Advanced Marketing Services reported record results for the fiscal year ended March 31, 2001, with revenues up 13.6%, to $713.6 million, and net income ahead 21.6%, to $20.8 million. Gross margins improved to 14.0% from 12.6%, as increased sell-through of children's and proprietary titles as well as increased international sales offset higher expenses associated with the company's expansion initiatives plus write-offs to cover the bankruptcies of several accounts. Return rates remained at 19%.
Company president Michael Nicita called fiscal 2001 "a year of transformation," in which the company built on its core business of providing books to warehouse clubs by moving into higher margin areas such as distribution and publishing. AMS's publishing program, which is done mainly through co-ventures, represented 7% of total revenues ($50 million) last year, Nicita noted, and he is looking for significant gains in fiscal 2002. In fact, Nicita is expecting the entire company to have a strong fiscal '02, forecasting earnings per share to range from $1.74 to $1.79, compared to the $1.59 recorded last year.
In fiscal '01 AMS spent $5.8 million on acquisitions, and Nicita said the company will continue to actively pursue purchases, particularly in the distribution and wholesale businesses. Capital expenditures will rise from $10.5 million last year to about $15 million this year, with investments targeted to upgrade AMS's software programs as well as to expand its Baltimore warehouse from 160,000 sq. ft. to 320,000 sq. ft. and its Indianapolis warehouse from 144,000 sq. ft. to 420,000 sq. ft. The increased capacity will provide AMS with ample space to take on additional clients in its Advanced Global Distribution subsidiary, which is currently working with six in-house clients and six outside publishers. Nicita is also expecting solid growth from its international operations and told analysts that its Australian Bookwise subsidiary will serve as a platform for expansion in English-speaking Pacific Rim countries.
AMS's business with Borders Group contributed $37 million to revenues in fiscal '01 and should increase again this year as the company finishes adding certain fulfillment services for Borders superstores in addition to the services it already provides to Waldenbooks.
