FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
(X) Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 2001
--------------
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _________ to _______
Commission file number 1-11720
-------
ADVO, Inc.
--------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 06-0885252
------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Univac Lane, P.O. Box 755, Windsor, CT 06095-0755
------------------------------------------ ---------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (860) 285-6100
----------------
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 ___
---
As of April 28, 2001 there were 20,341,944 shares of common stock outstanding.
ADVO, Inc.
Index to Quarterly Report
on Form 10-Q
Quarter Ended March 31, 2001
Part I - Financial Information
------------------------------
Page
----
Item 1. Financial Statements (Unaudited).
Consolidated balance sheets -
March 31, 2001 and September 30, 2000. 2
Consolidated statements of operations -
Six months and three months ended
March 31, 2001 and March 25, 2000. 3
Consolidated statements of cash flows -
Six months ended March 31, 2001
and March 25, 2000. 4
Notes to consolidated financial statements. 5
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations. 8
Item 3. Quantitative and Qualitative Disclosures
about Market Risk 11
Part II - Other Information
---------------------------
Item 5. Other Information. 12
Item 6. Exhibits and Reports on Form 8-K. 12
Signatures 13
ADVO, Inc.
CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands, except share data)
March 31, September 30,
ASSETS 2001 2000
---------- -------------
Current assets:
Cash and cash equivalents $ 4,195 $ 6,003
Accounts receivable, net 116,729 114,093
Other current assets 8,590 9,217
Investment in deferred compensation plan 13,466 14,546
Deferred income taxes 9,843 10,457
--------- ---------
Total current assets 152,823 154,316
Property, plant and equipment 239,896 231,980
Less accumulated depreciation and amortization (121,312) (120,449)
--------- ---------
Net property, plant and equipment 118,584 111,531
Other assets 28,727 23,330
--------- ---------
TOTAL ASSETS $ 300,134 $ 289,177
========= =========
LIABILITIES
Current liabilities:
Current portion of long-term debt $ 3,750 $ 10,000
Notes payable - short term 2,315 --
Accounts payable 35,065 43,674
Accrued compensation and benefits 17,028 27,230
Deferred compensation plan 13,466 14,546
Other current liabilities 38,084 43,649
--------- ---------
Total current liabilities 109,708 139,099
Long-term debt 192,250 180,000
Notes payable - long term 1,715 --
Deferred income taxes 6,927 5,800
Other liabilities 4,863 4,850
STOCKHOLDERS' DEFICIENCY
Series A Convertible preferred stock,
$.01 par value (Authorized 5,000,000
shares, none issued) -- --
Common stock, $.01 par value (Authorized
40,000,000 shares, issued 30,298,108
and 29,908,609 shares, respectively) 303 299
Additional paid-in capital 195,279 185,949
Accumulated deficit (7,480) (31,671)
--------- ---------
188,102 154,577
Less common stock held in
treasury, at cost (199,124) (195,149)
Accumulated other comprehensive income (loss) (4,307) --
--------- ---------
Total stockholders' deficiency (15,329) (40,572)
--------- ---------
TOTAL LIABILITIES & STOCKHOLDERS'
DEFICIENCY $ 300,134 $ 289,177
========= =========
See Accompanying Notes.
-2-
ADVO, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share data)
Six months ended Three months ended
----------------------- -----------------------
March 31, March 25, March 31, March 25,
2001 2000 2001 2000
--------- --------- --------- ---------
Revenues $569,324 $536,576 $271,783 $262,373
Costs and expenses:
Cost of sales 413,346 385,294 200,346 190,273
Selling, general and
administrative 105,164 105,595 50,194 51,589
Provision for bad debts 3,017 4,484 1,924 2,248
-------- -------- -------- --------
Operating income 47,797 41,203 19,319 18,263
Interest expense 9,177 8,796 4,538 4,797
Other expense, net 221 147 103 84
-------- -------- -------- --------
Income before income taxes 38,399 32,260 14,678 13,382
Provision for income taxes 14,208 11,936 5,431 4,951
-------- -------- -------- --------
Net Income $ 24,191 $ 20,324 $ 9,247 $ 8,431
======== ======== ======== ========
Basic earnings per share $ 1.20 $ .99 $ .46 $ .41
======== ======== ======== ========
Diluted earnings per share $ 1.17 $ .98 $ .45 $ .41
======== ======== ======== ========
Weighted average common shares 20,105 20,497 20,183 20,369
Weighted average diluted shares 20,650 20,741 20,713 20,707
See Accompanying Notes.
-3-
ADVO, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
Six months ended
---------------------
March 31, March 25,
2001 2000
--------- ---------
Net cash provided by operating activities $ 14,674 $ 23,076
Cash flows from investing activities:
Acquisition of property, plant and equipment (17,875) (12,630)
Proceeds from disposals of property, plant and equipment 71 203
Acquisitions/joint ventures, net of cash acquired (9,255) (250)
-------- --------
Net cash used by investing activities (27,059) (12,677)
Cash flows from financing activities:
Revolving line of credit - net 6,000 (23,291)
Proceeds from long-term debt -- 30,725
Increase in note payable 4,030 --
Payment of debt issue costs -- (2,290)
Proceeds from exercise of stock options 4,523 583
Purchase of common stock for treasury (3,976) (16,676)
-------- --------
Net cash provided (used) by financing activities 10,577 (10,949)
-------- --------
Decrease in cash and cash equivalents (1,808) (550)
Cash and cash equivalents at beginning of period 6,003 9,341
-------- --------
Cash and cash equivalents at end of period $ 4,195 $ 8,791
======== ========
Noncash financing activities:
Increase in liabilities - fair value of interest rate
swap agreements $ 4,307 $ --
See Accompanying Notes.
-4-
ADVO, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. Basis of presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included. Operating results for the
six-month period ended March 31, 2001 are not necessarily indicative of the
results that may be expected for the fiscal year ending September 29, 2001. For
further information, refer to the consolidated financial statements and
footnotes thereto included in ADVO's annual report on Form 10-K for the fiscal
year ended September 30, 2000. Certain reclassifications have been made in the
fiscal 2000 financial statements to conform with the fiscal 2001 presentation.
2. Summary of accounting policies
Derivatives and hedging activities
Statement of Financial Accounting Standards ("SFAS") No. 133 "Accounting for
Derivative Instruments and Hedging Activities", as amended by SFAS Nos. 137 and
138, requires companies to recognize all derivatives on the balance sheet at
fair value. If the derivative is a hedge, depending on the nature of the hedge,
changes in the fair value are either offset against the change in fair value of
assets, liabilities, or firm commitments through earnings, or recognized in
other comprehensive income until the hedged item is recognized in earnings. The
Company's interest rate swap agreements are considered 'effective' under SFAS
No. 133 and, as a result, changes in the fair value of the agreements are
recorded in current assets or liabilities with the offset amount recorded to
accumulated other comprehensive income (loss) in stockholders' deficiency.
The Company's existing interest rate swap agreements (derivatives) convert a
portion of its floating rate debt to a fixed rate basis through December 2002,
thus limiting substantial risk should interest rates fluctuate. In accordance
with its credit agreement, at March 31, 2001, $100 million of the Company's
outstanding variable rate debt was designated as hedged relating to the interest
rate swap agreements. The Company adopted SFAS No 133, as amended, on October 1,
2000 and recorded an unrealized loss of $1.2 million in accumulated other
comprehensive income (loss), offsetting the fair value of the swap agreements
recorded in other current liabilities.
3. Comprehensive Income
Comprehensive income for a period encompasses net income and all other changes
in a company's equity other than from transactions with the company's owners.
Comprehensive income was $7.7 million for the quarter ended March 31, 2001 which
consisted of net income of $9.2 million and the change in the unrealized loss on
the fair value of derivative instruments of $1.5 million. For the year to date
period ended March 31, 2001, comprehensive income was $21.1 million, which
consisted of net income of $24.2 million and the change in the unrealized loss
on the fair value of derivative instruments of $3.1 million
Accumulated other comprehensive income (loss) at March 31, 2001 consisted of the
following:
Unrealized loss from derivative instruments at adoption of SFAS No. 133 $ (1.2) million
Change in the fair value of derivative instruments for the year to date
period ended March 31, 2001 (3.1) million
-------------
Total accumulated other comprehensive income (loss) $ (4.3) million
-5-
ADVO, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
4. Acquisition
During the first quarter of fiscal 2001 the Company announced the acquisition of
Mail Marketing Systems, Inc., ("MMSI") a privately held direct mail advertising
company for $7.3 million, net of $1.7 million cash acquired. The purchase price
was comprised of a $5.0 million cash payment and $4.0 million financed by the
owner of MMSI. In addition, during the second quarter of fiscal 2001 the Company
paid an additional $1.0 million to MMSI for contingent consideration in
connection with the acquisition. The acquisition has been accounted for under
the purchase method of accounting and, accordingly, the results of operations of
the acquired company have been included in the consolidated statements of
operations from its acquisition date. The acquired assets were recorded at their
estimated fair values. The acquisition did not have a material pro forma effect
on operations for periods prior to the acquisition.
5. Earnings per share
Basic earnings per share excludes common stock equivalents, such as stock
options, and is computed by dividing earnings by the weighted average number of
common shares outstanding for the period. Diluted earnings per share reflect the
potential dilution that could occur if common stock equivalents, such as stock
options, were exercised.
Six months ended Three months ended
------------------------------ -------------------------
March 31, March 25, March 31, March 25,
2001 2000 2001 2000
----------- --------- --------- ---------
Net income $ 24,191 $ 20,324 $ 9,247 $ 8,431
Weighted average common shares 20,105 20,497 20,183 20,369
Effect of dilutive securities:
Stock options 508 217 494 303
Restricted stock 37 27 36 35
----------- --------- --------- ---------
Dilutive potential common shares 545 244 530 338
Weighted average diluted shares 20,650 20,741 20,713 20,707
=========== ========= ========= =========
Basic earnings per share $ 1.20 $ .99 $ .46 $ .41
=========== ========= ========= =========
Diluted earnings per share $ 1.17 $ .98 $ .45 $ .41
=========== ========= ========= ==========
6. Consulting Agreement
The Company recorded a special charge of $2.2 million during the first quarter
of the previous year related to the expensing of a long-term consulting
agreement with the Company's former Chairman and Chief Executive Officer who was
no longer providing services to the Company.
-6-
ADVO, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
7. Subsequent Events
Subsequent to the end of the second quarter of the current fiscal year, the
Company announced on April 19, 2001, the acquisition of New Jersey Shoppers
Guide for approximately $4.9 million. The acquisition will be accounted for
under the purchase method of accounting and, accordingly, the results of
operations of the acquired company will be included in the consolidated
statements of operations from its acquisition date. The acquired assets will be
recorded at their estimated fair values.
In addition, on April 19, 2001, subsequent to the end of the second quarter, the
Company announced that Beth Bronner had resigned as President and Chief
Operating Officer to explore other opportunities. As a result of a pre-existing
contractual agreement, the Company will record a charge of approximately $1.9
million during the third quarter of fiscal 2001.
-7-
ADVO, Inc.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
This section should be read in conjunction with the consolidated financial
statements of the Company and the notes thereto.
RESULTS OF OPERATIONS
---------------------
REVENUES For the second quarter ended March 31, 2001, revenues were $271.8
million representing a 3.6% increase over the second quarter of the prior fiscal
year. Pricing gains resulting in 4.0% growth in revenue per thousand pieces to
$38.66 for the second quarter of fiscal 2001 from $37.16 for the comparable
prior year period contributed to the revenue increase for the quarter. The
increase in revenue per thousand pieces was, in part, the result of the postal
rate increase effective in January 2001. Shared mailed package growth, a 3.6%
increase over fiscal 2000's second quarter, also contributed favorably to the
revenue growth for the second quarter of fiscal 2001. Partially offsetting the
revenue growth were volume decreases in the Company's core shared mail products
as demonstrated by the decrease in average pieces per package from 8.37 pieces
for the second quarter of fiscal 2000 to 7.90 pieces for the current fiscal
quarter. This decrease was primarily due to shortfalls against revenue
opportunities in the Company's medium-sized local and regional client segment, a
reflection of the caution these clients are exhibiting because of the current
economic uncertainties.
For the year-to-date period ended March 31, 2001, the Company's revenues grew
$32.7 million or 6.1% to $569.3 million over the same prior year period,
primarily driven by pricing and volume gains. Pricing gains were illustrated by
the 3.0% increase in revenue per thousand pieces to $39.33 for the six month
period ended March 31, 2001 from $38.19 for the same period of the prior year.
The strong volume gains during the first quarter of fiscal 2001 were offset in
part by the volume declines experienced in the second quarter of fiscal 2001. As
a result, on a year-to-date basis, total shared mail pieces increased 1.6%.
Total shared mail packages delivered grew 5.3% for the first half of fiscal 2001
over the same period of the prior year. Contributing to the package growth for
both the three and six month periods ended March 31, 2001 were additional
mailings due to the second in-home date programs in two of the Company's
markets.
The revenue associated with the Company's A.N.N.E. (ADVO National Network
Extension) brokered distribution program contributed substantially to the
revenue growth for the second quarter and first half of fiscal 2001. In
addition, revenues for both the three and six month periods ended March 31, 2001
were favorably impacted by increased revenues from MailCoups, the Company's
targeted coupon distributor which utilizes an envelope format and also the
Company's acquisition of Mail Marketing Systems, Inc. ("MMSI"), a privately held
direct mail advertising company acquired during the first quarter of fiscal
2001.
OPERATING EXPENSES Cost of sales as a percentage of revenue increased 1.2
percentage points to 73.7% for the three months ended March 31, 2001, and
increased 0.8 percentage points to 72.6% for the six month year-to-date period
when compared to the same periods in the prior year. These increases were
primarily due to higher underweight postage costs. Offsetting these increases to
a degree were continued improvements and efficiencies in the branch operations
of the Company.
In absolute terms, cost of sales for the three and six months ended March 31,
2001 increased $10.1 million and $28.1 million, respectively, over the same
periods of the prior year. These increases were mainly attributable to higher
postage costs as a result of the postal rate increase, higher printing and paper
costs and increased delivery costs incurred as a result of increased revenues
associated with A.N.N.E. On a year-to-date basis, the increase in cost of sales
also reflected higher postage costs as a result of the volume growth in the
number of shared mail packages delivered.
-8-
ADVO, Inc.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Selling, general and administrative expenses, including the provision for bad
debts, as a percentage of revenue decreased slightly to 19.2% and 19.0% for the
quarter and six months ended March 31, 2001, respectively, as compared to the
prior year periods. The second quarter and first half of fiscal 2001 experienced
absolute decreases of $1.7 million and $1.9 million, respectively in selling,
general and administrative costs when compared to the same periods of fiscal
2000. These decreases were the result of lower compensation related expenses and
lower bad debt expense offset by higher commission expense as a result of the
revenue growth. Excluding the $2.2 million charge related to the expensing of a
long-term consulting agreement with the Company's former Chairman and Chief
Executive Officer recorded in the first quarter of the prior year, selling,
general and administrative costs for the year-to-date period would have
increased $0.3 million over fiscal 2000 costs.
OPERATING INCOME For the second quarter of fiscal 2001, the Company reported
operating income of $19.3 million, representing a 5.8% increase over the second
quarter of fiscal 2000. For the first half of fiscal 2001, operating income was
$47.8 million, representing a $6.6 million or 16.0% increase over the first half
of fiscal 2000. As a percent of revenue, operating income was 7.1% for the
second quarter and 8.4% for the first six months of fiscal 2001, when compared
to 7.0% and 7.7%, respectively, for the same periods of the prior fiscal year.
INTEREST EXPENSE Interest expense decreased $0.3 million for the three month
period and increased $0.4 million for the six month period ended March 31, 2001,
respectively.
INCOME TAXES The effective income tax rate was 37% for both the three and six
months ended March 31, 2001 and March 25, 2000.
EARNINGS PER SHARE Diluted earnings per share increased 9.8% to $0.45 for the
second quarter of fiscal 2001 and increased 19.4% to $1.17 for the six months
ended March 31, 2001. This increase was the result of the Company's improved
earnings.
FINANCIAL CONDITION
-------------------
The working capital ratio was 1.39 at March 31, 2001 versus 1.11 at September
30, 2000. Overall, working capital increased $27.9 million from September 30,
2000. The increase in working capital from the end of the prior fiscal year was
primarily related to the $29.4 million decrease in current liabilities which was
mostly comprised of the following: a decrease in accounts payable due to the
seasonal timing of vendor payments; a decrease in accrued compensation and
benefits due to the fiscal 2000 incentive compensation payout which occurred in
fiscal 2001; and a decrease in the current portion of long-term debt due to
scheduled principal payments within the next year.
Stockholders' deficiency decreased $25.2 million to a net deficiency of $15.3
million at March 31, 2001. The decrease in net deficiency was primarily the
result of the Company's net income of $24.2 million and $9.3 million of
stock/option related transactions by associates, offset by treasury stock
purchases of $4.0 million. The treasury stock purchases consisted of $1.6
million made on the open market associated with the Company's buyback program
and $2.4 million pursuant to elections by employees to satisfy withholding
requirements under the Company's restricted stock and stock option plans. In
addition, the Company recorded an unrealized loss of $4.3 million to accumulated
other comprehensive income (loss) related to the adoption of SFAS No. 133 and
the change in fair value of the derivative instruments during the first half of
fiscal 2001.
-9-
ADVO, Inc.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities", as
amended by SFAS Nos. 137 and 138, requires companies to recognize all
derivatives on the balance sheet at fair value. If the derivative is a hedge,
depending on the nature of the hedge, changes in the fair value are either
offset against the change in fair value of assets, liabilities, or firm
commitments through earnings, or recognized in other comprehensive income until
the hedged item is recognized in earnings. The Company's interest rate swap
agreements are considered 'effective' under SFAS No. 133 and, as a result
changes in the fair value of the agreements are recorded in current assets or
liabilities with the offset amount recorded to accumulated other comprehensive
income (loss) in stockholders' deficiency.
The Company's existing interest rate swap agreements (derivatives) convert a
portion of its floating rate debt to a fixed rate basis through December 2002,
thus limiting substantial risk should interest rates fluctuate. In accordance
with its credit agreement, at March 31, 2001, $100 million of the Company's
outstanding variable rate debt was designated as hedged relating to the interest
rate swap agreement. The Company adopted SFAS No 133, as amended, on October 1,
2000 and recorded an unrealized loss of $1.2 million in accumulated other
comprehensive income (loss), offsetting the fair value of the swap agreements
recorded in other current liabilities.
PROPERTY, PLANT AND EQUIPMENT
-----------------------------
Property, plant and equipment investments were $17.9 million for the six-month
period ended March 31, 2001. These capital expenditures consisted mainly of
software development for the client management, order fulfillment and order
management systems, the purchase of computerized mail sorters (Alphaliners) for
the Company's production facilities, renovations at certain of the Company's
facilities and deployment of computer hardware. The Company expects its capital
expenditures for the entire year to be approximately $37.0 million.
LIQUIDITY
---------
The Company's main source of liquidity continues to be funds generated from
operating activities. In addition, the Company has available unused credit
commitments of $97.4 million that may be used to fund operating activities.
The net cash provided by operating activities for the six months ended March 31,
2001 was $14.7 million versus $23.1 million for the six months ended March 25,
2000. The year over year decrease was due to changes in accounts receivable,
accounts payable, accrued compensation and benefits, customer advances, other
current liabilities and taxes payable.
Cash and cash equivalents decreased $1.8 million to $4.2 million at March 31,
2001. Contributing to the decrease was $27.1 million of investing activities
offset by cash provided by operating activities of $14.7 million and financing
activities of $10.6 million.
Investing activities primarily consisted of $17.9 million for the capital
expenditures detailed above and $9.3 million, net of cash acquired, for
acquisitions and joint ventures made during the half of fiscal 2001. During the
first quarter of fiscal 2001, the Company announced the acquisition of MMSI, a
privately held direct mail advertising company for $7.3 million, net of cash
acquired. In addition, during the second quarter of fiscal 2001 the Company paid
an additional $1.0 million to MMSI for contingent consideration in connection
with the acquisition. The acquisition has been accounted for under the purchase
method of accounting and, accordingly, the results of operations of the acquired
company have been included in the consolidated statements of operations from its
acquisition date.
-10-
ADVO, Inc.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Net cash provided by financing activities included net borrowings of $6.0
million under the Company's renegotiated credit agreement, $4.0 million of a
note payable incurred with the acquisition of MMSI and $4.5 million of proceeds
from option exercises under the Company's stock option plan offset by treasury
stock purchases of $4.0 million.
FINANCING ARRANGEMENTS
----------------------
The Company maintains a credit agreement which provides for total credit
facilities of $300 million, consisting of a $135 million term loan and a $165
million revolving line of credit. At March 31, 2001 there was $196.0 million of
debt outstanding, with $3.8 million classified as current which represents the
Company's scheduled principal payment due in March, 2002. The Company
anticipates it will be able to meet its long-term debt obligations through funds
generated from operations. During April 2001 the Company borrowed an additional
$18.0 million under the revolving line of credit.
Under the terms of the credit agreement, the Company is required to maintain
certain financial ratios. In addition, the credit agreement also places
restrictions on disposals of assets, mergers and acquisitions, dividend
payments, investments and additional debt.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
The Company's interest expense is sensitive to changes in interest rates. In
this regard, changes in interest rates affect the interest paid on its debt. To
mitigate the impact of interest rate fluctuations, the Company has historically
maintained interest rate swap agreements on notional amounts totaling $100
million which is currently over 50% of its outstanding debt balance.
The Company believes that the interest rate swap agreements limit substantial
risk if interest rates should fluctuate. If interest rates should change by 2
percentage points for the remainder of the 2001 fiscal year from those rates in
effect at March 31, 2001, assuming no change in the outstanding debt balance and
considering the effects of the Company's interest rate swap agreements, interest
expense would increase/decrease by approximately $1.0 million.
SUBSEQUENT EVENTS
-----------------
Subsequent to the end of the second quarter of the current fiscal year, the
Company announced on April 19, 2001, the acquisition of New Jersey Shoppers
Guide for approximately $4.9 million. The acquisition will be accounted for
under the purchase method of accounting and, accordingly, the results of
operations of the acquired company will be included in the consolidated
statements of operations from its acquisition date. The acquired assets will be
recorded at their estimated fair values.
In addition, on April 19, 2001, subsequent to the end of the second quarter, the
Company announced that Beth Bronner had resigned as President and Chief
Operating Officer to explore other opportunities. As a result of a pre-existing
contractual agreement, the Company will record a charge of approximately $1.9
million during the third quarter of fiscal 2001.
-11-
FORWARD LOOKING STATEMENTS
--------------------------
Except for the historical information stated herein, the matters discussed in
this Management's Discussion and Analysis of Financial Condition and Results of
Operations contain forward looking statements within the meaning of Section 21E
of the Securities Exchange Act of 1934, as amended. Such forward looking
statements are based on current information and expectations and are subject to
risks and uncertainties which could cause the Company's actual results to differ
materially from those in the forward looking statements. Such risks and
uncertainties include but are not limited to: changes in customer demand and
pricing; the possibility of consolidation throughout the retail sector; the
impact of economic conditions on retail advertising spending; postal and paper
prices; possible governmental regulation or legislation affecting aspects of the
Company's business; the efficiencies achieved with technology upgrades; the
amount of shares the Company will purchase in the future under its buyback
program; fluctuations in interest rates related to the outstanding debt and
other general economic factors.
Part II - Other Information
Item 5. Other Information
-----------------
On April 19, 2001, subsequent to the end of the second quarter, the Company
announced that Beth Bronner had resigned as President and Chief Operating
Officer to explore other opportunities. As a result of a pre-existing
contractual agreement, the Company will record a charge of approximately $1.9
million during the third quarter of fiscal 2001.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibit Index
Exhibit No. Exhibits
---------- --------
10 Agreement dated April 24, 2001 between
ADVO, Inc. and Beth Bronner. *
* Management contract or compensatory plan required to be filed as an
exhibit.
(b) Reports on Form 8-K
-------------------
No report on Form 8-K was filed by the Company with respect to the quarter
ended March 31, 2001.
--------------------------------------------------------------------------------
Omitted from this Part II are items which are inapplicable or to which the
answer is negative for the period covered.
-12-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ADVO, Inc.
Date: May 15, 2001 By: /s/ JULIE ABRAHAM
------------ -------------------------------------
Julie Abraham
Senior Vice President
of Finance and Controller
(Principal Accounting Officer)
-13-