AMS Lowers Earnings

Advanced Marketing Services, a wholesaler to warehouse clubs and distributor for independent publishers, lowered its earnings again as it struggles under the weight of government investigations and transitions in its major businesses.AMS warned investors on Monday that it expects to show earnings of only 10 cents to 15 cents a share for the fiscal year ending March 31, 2004, after an internal audit rather than the previously predicted 30 cents to 40 cents a share.Even that figure, announced by the company in January, was a reduction in its expectations.Facing two long-standing inquiries into its advertising practices, AMS has failed to file quarterly 10-Q forms for five consecutive quarters. It’s also in the process of restating earnings for the fiscal years ending March 31, 2003, and 2002.The company says it continues to suffer from “substantial fees and expenses” related to the federal investigations. Additionally, it “changed its sales approach regarding how it handles the disposition of excess inventory,” which resulted in higher reserves against some nonreturnable or only partially returnable goods. (Essentially, it sees itself getting stuck with some unsellable books that can’t be returned to the publisher for full credit.)“Publisher incentive income” also declined more than forecast, and apparently the company incurred higher-than-expected costs related to the reorganization of its distribution centers. It announced in January the closing of a Reno warehouse acquired when it bought distributor PGW and the consolidation of operations into a single Indianapolis warehouse.The company’s statement notes, “These factors will have an adverse impact on the Company’s results of operations for the first and second quarters of fiscal 2005, but are expected to have a favorable impact in future periods.”AMS is also thought to have suffered from the trend among warehouse clubs they service, such as Costco, focusing on deeply discounted new book releases, which yield lower margins for the distributor and often produce higher returns.

AMS Lowers Earnings

AMS Lowers Earnings

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