AMS Bankruptcy fallout continues

AMS has been in turmoil for the past three years since federal investigators raided the company’s headquarters in Sorrento Mesa. The investigation uncovered fraudulent accounting activities, and led to felony guilty pleadings by three senior executives. In May, the company hired Rautenstrauch, a veteran of the book publishing industry, who is the third CEO since longtime former CEO Michael Nicita resigned in 2004. AMS has also been in the middle of restating its financial results for the past five fiscal years. In a March statement, the company said for the current fiscal year that ends March 31, it anticipated a net loss of about $19 million on revenue between $915 million to $920 million. AMS has some 1,400 employees, primarily at three distribution centers in Baltimore, Indianapolis and Sacramento. At its headquarters, it has 264 employees.

While there is a reasonable possibility that a white knight could swoop in and take in some, if not all, of PGW’s distribution clients (several sources indicated to GalleyCat that this could take place) Michael Cader pointed out in yesterday’s Publishers Lunch that this scenario could leave “pain in its wake,” adding that “creditors will need to see some money in order to approve the sale, which will limit the capital available to repay the debts owed to client publishers.” This is hardly new to the small presses who had to jump ship to new hosts when the last two major distributors to go under, LPC and Stoddart/General Distribution Services, did so in 2002 – the same year that AMS bought PGW. And that seeming coincidence underscores the other major big-picture problem at work: there aren’t that many other distribution options in place. Consider Consortium’s recent buyout by Perseus, which only recently took over CDS. SCB, IPG and NBN are still around, but their reach – individual or even collective – may not be wide enough to help PGW’s client base. And the economics of the industry are not predisposed towards someone starting up a new distribution company from scratch. So what then? It will take time for every nuance of the AMS bankruptcy story to play out, but things aren’t looking pretty, and the casualties may run deep.