AMS Makes Progress in Diversification Efforts

Advanced Marketing Services had some success in lessening its dependence on the warehouse clubs for its business in the fiscal year ended March 31, 2002. According to its year-end filing with the Securities and Exchange Commission, warehouse clubs accounted for 78% of its total revenues last year, compared to 85% in fiscal 2001. The percentage of its business done with Costco and Sam's Club fell from a total of 76% in fiscal 2001 to 71% last year.

In addition to supplying books to office product superstores and computer superstores, AMS's diversification efforts include doing more business with Internet retailers and specialty retailers and handling more distribution for bookstores, particularly Borders Group. The company's publishing program has also grown, and its distribution operations represented 3% of sales last year. With the purchase of Publishers Group West, AMS estimates that distribution will generate between 14% to 16% of its sales in fiscal 2003. PGW added $23.1 million in revenues to AMS in the two months it was owned by the company last year.

Revenues in the company's international operations rose nearly 24% last year to $63.8 million. Growth was solid in all overseas segments: sales rose 20.4% in the U.K., to $52.5 million; increased 43.1% in Mexico, to $7 million; and increased 37.8% in Australia, to $4.1 million. The company began selling books in Singapore last year, generating $150,000. Expansion into Asia and Pacific Rim markets is one goal AMS has set for its international division. The company also hopes its ties to Mexican publishers will help it expand in Central and South America as well as giving AMS a source of supply for the distribution of Spanish-language books in the U.S.

Excluding PGW, AMS bought books from about 400 publishers last year, with the top four publishers accounting for 55% of its book purchases. Random House accounted for 19% of its purchases ($121 million), followed by Penguin Putnam at 14% ($89 million) and the AOL Time Warner Book Group and Simon & Schuster at 11% each ($70 million).