In its first public filing in more than two months, Advanced Marketing Services disclosed last week that it will have sharply lower earnings per share for the full year ended March 31, 2004.
The company, which has been the target for more than a year of separate investigations by the U.S. attorney's office and the Securities and Exchange Commission over its co-op advertising programs, said earnings per share will be in the range of 10 cents to 15 cents per share, down from estimates of 30 cents to 40 cents per share. AMS's original estimates for fiscal '04, made in July 2003, called for earnings per share between 90 cents and $1.05.
AMS explained that the lower earnings forecast was related to an increase in reserves for markdowns on nonreturnable or partially returnable inventory and a change in the way AMS disposes of extra inventory.
The company also reported that profits in the first two quarters of fiscal 2005 have been hurt by "substantial" expenses associated with its audit and internal review, as well as higher costs associated with reorganizing its distribution centers. AMS closed the Publishers Group West Reno, Nev., warehouse in June and moved the inventory to Indianapolis. Publisher incentive income also declined, AMS said. A company spokesperson couldn't comment on how many settlements AMS has reached with publishers about overcharges.
AMS had no new date, however, on when the investigations and internal reviews will be completed. At one point this spring, AMS had hoped to be able to file its long-delayed quarterly and 10-ks by the end of June.