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| Advanced Marketing Services Reports Third Quarter Results |
Net Sales Increase 10%, Net Income Down 34% vs. Prior Year's Quarter
SAN DIEGO, Jan. 23 /PRNewswire-FirstCall/ -- Advanced Marketing Services,
Inc. (NYSE: MKT), a leading global provider of customized services to book
retailers and publishers, today reported financial results for its fiscal
third quarter ended Dec. 28, 2002.
Net sales for the third quarter of fiscal 2003 increased to
$294.8 million, up $27.7 million or 10 percent from the $267.1 million
reported for the comparable period last year. Net income decreased 34 percent
to $8.8 million, in comparison to $13.3 million achieved in the fiscal 2002
third quarter. Diluted earnings per share for the third quarter of fiscal
2003 declined 33 percent to $0.45, as compared with $0.67 for the same period
last year.
For the first nine months of fiscal 2003, net sales increased 22 percent
to $705.9 million, in comparison to the $578.3 million achieved in the same
period a year ago. Net income decreased 22 percent to $15.6 million for the
first nine months of fiscal 2003, down from the $20.1 million achieved in the
similar fiscal 2002 nine-month period. Diluted earnings per share decreased
22 percent to $0.79, down from $1.01 for the comparable period last year.
"Publishers Group West, which we acquired in January 2002, accounted for
$31.4 million of sales during the third quarter," explained Michael M. Nicita,
president and chief executive officer of Advanced Marketing Services.
"Domestic net wholesale sales decreased $8.7 million or 3.5 percent from the
comparable quarter last year due to a particularly weak selling season, with
this weakness extending to our major warehouse club customers. Sales from
international operations were up $5.1 million or 23 percent.
"One consequence of the lower domestic wholesale sales was increased
markdown expense on goods purchased by the Company on a non-returnable basis;
this expense was up $1.5 million over last year," Nicita added. "The drop in
net income during the quarter was attributable to weak domestic wholesale
sales, increased costs associated with the ongoing implementation of two new
computing systems necessary for the growth of our business, and related
temporary higher freight and labor costs necessary to maintain the high level
of service AMS provides to its customers affected by those systems
implementations.
"These higher operational costs combined with a particularly weak
Christmas selling season produced the disappointing results we pre-announced
on January 16th and that we are confirming today," he noted. "As we said in
that pre-announcement, with regard to the soft retail book market, we are
reviewing all available cost reductions. We believe that to some degree this
market softness will be remedied by sales of the new 'Harry Potter and the
Order of the Phoenix' book, currently scheduled for release on June 21, during
the Company's first quarter of fiscal 2004, both in the U.S. and in Canada.
The Company owns a 25% interest in Raincoast Books, the exclusive Canadian
publisher and distributor of the Harry Potter books. With regard to our
systems implementations, we do not anticipate that it will be necessary to
continue to incur the substantial systems-related freight and labor costs we
absorbed during the third quarter."
Gross profit as a percent of net sales was 17.4 percent during the third
quarter, up from 16.4 percent during the same quarter one year ago. The
increase was primarily due to the higher-margin distribution business from
Publishers Group West, and contributions from the company's international
businesses that historically have had higher margins. The AMS worldwide
customer return rate increased to 24 percent during the third quarter,
compared to 16 percent from the corresponding quarter last year. "This can
also be attributed to the softer retail sales environment during the quarter,
together with the lackluster sales experienced during the final weeks of the
holiday selling season," Nicita added. "Processing these additional returns
is labor intensive and expensive, and an increase in our return rates is
counter to the favorable decreasing quarterly return rate trend we had been
experiencing. As many of you know, our club wholesale model is extremely
sensitive to high return rates."
Distribution and administrative expenses as a percent of net sales
increased to 12.6 percent during the third quarter, up from 8.4 percent for
the comparable quarter last year. The increase resulted primarily from the
addition of Publisher's Group West, inefficiencies in distribution center
freight and labor expenses related to the two systems implementations,
increased consulting costs associated with these two systems implementations,
and increases in small order processing volume.
"While we are not pleased to be announcing disappointing results like this
for our third quarter, we remain committed to both our distribution strategy
and our decision to move to an enterprise system platform that better
positions us for future growth. PGW and our related distribution businesses
in Australia, the U.K. and Canada are an important part of the future growth
of AMS. Our systems implementations, though certainly more challenging than
we had originally planned, will enable us to gain efficiencies at our
distribution centers and in our corporate office that will allow us to drive
significant costs out of our business," said Charles C. Tillinghast, chairman
of Advanced Marketing Services.
AMS has lowered its guidance for the full year of Fiscal 2003 ending
March 31, 2003, for an EPS range of $0.82 to $0.87. This assumes continuing
softness in the domestic book retail market and at least $1.0 million in
systems related expense, primarily ongoing consulting costs. If it is
determined that these results will change materially from this guidance, AMS
will update these estimates and disseminate this information via a news
release as promptly as possible.
CONFERENCE CALL
Advanced Marketing Services' management will host a conference call to
discuss the operating results for the third quarter ended December 28, 2002,
at 11:30 a.m. (Eastern Standard Time) on January 23, 2003. All shareholders
and other interested persons are encouraged to participate. The conference
call may be accessed by dialing 973-321-1030 ("listen only" mode) just prior
to the scheduled start time. A replay of the call will be available within
two hours following the conference call, through midnight January 28, 2003, by
dialing 973-341-3080 (Pin Number: 3245923). The conference call, on a "live"
or replay basis, may also be accessed through the Advanced Marketing Services'
Web site, http://www.advmkt.com , for a period of 90 days.
ABOUT ADVANCED MARKETING SERVICES
Headquartered in San Diego, Calif., Advanced Marketing Services (AMS) is a
leading global provider of customized wholesaling, distribution and custom
publishing services to the book industry. The Company provides a full range
of value-added services that provide AMS customers with book buying advice and
expert supply chain management, including advertising and promotional support,
to ensure the success of their book programs. AMS's proprietary Vendor
Managed Inventory (VMI) software is a unique tool that allows its book
specialists to efficiently and effectively manage global book distribution
systems for the benefit of its warehouse clubs and book store customers. AMS
has extensive operations in the U.S., Canada, Mexico, Singapore, the United
Kingdom and Australia and employs approximately 1,100 people worldwide.
Recent press releases on Advanced Marketing Services, Inc. are available
on both the Company's Website, http://www.advmkt.com , and on PR Newswire,
http://www.prnewswire.com .
Forward-looking statements in this news release are made under the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
All statements other than statements of historical fact 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 factors discussed from time to time in
reports filed by the Company with the Securities and Exchange Commission.
For further information, please contact: investors, Chuck Williams,
Director of Investor Relations of Advanced Marketing Services, Inc.,
+1-858-450-3545, chuckw@advmkt.com; or media, Greg McQuerter, or Tina Wilmott,
twilmott@mcquerter.com, both of The McQuerter Group, +1-858-450-0030,
ext. 140, for Advanced Marketing Services, Inc.
ADVANCED MARKETING SERVICES, INC.
COMPARATIVE FINANCIAL RESULTS
(Unaudited - amounts in thousands, except per share data)
Condensed Statements Three Months Ended Nine Months Ended
of Operations Dec. 28, Dec. 29, Dec. 28, Dec. 29,
2002 2001 2002 2001
NET SALES $294,833 $267,105 $705,893 $578,286
Cost of Goods Sold 243,431 223,384 588,679 487,951
GROSS PROFIT 51,402 43,721 117,214 90,335
Distribution and
Administrative
Expenses 37,222 22,361 92,414 58,426
INCOME FROM
OPERATIONS 14,180 21,360 24,800 31,909
Other Income, Net 231 483 868 1,127
INCOME BEFORE
PROVISION FOR
INCOME TAXES 14,411 21,843 25,668 33,036
Provision for
Income Taxes 5,656 8,573 10,075 12,966
NET INCOME $8,755 $13,270 $15,593 $20,070
NET INCOME
PER SHARE (diluted) $0.45 $0.67 $0.79 $1.01
SHARES USED IN
CALCULATION 19,624 19,887 19,835 19,851
Condensed Balance Sheets Dec. 28, Dec. 29,
2002 2001
ASSETS
Cash and Short-term Investments $13,441 $30,372
Accounts Receivable, Net 187,458 160,149
Inventories 192,255 136,636
Other Current Assets 9,139 9,038
Total Current Assets 402,293 336,195
Property and Equipment, Net 33,049 26,350
Goodwill and Other Assets 50,047 18,660
TOTAL ASSETS $485,389 $381,205
LIABILITIES AND STOCKHOLDERS' EQUITY
Line of Credit $12,000 $--
Accounts Payable 301,718 229,327
Accrued Liabilities 22,054 18,418
Income Taxes Payable 4,464 5,417
Stockholders' Equity 145,153 128,043
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $485,389 $381,205
SOURCE Advanced Marketing Services, Inc.
back to topRelated links:
CONTACT:
investors, Chuck Williams, Director of
Investor Relations of Advanced Marketing Services, Inc.,
+1-858-450-3545, chuckw@advmkt.com; or media, Greg McQuerter, or
Tina Wilmott, twilmott@mcquerter.com, both of The McQuerter
Group, +1-858-450-0030, ext. 140, for Advanced Marketing
Services, Inc.
