain normal activities or operations. Such
interruptions or failures could materially and adversely affect the Company's
results of operations, liquidity and financial condition. Because there is
general uncertainty about the Year 2000 problem, including uncertainty about
the Year 2000 readiness of suppliers and customers, it is not possible to
predict whether Year 2000 problems will occur or what the consequences such
problems will have on results of operations, liquidity, or financial
condition. However, the Company's plan to address Year 2000 issues is
intended to minimize, to the extent feasible, the possibility of
interruptions of normal operations. There can, however, be no assurance that
the Company will be successful in doing so.
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 are forward-looking
statements that involve risks and uncertainties, including but not limited to
factors related to the highly competitive nature of the publishing industry
as well as the warehouse club and retail industries and their sensitivity to
changes in general economic conditions, the Company's concentration of sales
and credit risk with two customers, the Company's ability to impact customer
return rates, continued successful results from the VMI program, currency and
other risks related to foreign operations, the Company's expansion plans, the
results of financing efforts, risks and uncertainties associated with the
failure of the Company or its suppliers or customers to be Year 2000
compliant with regard to computer and other systems, and other factors
discussed in the Company's other filings with the Securities and Exchange
Commission. Such factors could affect the Company's actual results during
fiscal 2000 and beyond and cause such results to differ materially from those
expressed in any forward-looking statement made by or on behalf of the
Company.
12
<PAGE>
PART II. OTHER INFORMATION
ITEMS 1-3. NOT APPLICABLE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Registrant's Annual Meeting of Stockholders was held on July 22, 1999.
Robert F. Bartlett (7,648,557 votes for; 2,500 abstain/withheld), Lynn S.
Dawson (7,648,557 votes for; 2,500 abstain/withheld) and Trygve E. Myhren
(7,648,557 votes for; 2,500 abstain/withheld) were elected as Class C
directors to serve a three-year term, and will serve until their respective
successors are elected and qualified.
ITEM 5. OTHER INFORMATION - NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following exhibits are included herein or incorporated by
reference: (27.0) Financial Data Schedule
(b) No reports on Form 8-K were filed for the three months ended
July 3, 1999.
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
August 9, 1999 By: /s/ Michael M. Nicita
- -------------- ------------------------------------
Date Michael M. Nicita
Chief Executive Officer and Director
(Principal Executive Officer)
August 9, 1999 By: /s/ Edward J. Leonard
- --------------- ------------------------------------
Date Edward J. Leonard
Chief Financial Officer
Executive Vice President-Finance
(Principal Financial and
Accounting Officer)
13
<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>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> JUL-03-1999
<CASH> 24,969
<SECURITIES> 5,140
<RECEIVABLES> 82,032
<ALLOWANCES> 3,803
<INVENTORY> 110,362
<CURRENT-ASSETS> 234,003
<PP&E> 16,675
<DEPRECIATION> 9,232
<TOTAL-ASSETS> 250,671
<CURRENT-LIABILITIES> 167,613
<BONDS> 0
0
0
<COMMON> 10
<OTHER-SE> 83,048
<TOTAL-LIABILITY-AND-EQUITY> 250,671
<SALES> 130,782
<TOTAL-REVENUES> 130,782
<CGS> 115,139
<TOTAL-COSTS> 115,139
<OTHER-EXPENSES> 11,928
<LOSS-PROVISION> 193
<INTEREST-EXPENSE> 38
<INCOME-PRETAX> 4,086
<INCOME-TAX> 1,614
<INCOME-CONTINUING> 2,472
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,472
<EPS-BASIC> .29
<EPS-DILUTED> .28
</TABLE>
