<PAGE>
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 June 25, 1994
-------------
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: (203) 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 July 23, 1994 there were 20,856,351 shares of common stock
----------
outstanding.
<PAGE>
ADVO, Inc.
Index to Quarterly Report
on Form 10-Q
Quarter Ended June 25, 1994
<TABLE>
<CAPTION>
Part I - Financial Information Page
------------------------------ ----
<S> <C>
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets -
June 25, 1994 and September 25, 1993 3
Consolidated statements of operations -
Nine months and three months ended
June 25, 1994 and June 26, 1993 4
Consolidated statements of cash flows -
Nine months ended June 25, 1994
and June 26, 1993 5
Consolidated statement of changes in
Stockholders' Equity -
Nine months ended June 25, 1994 6
Notes to consolidated financial statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations. 9
<CAPTION>
Part II - Other Information
---------------------------
<S> <C>
Item 6. Exhibits and Reports on Form 8-K. 12
Signatures 13
</TABLE>
- 2 -
<PAGE>
ADVO, Inc.
CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands, except share data)
<TABLE>
<CAPTION>
June 25, September 25,
1994 1993
------------ -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents-Related Party $ 2,212 $ 32,449
Cash and cash equivalents-Other 26,120 18,631
-------- --------
Total cash and cash equivalents 28,332 51,080
Marketable securities-Related Party 30,597 20,368
Accounts receivable, less allowances
of $6,457 and $4,472 52,643 52,816
Inventories 5,267 6,622
Prepaid expenses and other current assets 7,608 8,938
Deferred income taxes 15,927 11,667
-------- --------
Total current assets 140,374 151,491
Property and equipment 115,797 106,192
Less accumulated depreciation and amortization (58,933) (51,389)
-------- --------
Net property and equipment 56,864 54,803
Non-current deferred income taxes - 348
Other assets 17,187 19,883
-------- --------
TOTAL ASSETS $214,425 $226,525
======== ========
LIABILITIES
Current liabilities:
Accounts payable $ 27,593 $ 24,879
Accrued compensation and benefits 30,951 24,175
Customer advances 7,918 15,079
Federal and state income taxes payable 8,031 5,450
Restructure reserve - short term 11,136 9,356
Accrued other expenses 16,162 12,380
-------- --------
Total current liabilities 101,791 91,319
Deferred liabilities 483 554
Non-current deferred income taxes 1,784 -
Restructure reserve - long term 9,897 16,394
-------- --------
12,164 16,948
STOCKHOLDERS' EQUITY
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 24,360,861
and 23,234,958 shares, respectively) 244 232
Additional paid-in capital 133,105 124,299
Retained earnings 26,090 8,972
-------- --------
159,439 133,503
Less 3,504,509 shares and 1,016,143 shares,
respectively, of common stock held in
treasury, at cost (58,969) (15,245)
-------- --------
Total stockholders' equity 100,470 118,258
-------- --------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $214,425 $226,525
======== ========
</TABLE>
See Accompanying Notes.
- 3 -
<PAGE>
ADVO, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Nine months ended Three months ended
------------------- -------------------
June 25, June 26, June 25, June 26,
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $732,570 $676,187 $256,082 $235,343
Costs and expenses:
Cost of sales 546,001 506,925 187,050 174,566
Selling, general and
administrative 154,823 142,543 53,923 48,130
Provision for bad debts 2,075 2,149 490 538
-------- -------- -------- --------
Operating income 29,671 24,570 14,619 12,109
Interest income-Related Party 1,320 1,406 395 473
Interest income-Other 42 41 14 12
Other expense 1,044 533 664 141
-------- -------- -------- --------
Income before income taxes 29,989 25,484 14,364 12,453
Provision for income taxes 11,396 8,486 5,458 4,091
-------- -------- -------- --------
Net income $ 18,593 $ 16,998 $ 8,906 $ 8,362
======== ======== ======== ========
Earnings per share (A) $ .77 $ .67 $ .38 $ .33
======== ======== ======== ========
Cash dividends declared per
share $ .07 $ .04 $ .025 $ .02
Weighted average common and
common equivalent shares:
Primary 24,113 25,415 23,234 25,455
Fully diluted 24,111 25,463 23,229 25,466
</TABLE>
- --------------
(A) Both primary and fully diluted.
See Accompanying Notes.
- 4 -
<PAGE>
ADVO, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine months ended
---------------------
June 25, June 26,
1994 1993
---------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 18,593 $ 16,998
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation and amortization 9,338 8,062
Amortization of deferred compensation 1,311 1,820
Deferred income taxes (2,128) (2,226)
Provision for bad debt 2,075 2,149
Pro forma adjustment for income taxes - 1,505
Other 586 (97)
Changes in assets and liabilities net of
effects of acquisitions:
Accounts receivable (1,902) (2,266)
Inventories 1,355 596
Other current assets 1,330 (973)
Other assets 1,324 (1,997)
Accounts payable 2,714 434
Accrued compensation and benefits 6,776 1,505
Customer advances (7,161) (1,838)
Federal and state income taxes payable 2,581 2,809
Other current liabilities 3,259 1,394
Restructure reserve (4,717) -
Deferred liabilities (71) (93)
-------- --------
Net cash provided by operating activities 35,263 27,782
Cash flows from investing activities:
Investment in business ventures/acquisitions - (7,519)
Acquisition of property and equipment (10,239) (11,027)
Proceeds from disposals of property and equipment 82 73
Sales of marketable securities 26,246 32,085
Purchases of marketable securities (36,929) (50,895)
-------- --------
Net cash used in investing activities (20,840) (37,283)
Cash flows from financing activities:
Tax effect - vesting of restricted
stock/options exercised 7,102 1,100
Proceeds from exercise of stock options 549 418
Purchase of common stock for treasury (43,868) (1,410)
Dividends paid (954) (401)
Decrease in bank overdraft - (615)
Proceeds from short-term debt - 1,600
Principal payment on long-term debt - (126)
Cash distribution to satisfy subchapter
S tax liability - (2,614)
Other - (9)
-------- --------
Net cash used by financing activities (37,171) (2,057)
-------- --------
Decrease in cash and cash equivalents (22,748) (11,558)
Cash and cash equivalents at beginning of period 51,080 65,749
-------- --------
Cash and cash equivalents at end of period $ 28,332 $ 54,191
======== ========
Supplemental disclosures of cash flow information:
Income tax payments $ 3,881 $ 5,297
Interest paid - 166
</TABLE>
See Accompanying Notes.
- 5 -
<PAGE>
ADVO, Inc.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited)
(In thousands, except share data)
<TABLE>
<CAPTION>
Common Stock Treasury Stock
------------ --------------
Additional
Paid-In Retained Total
Shares Amount Shares Amount Capital Earnings Equity
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance - September 25,
1993 23,234,958 $232 (1,016,143) $(15,245) $124,299 $ 8,972 $118,258
Purchase of
Common Stock
for
treasury (2,497,366) (43,868) (43,868)
Grants of
restricted
stock 44,000 9,000 144 (144)
Exercise of
stock options 1,081,903 12 537 549
Tax effect-
employee stock
plans 7,102 7,102
Amortization
of deferred
compensation 1,311 1,311
Cash dividends
declared ($.07
per share) (1,475) (1,475)
Net income 18,593 18,593
- ----------------------------------------------------------------------------------------------------------------
Balance - June 25,
1994 24,360,861 $244 (3,504,509) $(58,969) $133,105 $26,090 $100,470
</TABLE>
- 6 -
<PAGE>
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 (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and nine month periods ended
June 25, 1994 are not necessarily indicative of the results that may be expected
for the fiscal year ended September 24, 1994. 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 25, 1993.
Revenues are recognized when services are rendered and are presented in the
financial statements net of sales allowances. Certain reclassifications have
been made in the fiscal 1993 financial statements to conform with the fiscal
1994 presentation.
2. Merger
On August 19, 1993 a plan of merger was consummated between the Company and
Marketing Force, Inc., ("MF" or "Marketing Force") a privately held specialty
marketing company located in Michigan, through the exchange of 2,115,956 shares
of ADVO Common Stock for all of the outstanding stock of MF. The merger was
accounted for as a pooling of interests and, accordingly, the Company's
consolidated financial statements have been restated to include the accounts and
operations of MF for all periods presented. MF's reported financial results
have been adjusted to conform to the financial presentation of the Company.
There were no significant intercompany transactions or differences in accounting
policies between the Company and MF. Prior to the merger, MF had elected to be
taxed as a subchapter S corporation for U.S. Federal and State purposes. As a
subchapter S corporation, MF's shareholders were required to pay individual
income taxes based on MF's taxable income. Income taxes on income for the
periods MF was a subchapter S corporation have been provided on a pro forma
basis at an effective rate of 41%. The 41% effective rate is ADVO's estimate of
the federal and state tax rates that would have been applied to MF had it been
merged with ADVO for the periods presented.
3. Income Taxes
Beginning with the first quarter of fiscal 1994, the Company changed its method
of accounting for income taxes from the deferred method to the liability method
required by FASB Statement No. 109, "Accounting for Income Taxes". As permitted
under the new rules, prior years' financial statements have not been restated.
The cumulative effect of adopting statement 109 for the three and nine month
periods ended June 25, 1994 was not material to either the Company's results of
operations or financial position.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax assets and liabilities as of June 25, 1994 are as
follows (in thousands):
<TABLE>
<CAPTION>
Deferred tax assets:
<S> <C>
Reserve for restructure $ 7,958
Reserve for deferred
compensation 2,769
Reserve for employee
benefits 5,910
Other 3,298
-------
Total deferred tax assets 19,935
-------
<CAPTION>
<S> <C>
Deferred tax liabilities:
Tax over book
depreciation 5,792
-------
Total deferred tax liabilities 5,792
-------
Net deferred tax assets $14,143
=======
</TABLE>
- 7 -
<PAGE>
4. Marketable securities
Marketable securities, consisting principally of U.S. Treasury securities and
municipal bonds, are carried at cost, cost approximates market at June 25, 1994
and September 25, 1993. The cost of securities sold is determined by the
specific identification method.
- 8 -
<PAGE>
ADVO, Inc.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
- ---------------------
Revenues for the third quarter of fiscal 1994 ended June 25, 1994 increased
8.8% or $20.7 million over the comparable period of the prior fiscal year.
Fiscal 1994 year-to-date revenues also increased 8.3% or $56.4 million over
the comparable nine month period of fiscal 1993. The Company experienced
both pricing and volume gains for the three and nine month periods ended June
25, 1994 when compared with the same periods ended June 26, 1993. The volume
gains accounted for a majority of the revenue growth and resulted from the
increase in shared mail packages delivered and the increase of pieces per
package within existing packages. Package volume for the third quarter of
fiscal 1994 was 792.3 million versus 748.0 million in the third quarter of
fiscal 1993, a 5.9% increase. For the nine months ended June 25, 1994,
package volume increased 7.8% to 2,352.7 million versus 2,182.4 million for
the comparable period in fiscal 1993. Pieces per shared mail package for the
two periods remained relatively constant with the prior year, at 7.83 for the
third quarter and 7.68 for the nine months. The flat growth in pieces per
shared mail package primarily resulted from the Company's addition of a
second weekly mailing in some of its larger markets, adjusting for these
packages, pieces per shared mail package would have increased 3.7% for the
third quarter and 3.2% for the nine months.
Cost of sales held steady as a percentage of revenues for the nine month
periods ended June 25, 1994 and June 26, 1993 at approximately 75%. For the
third quarter of fiscal 1994, cost of sales decreased 1% to 73% of revenues
versus 74% in the third quarter of fiscal 1993, mainly attributable to
increased postage utilization. In absolute terms, cost of sales increased
$12.5 million in the third quarter of fiscal 1994 and $39.1 million for the
nine months ended June 25, 1994 over the comparable periods a year earlier.
Increases in both postage and print costs associated with the shared mail
package and piece growth over the prior year's results accounted for a
majority of the increase. Total pieces mailed increased 7.7% to 18.1 billion
during the nine month period ended June 25, 1994 while the third quarter
experienced a 6.5% increase to 6.2 billion versus the comparable period of
the prior year.
Selling expense, including the provision for bad debt, remained constant as a
percentage of revenues at approximately 12% for the third quarter of fiscal
1994 and fiscal 1993 and for the nine month periods ended June 25, 1994 and
June 26, 1993. The third quarter of fiscal 1994 experienced an absolute
increase of $3.0 million in selling costs when compared to the third quarter
of fiscal 1993. During the first nine months of fiscal 1994 selling costs
increased $6.0 million in absolute terms when compared with the same period
of a year earlier. Both the quarter and nine month increases were primarily
related to increased commission expense resulting from the fiscal 1994
revenue growth over fiscal 1993.
As a percentage of revenues, general and administrative costs were
approximately 9.0% for the three and nine month periods ended June 25, 1994
and June 26, 1993. In absolute terms, general and administrative costs
increased $2.7 million for the third quarter of fiscal 1994 and $6.2 million
for the nine month period ended June 26, 1994 over the comparable periods of
a year earlier. The increase for the third quarter was primarily related to
increases in promotional and consulting costs while the increase for the nine
months was related to increased employee costs as well as those costs
mentioned for the third quarter when compared to a year earlier.
As a result of the above, the Company reported operating income of $14.6
million for the third quarter and $29.7 million for the nine month period
ended June 26, 1994 versus $12.1 million for the third quarter and $24.6
million for the nine month period ended June 26, 1993.
- 9 -
<PAGE>
The effective income tax rate for the three and nine month periods ended June
25, 1994 was 38% versus 32.9% for the third quarter and 33.3% for the nine
month period ended June 26, 1993. The increase in the effective income tax
rate for fiscal 1994 is principally related to the increase in the Federal
Statutory rate, effective January 1, 1993 and the expiration of Federal tax
benefits available in the prior fiscal year. During the first quarter of
fiscal 1994, the Company implemented Statement of Financial Accounting
Standard No. 109 "Accounting for Income Taxes". There was no material impact
to the Company's consolidated operations or financial position.
For the fiscal year ended September 25, 1993, the Company recorded a $25.8
million charge to operations in connection with a plan of restructuring.
Through the first nine months of fiscal 1994, the Company has recorded
reductions to the reserve of $4.7 million. The Company's management
continues to believe that cost efficiencies and future benefits will be
recognized from the plan of restructuring and there have been no material
changes to the estimates or timing of the restructuring plan as of June 25,
1994.
The Company's weighted average shares used in its earnings per share
calculations decreased approximately 2.2 million shares for the third quarter
and 1.3 million shares for the nine month period ended June 25, 1994 when
compared with the same periods of fiscal 1993. The decrease was primarily
the result of the Company's stock buyback program announced on October 19,
1993 to reacquire up to 2.1 million shares of its Common Stock. As of June
25, 1994 the Company has purchased 2,097,175 shares under this program.
In early 1995, the Company expects to experience an increase to its postage
costs as a result of the pending postal rate increase. The Company is
currently maximizing its efforts to ensure that any increases implemented by
the United States Postal Service as a result of the postal rate case will
fairly reflect the Company's position as a work sharing member of the postal
system. The final announcement of the magnitude of the postal rate increase
is expected in December 1994. Typically, the Company's agreements with its
customers provide that any postal increase will be immediately passed along
to the customer.
Financial Condition
- -------------------
Working capital decreased $21.6 million to $38.6 million at June 25, 1994
from $60.2 million at September 25, 1993. The decrease from September 25,
1993 was mainly attributable to the decrease in cash and cash equivalents
resulting from the $36.6 million used to purchase the Company's Common Stock
for treasury under a repurchase program announced by the Company on October
19, 1993. The program was undertaken because the Company believes its stock
is undervalued at current market prices and, therefore, represents a sound
investment. The Company also acquired $7.3 million of its Common Stock for
treasury pursuant to elections made by employees to pay the purchase price of
stock options and to satisfy tax withholding requirements under the Company's
restricted stock and stock option plans.
Also contributing to the decrease in working capital were increases in
accrued compensation and benefits resulting from the Company's improved
revenue and operating results and an increase in the short-term portion of
the restructure reserve resulting from items accrued within the long-term
portion becoming current. The increase in accrued other expenses was
primarily due to the increase in consulting costs. Offsetting these increases
to a slight degree, was a decrease in customer advances due to the timing of
customer payments. As a result of the aforementioned, the working capital
ratio decreased to 1.38 at June 25, 1994 from 1.66 at September 25, 1993.
Total stockholders' equity decreased $17.8 million to $100.5 million at June
25, 1994. The decrease was reflective of the $43.9 million recorded for the
purchase of the Company's Common Stock for treasury as discussed above. This
decrease was offset somewhat by $7.1 million recorded for the tax benefit on
the exercise of options under the Company's employee stock option plans and
the vesting of restricted stock under the Company's restricted stock plans.
Also offsetting the treasury stock purchases were the Company's net income
for the first nine months of fiscal 1994 of $18.6 million and $1.3 million
recorded for the amortization of deferred compensation.
- 10 -
<PAGE>
Liquidity
- ---------
The Company's main source of liquidity continues to be funds from operating
activities. Cash provided from operating activities increased $7.5 million
to $35.3 million for the nine months ended June 25, 1994 versus $27.8 million
for the comparable period of fiscal 1993. The increase in cash provided from
operating activities was mainly attributable to the Company's improved
operating results and the increase in accrued compensation and benefits, for
the reasons mentioned above. Offsetting these increases to cash flows from
operating activities were decreases to customer advances as discussed above
and the decrease to the reserve for restructuring associated with the
Company's plan of restructuring.
The Company experienced a $22.7 million decrease in cash and cash equivalents
during the nine month period ended June 25, 1994. The decrease was primarily
reflective of the $43.9 million paid for the purchase of the Company's Common
Stock under its repurchase program and employee stock programs, as discussed
earlier, and the $10.7 million used for investments in marketable securities.
These decreases were offset to a degree by the $35.3 million provided from
operating activities. For the first nine months of fiscal 1993, the
Company's cash and cash equivalents decreased $11.6 million primarily related
to the $18.8 million used to invest in marketable securities.
Also offsetting the $27.8 million provided from operating activities in the
first nine months of fiscal 1993 was $7.5 million used for investment in
business ventures and $11.0 million used for capital additions.
On February 16, 1994 the Company announced an increase in its quarterly
dividend from $.02 per share to $.025 per share or $.10 annually from $.08.
The increase in the dividend began with the quarter ended March 26, 1994 or
the Company's second fiscal quarter.
- 11 -
<PAGE>
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibit Index
Sequential
Exhibit No. Exhibits Page Number
----------- -------- -----------
11 Statement re computation of per share
earnings.
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed by the Company during the quarter
ended June 25, 1994.
- --------------------------------------------------------------------------------
Omitted from this Part II are items which are inapplicable or to which the
answer is negative for the period covered.
- 12 -
<PAGE>
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: August 5, 1994 By:ROBERT S. HIRST /s/
-------------- ----------------------------------
Robert S. Hirst
Vice President and Controller
(Principal Accounting Officer)
- 13 -
<PAGE>
Exhibit 11
----------
Page 1 of 2
ADVO, Inc.
COMPUTATION OF PRIMARY PER SHARE EARNINGS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Nine months ended Three months ended
---------------------------------------------
June 25, June 26, June 25, June 26,
1994 1993 1994 1993
-------- --------- -------- --------
<S> <C> <C> <C> <C>
EARNINGS APPLICABLE TO COMMON STOCK
Net income $18,593 $16,998 $8,906 $8,362
------- ------- ------ --------
Net income applicable
to common stock $18,593 $16,998 $8,906 $8,362
======= ======= ====== ========
AVERAGE COMMON AND COMMON EQUIVALENT
SHARES (A)
Average common shares outstanding 21,240 20,198 20,721 21,905
Assumed conversion or exercise of:
Warrants 2,236 2,317 2,238 2,321
Stock Options 586 1,122 235 1,119
Series A Preferred Stock - 1,639 - -
Restricted Stock 51 139 40 110
------- ------- ------ ------
Weighted average common
equivalent shares 24,113 25,415 23,234 25,455
======= ======= ====== ======
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE $ .77 $ .67 $ .38 $ .33
======= ======= ====== ======
</TABLE>
(A) The three and nine month periods ended June 26, 1993 have been restated for
2,115,956 common shares issued in connection with the merger of ADVO, Inc.
and Marketing Force, Inc. on August 19, 1993 accounted for as a pooling of
interests. The shares are being treated as if issued as of the beginning of
each period presented.
- 14 -
<PAGE>
Exhibit 11
----------
Page 2 of 2
ADVO, Inc.
COMPUTATION OF FULLY DILUTED PER SHARE EARNINGS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Nine months ended Three months ended
------------------- --------------------
June 25, June 26, June 25, June 26,
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
EARNINGS APPLICABLE TO FULLY
DILUTED SHARES
Net income $18,593 $16,998 $ 8,906 $8,362
------- ------- ------- -------
Net income applicable
to common stock $18,593 $16,998 $ 8,906 $ 8,362
======= ======= ======= =======
FULLY DILUTED SHARES (A)
Average common shares outstanding 21,240 20,198 20,721 21,905
Assumed conversion or exercise of:
Warrants 2,236 2,322 2,238 2,322
Stock Options 586 1,129 235 1,121
Series A Preferred Stock - 1,639 - -
Restricted Stock 49 175 35 118
------- ------- ------- -------
Fully diluted shares 24,111 25,463 23,229 25,466
======= ======= ======= =======
EARNINGS PER SHARE ASSUMING
FULL DILUTION $ .77 $ .67 $ .38 $ .33
======= ======= ======= =======
</TABLE>
(A) The three and nine month periods ended June 26, 1993 have been restated for
2,115,956 common shares issued in connection with the merger of ADVO, Inc.
and Marketing Force, Inc. on August 19, 1993 accounted for as a pooling of
interests. The shares are being treated as if issued as of the beginning
of each period presented.
- 15 -
