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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K/A

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended March 31, 2001

Commission file number 0-16002

ADVANCED MARKETING SERVICES, INC.
(Exact name of Registrant as specified in its charter)

5880 Oberlin Drive
San Diego, California 92121
(Address of principal executive offices)

Registrant’s telephone number : (858) 457-2500

Securities registered pursuant to Section 12(b) of the Act:
None

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
(Title of class)

      Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes   [X]     No   [   ]

      Indicate by a check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K/A or any amendment to this Form 10-K/A:  [   ]

      The aggregate market value of the Registrant’s voting stock held by nonaffiliates of the Registrant at March 31, 2001 was $224,074,264.

      The number of shares of the Registrant’s Common Stock outstanding as of March 31, 2001 was 18,993,542.

DOCUMENTS INCORPORATED BY REFERENCE

      Portions of the Registrant’s definitive Proxy Statement for its July 26, 2001 Annual Meeting of Stockholders (filed June 25, 2001) are incorporated by reference into Part III of this Form 10-K/A.

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EXPLANATORY NOTE

      Advanced Marketing Services, Inc. is filing this amendment to our Annual Report on Form 10-K for the fiscal year ended March 31, 2001 in order to correct a misclassification within our Consolidated Statements of Cash Flows. The misclassification, in the amount of approximately $3,600,000, was contained within the Cash Flows from Operating Activities and resulted in an overstatement of the Provision for Uncollectible Accounts and Sales Returns and an equal overstatement of the Increase in Accounts Receivable- Trade. The revision has no impact on the previously reported Net Cash Provided by Operating Activities or on our Consolidated Balance Sheets or Statements of Income.

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PART II

ITEM 8 — CONSOLIDATED FINANCIAL STATEMENTS

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Advanced Marketing Services, Inc.:

      We have audited the accompanying consolidated balance sheets of Advanced Marketing Services, Inc. (a Delaware corporation) and subsidiaries as of March 31, 2001 and 2000, and the related consolidated statements of income, stockholders’ equity and cash flows as revised (see Note 1) for each of the three years in the period ended March 31, 2001. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

      We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

      In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Advanced Marketing Services, Inc. and subsidiaries as of March 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 2001 in conformity with accounting principles generally accepted in the United States.

      Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. Schedule II, Valuation and Qualifying Accounts as revised (see Note 1), is presented for purposes of complying with the Securities and Exchange Commission’s rules and is not part of the basic consolidated financial statements. The schedule has been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, fairly states, in all material respects, the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole.

/S/ ARTHUR ANDERSEN LLP

ARTHUR ANDERSEN LLP

San Diego, California
July 9, 2001

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ADVANCED MARKETING SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2001 AND 2000

(In Thousands, Except Share Data)

The accompanying notes are an integral part of these consolidated balance sheets.

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ADVANCED MARKETING SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED MARCH 31, 2001, 2000 AND 1999

(In Thousands, Except Per Share Data)

The accompanying notes are an integral part of these consolidated statements.

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ADVANCED MARKETING SERVICES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE YEARS ENDED MARCH 31, 2001, 2000 AND 1999

(In Thousands)

The accompanying notes are an integral part of these consolidated statements.

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ADVANCED MARKETING SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (As Revised — see Note 1)
FOR THE YEARS ENDED MARCH 31, 2001, 2000 AND 1999

(In Thousands)

The accompanying notes are an integral part of these consolidated statements.

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ADVANCED MARKETING SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

THE COMPANY

Advanced Marketing Services, Inc., a Delaware Corporation, provides global customized services to book retailers and publishers. We are a leading distributor of general interest books to the membership warehouse clubs and certain specialty retailers, certain e-commerce companies and traditional bookstores. General interest books include bestsellers; basic reference books, including computer and medical books; books regarding business and management; cookbooks; gift books, including art and coffee table books; calendars; travel books; regional books; mass market paperbacks; children’s books; and Spanish-language books. We provide product selection advice, specialized merchandising and product development services, and distribution and handling services to membership warehouse clubs and other retailers operating in the United States, Canada, Mexico, the United Kingdom (UK), and certain Pacific Rim countries. References to Advanced Marketing Services throughout these Consolidated Financial Statements are made using the first person notations of “we”, “our”, or “us.”

PRINCIPLES OF CONSOLIDATION

The accompanying Consolidated Financial Statements include our accounts and those of our wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.

REVISED STATEMENT OF CASH FLOWS

Subsequent to the issuance of our Fiscal 2001 financial statements, we discovered a misclassification within our Consolidated Statements of Cash Flows. The misclassification, in the amount of approximately $3,600,000, was contained within the Cash Flows from Operating Activities and resulted in an overstatement of the Provision for Uncollectible Accounts on Sales Returns and an equal overstatement of the Increase in Accounts Receivable — Trade. Accordingly, our Fiscal 2001 Consolidated Statement of Cash Flows has been revised to correct this misclassification. The revision had no impact on the previously reported Net Cash Provided by Operating Activities or on our Consolidated Balance Sheets or Statements of Income.

USE OF ESTIMATES

Our preparation of the accompanying Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Our actual results could differ from those estimates.

FOREIGN CURRENCY TRANSLATION

The balance sheet accounts of our foreign operations are translated from their respective foreign currencies into U.S. dollars at the exchange rate in effect at the balance sheet date and revenue and expense accounts are translated using an average exchange rate during the respective period. The effects of the translation are recorded as a separate component of other comprehensive income (loss). Exchange gains and losses arising from the transactions denominated in foreign currencies are recorded using the actual exchange differences on the date of the transaction and are included in the Consolidated Statements of Income.

CASH AND CASH EQUIVALENTS

We consider all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash equivalents consist principally of money market funds and short-term municipal instruments.

INVESTMENTS, AVAILABLE-FOR-SALE

Investments, available-for-sale consists principally of debt securities issued by the States of the U.S. and political subdivisions of the States. We account for our investments in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 115 which requires the use of fair value accounting for debt and equity securities, except in those cases where there is a positive intent and ability to hold debt securities to maturity. See Note 3.

CONCENTRATION OF CREDIT RISK

We invest our excess cash in debt and equity instruments of financial institutions and corporations with strong credit ratings. We have established guidelines relative to diversification and maturities that maintain safety and liquidity. These guidelines are periodically reviewed and modified to take advantage of trends in yields and interest rates. Approximately 76 and 77 percent of our accounts receivable balances at March 31, 2001 and 2000, respectively, were concentrated with two major customers in the warehouse club industry.

ACCOUNTS RECEIVABLE ALLOWANCES

In accordance with industry practice, a significant portion of our products are sold to customers with the right of return. On

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approximately 90 percent of our purchases, we have the right to return unsold product to publishers. We have provided allowances of $3,054,000 and $2,306,000 as of March 31, 2001 and 2000, respectively, for the gross profit effect of estimated future sales returns after considering historical results and evaluating current conditions. We also have provided allowances for uncollectible trade accounts receivable of $2,568,000 and $1,665,000 as of March 31, 2001 and 2000, respectively.

VENDOR AND OTHER RECEIVABLES

Vendor and other receivables primarily consist of amounts due from vendors for purchase rebates and for merchandise returned to vendors.

INVENTORIES

Inventories consist primarily of books and, to a lesser extent, music CDs, CD-ROMs and prerecorded audio cassettes purchased for resale and are stated at the lower of cost (first-in, first-out) or market. Our rights to return to publishers were limited or nonexistent on approximately 27 and 29 percent of our inventories at March 31, 2001 and 2000, respectively.

GOODWILL

Goodwill, representing the excess of the cost over the net tangible and identifiable intangible assets recorded in connection with our acquisitions, is amortized on a straight-line basis over the estimated lives of between 20 and 25 years, depending on the estimated useful life of the intangible assets acquired. Goodwill totaled $9,905,000 and $6,465,000, net of accumulated amortization of $943,000 and $511,000, as of March 31, 2001 and 2000, respectively.

LONG-LIVED ASSETS

On a regular basis, we evaluate and assess our assets for impairment and we make appropriate adjustments when an asset is deemed to be impaired. In performing this analysis, we estimate future cash flows to be generated as a result of operations compared against the carrying value of related assets.

SIGNIFICANT CUSTOMERS

A substantial portion of the revenue earned by our operations is derived from a limited number of customers. Taking into account domestic and international activities, our two largest customers accounted for approximately 38 and 38 percent of net sales in Fiscal 2001, 40 and 41 percent of net sales in Fiscal 2000 and 40 and 37 percent of net sales in Fiscal 1999. No other customers accounted for 10 percent or more of our net sales during these years.

REVENUE RECOGNITION

We recognize sales and related cost of sales upon delivery of merchandise to customer locations. We provide reserves for the effect of estimated future sales returns. We include revenues and associated expenses related to our advertising activities in Distribution and Administrative Expenses.

In December 1999, The Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements: (“SAB 101”). This bulletin draws on existing accounting rules and provides specific guidance on how those accounting rules should be applied to revenue recognition. In June 2000, the SEC issued SAB 101B which deferred the implementation of SAB 101 to the fourth quarter results for fiscal years beginning after December 15, 1999. We believe our accounting policies conform to the provisions of SAB 101 and the adoption of SAB 101 did not have a material impact to our Consolidated Financial Statements.

INCOME TAXES

We provide currently for taxes on income regardless of when such taxes are payable in accordance with SFAS No. 109, “Accounting for Income Taxes.” Deferred income taxes result from temporary differences in the recognition of income and expense for tax and financial reporting purposes. See Note 5.

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PROPERTY AND EQUIPMENT

A summary of property and equipment as of March 31, 2001 and 2000 is as follows (in thousands):

Depreciation and amortization of property and equipment are provided using the straight-line method over the estimated useful lives (ranging from three to five years) of the assets. Maintenance, repairs and minor renewals are charged to earnings when they are incurred. Upon the disposition of an asset, its accumulated depreciation is deducted from the original cost, and any gain or loss is reflected in current earnings.

We account for our internal-use software in accordance with Statement of Position (SOP) 98-1, “Accounting for Costs of Computer Software Developed or Obtained for Internal Use”. SOP 98-1 requires capitalization of certain costs incurred in the development of internal-use software, including external direct material and service costs, employee payroll and payroll-related costs. We have capitalized approximately $5,503,000, $1,056,000 and $0 for the fiscal years ended March 31, 2001, March 31, 2000 and March 31, 1999, respectively.

PER SHARE INFORMATION

On February 15, 1999, we effected a three for two stock split to stockholders of record on February 1, 1999. On January 17, 2000, we effected a three for two stock split to stockholders of record on January 3, 2000. On May 11, 2001, we effected an additional three for two stock split to stockholders of record on April 27, 2001. Accordingly, all references to shares and earnings per share amounts included in these Consolidated Financial Statements have been restated to reflect the stock splits.

The following financial data summarizes information relating to the per share computations (in thousands, except per share data):

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the FASB issued SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities.” SFAS No. 133 was amended in June 1999 by SFAS No. 137 “Accounting for Derivative Instruments and Hedging Activities — Deferral of the Effective Date of FASB Statement No. 133,” and in June 2000 by SFAS No. 138 for “Accounting for Certain Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133.” These statements establish accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives), and for hedging activities. They require that an entity recognize all derivatives as either assets or liabilities and measure those instruments at fair value with changes form fair value reflected in operations. We adopted the provisions of SFAS No.133, as amended by SFAS No. 137 and SFAS No. 138, in April 2001, and we believe the effect of the adoption will be immaterial to our Consolidated Financial Statements.

In April 2000, the FASB issued FASB Interpretation Number (“FIN”) 44, “Accounting For Certain Transactions Involving Stock Compensation: an Interpretation of APB Opinion No. 25.” FIN 44 affects certain awards and modifications made after December 15, 1998 and was effective for all new awards granted beginning July 2000. The adoption of FIN 44 during Fiscal 2001 did not materially impact the accounting of our stock based compensation.

In July 2000, the Emerging Issues Task Force (“EITF”) reached a consensus on EITF 00-10, “Accounting For Shipping and Handling Fees and Costs.” EITF 00-10 requires that all amounts billed to a customer in a sales transaction related to shipping and handling, if any, represent revenue to the vendor and should be classified as revenue. There has been no consensus at this time in the treatment for the related costs. This EITF was effective in the fiscal year ended March 31, 2001. The adoption of EITF 00-10 did not have a material effect on our Consolidated Financial Statements, results of operations or related disclosures thereto.

2. INDUSTRY SEGMENT AND GEOGRAPHICAL DATA

We operate in one industry segment and in several geographic regions.

Net sales by geographic region are as follows (in thousands):

Net identifiable assets of our operations in different geographic areas are as follows (in thousands):

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3. INVESTMENTS, AVAILABLE-FOR-SALE

Investments, available-for-sale at March 31, 2001 and 2000 are as follows (in thousands):

Investments in debt securities issued by States of the U.S. and political subdivisions of the States as of March 31, 2001 of approximately $4,395,000 are scheduled to mature within one year. For the year ended March 31, 2001, we sold no investment prior to its maturity date. We recognized no gain or loss on these investments. Proceeds from investments sold prior to maturity for Fiscal 2000 totaled approximately $12,192,000 on which a net gain of approximately $4,000 was realized. Proceeds from investments sold prior to maturity for Fiscal 1999 totaled approximately $19,159,000 on which a net gain of approximately $120,000 was realized. We use the specific identification method in determining cost of these investments.

4. LINE OF CREDIT

We had available at March 31, 2001 an unsecured bank line of credit with a maximum borrowing limit of $12,000,000. The interest rate on bank borrowings is based on the prime rate and “Libor” rates. The line of credit expires on August 31, 2002. As of and during the years ended March 31, 2001 and March 31, 2000, we had no borrowings on our bank line of credit.

5. INCOME TAXES

The components of the provision for income taxes are as follows (in thousands):

A reconciliation of the provision for income taxes at the statutory federal income tax rate of 35 percent in Fiscal 2001, 2000 and 1999 to the effective tax provision as reported is as follows (in thousands):

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The temporary differences that give rise to the deferred tax assets as of March 31, 2001 and 2000 are as follows (in thousands):

6. COMMITMENTS AND CONTINGENCIES

We lease facilities and some equipment under non-cancelable operating leases. Rental expense for the years ended March 31, 2001, 2000 and 1999 was $5,266,000, $3,982,000 and $3,867,000 respectively. The leases have initial expiration dates ranging from 2001 to 2014. Some of the leases contain renewal options, termination options and periodic adjustments of the minimum monthly rental payments.

At March 31, 2001, the aggregate future minimum rentals are as follows (in thousands):

We are involved in various claims and lawsuits incidental to our business and management believes that the outcome of any of those matters will not have a material adverse effect on our Consolidated Financial Statements or results of operations.

7. EMPLOYEE BENEFIT PLANS

We have a qualified 401(k) profit-sharing plan covering substantially all of our employees. We match, at a 25 percent rate, employee contributions up to 4 percent of compensation. In Fiscal Years 2001, 2000 and 1999, our matching contributions were $126,000, $87,000 and $86,000, respectively. The plan also permits us to make discretionary contributions as approved by our Board of Directors. Our discretionary contributions were $554,000, $526,000 and $497,000 for the years ended March 31, 2001, 2000 and 1999, respectively.

We also have a deferred compensation plan which permits eligible employees, including officers, to defer a portion of their compensation and requires us to make matching contributions and pay accrued interest as provided in the plan. The deferred compensation liability, including our matching contributions and accumulated interest, was approximately $3,029,000 and $1,977,000 at March 31, 2001 and 2000, respectively. We fund the deferred compensation plan under a trust agreement through which we pay to the trust amounts necessary to pay premiums on life insurance policies carried to meet the obligations under the plan. The expense associated with the plan, including life insurance costs, was $565,000, $357,000 and $236,000 for the years ended March 31, 2001, 2000 and 1999, respectively.

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8. STOCK PLANS

We have two stock option plans which provide for the grant of incentive or nonqualified stock options to employees and directors. Nonemployee directors are only eligible for nonqualified stock options. We may grant incentive stock options at prices not less than 100 percent of the fair market value of the shares at the date of grant (110 percent with respect to optionees who are 10 percent or more stockholders). Nonqualified options may be granted at prices not less than 85 percent of the fair market value of such shares at the date of grant. Options granted under the Plans become exercisable in installments as determined by the Board of Directors. There were 2,281,500 shares issuable pursuant to options granted under our 1987 Plan and as of March 31, 1997, no further options may be granted under this plan. As of March 31, 2001, there were 3,693,750 shares issuable pursuant to options granted under our 1995 Plan. The expiration date of the options is determined by the Board of Directors and may not exceed 10 years for incentive options (5 years with respect to optionees who are 10 percent or more stockholders) and 10 years and 1 day for nonqualified options.

We have adopted the disclosure only provision of SFAS No. 123, “Accounting for Stock-Based Compensation.” Accordingly, no compensation expense has been recognized for stock options. Had compensation expense been recorded for options granted in Fiscal Years 2001, 2000 and 1999, our net income and earnings per share would have been reduced by approximately $1,382,000, or $.07 per share, $831,000 or $.04 per share and approximately $359,000, or $.02 per share in Fiscal 2001, 2000 and 1999, respectively. These amounts are for disclosure purposes only and may not be representative of future calculations since additional options may be granted in future years. The fair value for these options was estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions for Fiscal Years 2001, 2000 and 1999, respectively: expected volatility of 76, 56 and 37 percent; risk-free interest rate of 6.1, 6.5 and 5.3 percent; weighted average dividend yield of .54, .34 and .28 percent; expected option life of 5 years.

The changes in the number of common shares under option for the years ended March 31, 1999, 2000 and 2001 are summarized as follows:

On July 23, 1998, we introduced an Employee Stock Purchase Plan which permits eligible employees to defer a portion of their compensation in order to purchase shares of our stock. The maximum number of shares that may be purchased under the Plan is 337,500 shares, subject to adjustment under certain circumstances. The amount of shares purchased under the plan were approximately 17,000, 17,000 and 6,000 in Fiscal 2001, 2000 and 1999, respectively.

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On July 22, 1999, we adopted a stock repurchase program pursuant to which we may repurchase in open market or private transactions, from time to time, based upon existing market conditions, shares of our Common Stock having an aggregate cost not to exceed $5 million or 450,000 shares. On March 16, 2000, we announced that our Board of Directors had approved a 525,000 share increase in the repurchase program. On July 27, 2000, our Board of Directors approved an additional 525,000 share increase in the repurchase program. Under the plan, we have repurchased approximately 1,247,000 shares at an average market price of approximately $10.50. As part of the repurchase program, during Fiscal 2000, we purchased, in a private transaction, approximately 225,000 shares for approximately $1.7 million from an affiliate, which reflects a 10 percent discount from the average market price for a specified period. During Fiscal 2001, we purchased approximately 684,000 shares of our stock from our Chairman for approximately $7.5 million, which reflects a 10 percent discount from the average market price for a specified period. The repurchase program has no expiration date and will be financed through internal funds.

9. EQUITY TRANSACTIONS

During Fiscal 2001, we recorded $1,107,000 in deferred compensation for approximately 411,000 stock options granted under our Stock Option Plan. The compensation is being amortized to expense over the vesting period of the options and we have expensed approximately $277,000 during the fiscal year ended March 31, 2001. The net balance of the remaining deferred compensation has been recorded as a separate component of stockholders’ equity.

10. EQUITY IN NET INCOME OF AFFILIATE

In September 1999, we acquired a 25 percent minority interest in Raincoast Book Distribution, Limited, a leading Canadian book distributor, for approximately $900,000. Headquartered in Vancouver, British Colombia, Raincoast has the exclusive distribution rights for approximately 40 publishers in Canada. In addition, Raincoast, through its own proprietary imprint label, publishes a wide variety of books. We accounted for the investment under the equity method of accounting and, consistent with our policy regarding international subsidiaries, we include our portion of Raincoast’s operating results in our Consolidated Statements of Income one month in arrears.

11. ACQUISITIONS

UNCLE JOHN’S BATHROOM READER

In August 2000, we acquired certain net assets and the publishing rights of Uncle John’s Bathroom Reader for approximately $2.5 million. Uncle John’s Bathroom Reader is a series of “info-tainment” books that is distributed through a variety of mass-market outlets. We will integrate this product series together with the assets acquired with our other publishing activities from the date of acquisition. We accounted for the acquisition as a purchase and, accordingly, the assets acquired and the publishing rights assumed from Earthworks Press Inc. were recorded at their estimated fair value at the date of acquisition. The excess of the purchase price over the net assets acquired of approximately $2,261,000 is being amortized over 20 years.

ASPEN BOOK MARKETING

In August 2000, we acquired certain net assets of the wholesale distribution business of Aspen Book Marketing for approximately $3.3 million. Aspen is a distributor of specialty books to the Safeway store chain across the UK. We accounted for the acquisition as a purchase and, accordingly, the assets acquired from Aspen Book Marketing were recorded at their estimated fair value at the date of acquisition. The excess of the purchase price over the net assets acquired of approximately $777,000 is being amortized over 20 years.

BOOKWISE INTERNATIONAL OF AUSTRALIA

In March 2000, we acquired certain assets and assumed certain liabilities of the wholesale distribution business of Bookwise International of Australia for approximately $2.0 million. Bookwise is a distributor of specialty books in a wide variety of subject areas. We accounted for the acquisition as a purchase and, accordingly, the assets acquired and the liabilities assumed from Bookwise were recorded at their estimated fair value at the date of acquisition. The excess of the purchase price over the net assets acquired of approximately $1.3 million is being amortized over 20 years. The operating results of Bookwise were not included in the accompanying Consolidated Statement of Income for the year ended March 31, 2000, as the amounts were not material and it is our policy to include the operating results of our foreign subsidiaries as of February 28.

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12. SUBSEQUENT EVENTS (UNAUDITED)

On May 25, 2001, our Board of Directors approved an additional 350,000 share increase in the repurchase program. The total number of shares of Common Stock currently remaining authorized for repurchases under the plan is approximately 600,000 shares.

On June 19, 2001, we acquired a 25 percent equity interest in The Templar Company, PLC for $1.3 million. Located in the United Kingdom, The Templar Company is a producer of children’s books for the international market.

13. SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)