<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 March 26, 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 April 23, 1994 there were 20,843,029 shares of common stock
----------
outstanding.
<PAGE>
ADVO, Inc.
Index to Quarterly Report
on Form 10-Q
Quarter Ended March 26, 1994
Part I - Financial Information Page
------------------------------ ----
Item 1. Financial Statements (Unaudited)
<TABLE>
<CAPTION>
<S> <C>
Consolidated balance sheets -
March 26, 1994 and September 25, 1993 2
Consolidated statements of operations -
Six months and three months ended
March 26, 1994 and March 27, 1993 3
Consolidated statements of cash flows -
Six months ended March 26, 1994
and March 27, 1993 4
Consolidated statement of changes in
Stockholders' Equity -
Six months ended March 26, 1994 5
Notes to consolidated financial statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations. 8
Part II - Other Information
---------------------------
Item 6. Exhibits and Reports on Form 8-K. 11
Signatures 12
</TABLE>
<PAGE>
ADVO, Inc.
CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands, except share data)
<TABLE>
<CAPTION>
March 26, September 25,
1994 1993
--------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents-Related Party $ 16,280 $ 32,449
Cash and cash equivalents-Other 7,686 18,631
-------- --------
Total cash and cash equivalents 23,966 51,080
Marketable securities-Related Party 30,744 20,368
Accounts receivable, less allowances
of $7,172 and $4,472 54,046 52,816
Inventories 7,402 6,622
Prepaid expenses and other current assets 8,084 8,938
Deferred income taxes 12,290 11,667
-------- --------
Total current assets 136,532 151,491
Property and equipment 112,473 106,192
Less accumulated depreciation and amortization (56,182) (51,389)
-------- --------
Net property and equipment 56,291 54,803
Non-current deferred income taxes 924 348
Other assets 18,031 19,883
-------- --------
TOTAL ASSETS $211,778 $226,525
======== ========
LIABILITIES
Current liabilities:
Accounts payable $ 29,183 $ 24,879
Accrued compensation and benefits 27,006 24,175
Customer advances 12,943 15,079
Federal and state income taxes payable 2,025 5,450
Restructure reserve - short term 10,305 9,356
Accrued other expenses 20,604 12,380
-------- --------
Total current liabilities 102,066 91,319
Deferred liabilities 504 554
Restructure reserve - long term 12,226 16,394
-------- --------
12,730 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 24,316,036
and 23,234,958 shares, respectively) 243 232
Additional paid-in capital 132,563 124,299
Retained earnings 17,705 8,972
-------- --------
150,511 133,503
Less 3,194,831 shares and 1,016,143 shares,
respectively, of common stock held in
treasury, at cost
(53,529) (15,245)
Total stockholders' equity -------- --------
96,982 118,258
-------- --------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $211,778 $226,525
======== ========
</TABLE>
See Accompanying Notes.
-2-
<PAGE>
ADVO, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Six months ended Three months ended
----------------------- ------------------
March 26, March 27, March 26, March 27,
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $ 476,489 $ 440,845 $ 229,726 $ 212,800
Costs and expenses:
Cost of sales 358,952 332,359 174,350 162,230
Selling, general and
administrative 100,900 94,414 50,905 47,151
Provision for bad debts 1,585 1,611 764 438
--------- --------- --------- ---------
Operating income 15,052 12,461 3,707 2,981
Interest income-Related
Party 926 933 406 461
Interest income-Other 27 29 12 9
Other expense 380 392 199 179
--------- --------- --------- ---------
Income before income taxes 15,625 13,031 3,926 3,272
Provision for income taxes 5,937 4,395 1,492 1,155
--------- ---------- --------- ---------
Net income $ 9,688 $ 8,636 $ 2,434 $ 2,117
========= ========= ========= =========
Earnings per share (A) $ .39 $ .34 $ .10 $ .08
========= ========= ========= =========
Cash dividends declared per
share $ .045 $ .02 $ .025 $ .02
Weighted average common and
common equivalent shares:
Primary 24,554 25,396 24,240 25,461
Fully diluted 24,668 25,507 24,252 25,503
</TABLE>
- --------------
(A) Both primary and fully diluted.
See Accompanying Notes.
- 3 -
<PAGE>
ADVO, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Six months ended
-----------------------
March 26, March 27,
1994 1993
-------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 9,688 $ 8,636
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation and amortization 6,078 5,224
Amortization of deferred compensation 916 1,286
Deferred income taxes (1,199) (1,394)
Provision for bad debt 1,585 1,611
Pro forma adjustment for income taxes - 1,024
Other 305 6
Changes in assets and liabilities net of
effects of acquisitions:
Accounts receivable (2,815) 1,626
Inventories (780) 574
Other current assets 854 (1,978)
Other assets 920 (1,737)
Accounts payable 4,304 84
Accrued compensation and benefits 2,831 (862)
Customer advances (2,136) (2,135)
Federal and state income taxes payable (3,425) 293
Other current liabilities 1,610 245
Restructure reserve (3,219) -
Deferred liabilities (50) (74)
-------- --------
Net cash provided by operating activities 15,467 12,429
Cash flows from investing activities:
Investment in business ventures/acquisitions - (5,829)
Acquisition of property and equipment (6,726) (6,787)
Proceeds from disposals of property and equipment 78 14
Sales of marketable securities 13,181 15,560
Purchases of marketable securities (23,850) (34,945)
-------- --------
Net cash used in investing activities (17,317) (31,987)
Cash flows from financing activities:
Tax effect - vesting of restricted
stock/options exercised 7,070 961
Proceeds from exercise of stock options 433 285
Purchase of common stock for treasury (32,341) (1,294)
Dividends paid (426) -
Decrease in bank overdraft - (615)
Proceeds from short-term debt - 1,125
Principal payment on long-term debt - (88)
Cash distribution to satisfy subchapter
S tax liability - (1,227)
Other - (10)
-------- --------
Net cash used by financing activities (25,264) (863)
-------- --------
Decrease in cash and cash equivalents (27,114) (20,421)
Cash and cash equivalents at beginning of period 51,080 65,749
-------- --------
Cash and cash equivalents at end of period $ 23,966 $ 45,328
======== ========
Supplemental disclosures of cash flow information:
Income tax payments $ 3,533 $ 3,511
Interest paid - 108
Non-cash financing and investing activities:
Purchase of ADVO Common Stock
for treasury, paid subsequent
to March 26, 1994 $ 6,077 $ -
</TABLE>
See Accompanying Notes.
- 4 -
<PAGE>
ADVO, Inc.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited)
(In thousands, expect 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, 23,234,958 $ 232 (1,016,143) $(15,245) $124,299 $ 8,972 $118,258
1993
Purchase of
Common Stock
for
Treasury (2,187,688) (38,428) (38,428)
Grants of
restricted
stock 12,000 9,000 144 (144)
Exercise of
stock options 1,069,078 11 422 433
Tax effect-
employee stock
plans 7,070 7,070
Amortization
of deferred
compensation 916 916
Cash dividends
declared ($.045
per share) (955) (955)
Net income 9,688 9,688
----------------------------------------------------------------------------------------------
Balance -
March 26,
1994 24,316,036 $ 243 (3,194,831) $(53,529) $132,563 $17,705 $ 96,982
</TABLE>
-5-
<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 six month periods ended
March 26, 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 an S corporation for U.S.Federal and State purposes. As an 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 six month
periods ended March 26, 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 March 26, 1994 are as
follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Deferred tax assets:
Reserve for restructure $ 8,600
Reserve for deferred
compensation 2,529
Reserve for employee
benefits 5,610
Other 2,342
-------
Total deferred tax assets 19,081
-------
Deferred tax liabilities:
Tax over book
depreciation 5,867
-------
Total deferred tax liabilities 5,867
-------
Net deferred tax assets $13,214
=======
</TABLE>
- 6 -
<PAGE>
4. Marketable securities
Marketable securities, consisting principally of U.S. Treasury securities and
municipal bonds, are carried at cost, cost approximates market at March 26, 1994
and September 25, 1993. The cost of securities sold is determined by the
specific identification method.
- 7 -
<PAGE>
ADVO, Inc.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
- ---------------------
Revenues for the second quarter of fiscal 1994 ended March 26, 1994 increased
8.0% or $16.9 million over the comparable period of the prior fiscal year.
Fiscal 1994 year-to-date revenues also increased 8.1% or $35.6 million over the
comparable six month period of fiscal 1993. The Company experienced both
pricing and volume gains for the three and six month periods ended March 26,
1994 when compared with the same periods ended March 27, 1993. The volume gains
accounted for a majority of the revenue growth as reflected by the 8.1% and 8.8%
increases in shared mail packages delivered for the second quarter and first
half of fiscal 1994 when compared to the same periods of a year earlier.
Package volume for the second quarter of fiscal 1994 was 790.2 million versus
730.7 million in the second quarter of fiscal 1993 and 1,560.3 million for the
first six months fiscal 1994 versus 1,434.4 million in fiscal 1993. Pieces per
shared mail package were down slightly for the two periods over prior year, down
0.4% for the second quarter and 0.3% for the first six months. The decline 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 3.3% for both the
second quarter and the first six months.
Costs of sales remained relatively constant as a percentage of revenues for the
second quarter and first six months of fiscal 1994 when compared to the same
periods of fiscal 1993 at approximately 76% and 75%, respectively. Both periods
experienced increases, in absolute terms, of $12.1 million and $26.6 million for
the three and six month periods ended March 26, 1994, respectively, when
compared with the prior year. Postage and print costs accounted for the
majority of the increase for each of the periods and resulted primarily from the
volume growth discussed above when comparing the second quarter and first half
of fiscal 1994 with a year earlier. Postage costs increased 7% and 8%,
respectively, for the three and six months ended March 26, 1994 over the
comparable periods ended March 27, 1993 and resulted from the shared mail
package growth. Print costs increased roughly 11% over prior year for both the
second quarter and first six months of fiscal 1994 and resulted from the
approximate 8% increase in both the second quarter and first six months of
fiscal 1994 over prior year in total pieces mailed to 5.8 billion and 11.9
billion, respectively.
Selling expense, including the provision for bad debt, remained constant as a
percentage of revenues at approximately 12% for the second quarter of fiscal
1994 and fiscal 1993 and 13% for the six month periods ended March 26, 1994 and
March 27, 1993. The second quarter of fiscal 1994 experienced an absolute
increase of $2.2 million in selling costs when compared to the second quarter of
fiscal 1993. The first half of fiscal 1994's selling costs also increased in
absolute terms, $3.0 million, when compared with the same period of a year
earlier. Both the quarter and first half 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
9.5% for the three month periods ended March 26, 1994 and March 27, 1993 and 9%
for the first half of fiscal 1994 and 1993. In absolute terms, general and
administrative costs increased $1.8 million for the second quarter of fiscal
1994 and $3.5 million for the first half of fiscal 1994. The increase for the
second quarter was primarily related to increases in promotional and consulting
costs while the increase for the first half was related to increased employee
costs as well as those costs mentioned for the second quarter when compared to a
year earlier.
As a result of the above, the Company reported operating income of $3.7 million
for the second quarter and $15.1 million for the first half of fiscal 1994
versus $3.0 million for the second quarter and $12.5 million for the first half
of fiscal 1993.
The effective income tax rate for the three and six month periods ended March
26, 1994 was 38% versus 35.3% for the second quarter and 33.7% for the first
half of fiscal 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 prior years. During the first quarter of fiscal 1994, the Company
implemented Statement of Financial Accounting standards No. 109 "Accounting for
Income Taxes". There was no material impact to the Company's consolidated
operations or financial position.
- 8 -
<PAGE>
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 six months of fiscal 1994, the Company has recorded reductions
to the reserve of $3.2 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 March 26, 1994.
The Company's weighted average shares used in its earning per share calculations
decreased approximately 1.2 million shares for the second quarter and 0.8
million shares for the first six months of fiscal 1994 ended March 26, 1994 when
compared with the same periods of fiscal 1993. The decrease was primarily the
result of the Company's buyback program announced on October 19, 1993 to
reacquire up to 2.1 million shares of its Common Stock. As of March 26, 1994
the Company has committed to the repurchase of 1,790,800 shares under this
program.
Financial Condition
- -------------------
Working capital decreased $25.7 million to $34.5 million at March 26, 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 $25.0 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 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 accounts
payable resulting from the timing of payments to vendors and an increase in
accrued other expenses resulting from a $6.1 million repurchase of the Company's
Common Stock under its repurchase program, as discussed earlier, that was
settled subsequent to March 26, 1994. Offsetting these decreases to a slight
degree, was a decrease in federal and state income taxes payable due to the
differences between book and tax deduction amounts for stock option exercises
under the Company's employee stock option plans. The increase in accounts
receivable allowances was primarily related to the growth in revenues and the
Company's overall more conservative evaluation of receivables during the first
six months of fiscal 1994 than during fiscal 1993. As a result of the afore-
mentioned, the working capital ratio decreased to 1.34 at March 26, 1994 from
1.66 at September 25, 1993.
Total stockholders' equity decreased $21.3 million to $97.0 million at March 26,
1994. The decrease was reflective of the $38.4 million recorded for the
purchases 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 half of fiscal 1994 of $9.7 million and $.9 million recorded for the
amortization of deferred compensation.
Liquidity
- ---------
The Company's main source of liquidity continues to be funds from operating
activities. Cash provided from operating activities increased $3.0 million to
$15.5 million for the six months ended March 26, 1994 versus $12.4 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, the increase in accounts payable, for the reasons mentioned above, and
the increase in accrued compensation and benefits due to the timing of payments
for employee benefits. Offsetting these increases to cash flows from operating
activities were increases to accounts receivable reflective of the growth in
revenues and timing of customer payments, decreases to Federal and state income
taxes payable from the tax benefits realized on the exercises of employee stock
options and the decrease to the reserve for restructuring associated with the
Company's plan of restructuring.
- 9 -
<PAGE>
The Company experienced a $27.1 million decrease in cash and cash equivalents
during the first half of fiscal 1994. The decrease was primarily reflective of
the $32.3 million paid for the repurchase of the Company's Common Stock, as
discussed earlier, and the $10.7 million used for investments in marketable
securities. These decreases were offset to a degree by the $15.5 million
provided from operating activities. For the first six months of fiscal 1993,
the Company's cash and cash equivalents decreased $20.4 million primarily
related to the $19.4 million used to invest in marketable securities.
Also offsetting the $12.4 million provided from operating activities in the
first half of fiscal 1993 was $5.8 million used for investment in business
ventures and $6.8 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 will begin with the quarter ended March 26, 1994 or the
Company's second fiscal quarter.
- 10 -
<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
-------------------
A report on Form 8-K dated February 16, 1994 was filed by the Company
during the quarter ended March 26, 1994. The Form 8-K reported under
Item 5 thereof the increase in its quarterly dividend from $.02 to $.025
or $.10 annually versus $.08 commencing with its second fiscal quarter
ended March 26, 1994. The record date for this quarter will be April 4,
1994 with a payment date of April 15, 1994.
- --------------------------------------------------------------------------------
Omitted from this Part II are items which are inapplicable or to which the
answer is negative for the period covered.
- 11 -
<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: May 6, 1994 By:ROBERT S. HIRST \S\
----------- --------------------------
Robert S. Hirst
Vice President and Controller
(Principal Accounting Officer)
- 12 -
<PAGE>
Exhibit 11
----------
Page 1 of 2
ADVO, Inc.
COMPUTATION OF PRIMARY PER SHARE EARNINGS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Six months ended Three months ended
------------------------- --------------------
March 26, March 27, March 26, March 27,
1994 1993 1994 1993
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
EARNINGS APPLICABLE TO
COMMON STOCK
Net income $ 9,688 $ 8,636 $ 2,434 $ 2,117
------- ------- ------- -------
Net income applicable
to common stock $ 9,688 $ 8,636 $ 2,434 $ 2,117
======= ======= ======= =======
<CAPTION>
AVERAGE COMMON AND COMMON EQUIVALENT
SHARES (A)
<S> <C> <C> <C> <C>
Average common shares outstanding 21,499 19,344 21,304 20,204
Assumed conversion or exercise of:
Warrants 2,235 2,315 2,264 2,335
Stock Options 763 1,123 640 1,145
Series A Preferred Stock - 2,459 - 1,675
Restricted Stock 57 155 32 102
------- ------- ------- -------
Weighted average common
equivalent shares 24,554 25,396 24,240 25,461
======= ======= ======= =======
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE $ .39 $ .34 $ .10 $ .08
======= ======= ======= =======
</TABLE>
(A) The three and six month periods ended March 27, 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.
<PAGE>
Exhibit 11
----------
Page 2 of 2
ADVO, Inc.
COMPUTATION OF FULLY DILUTED PER SHARE EARNINGS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Six months ended Three months ended
------------------------- --------------------
March 26, March 27, March 26, March 27,
1994 1993 1994 1993
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
EARNINGS APPLICABLE TO FULLY
DILUTED SHARES
Net income $ 9,688 $ 8,636 $ 2,434 $ 2,177
_______ _______ ------- -------
Net income applicable
to common stock $ 9,688 $ 8,636 $ 2,434 $ 2,117
======= ======= ======= =======
<CAPTION>
FULLY DILUTED SHARES (A)
<S> <C> <C> <C> <C>
Average common shares outstanding 21,499 19,344 21,304 20,204
Assumed conversion or exercise of:
Warrants 2,268 2,345 2,268 2,345
Stock Options 831 1,167 650 1,160
Series A Preferred Stock - 2,459 - 1,675
Restricted Stock 70 192 30 119
------- ------- ------- -------
Fully diluted shares 24,668 25,507 24,252 25,503
======= ======= ======= =======
EARNINGS PER SHARE ASSUMING
FULL DILUTION $ .39 $ .34 $ .10 $ .08
======= ======= ======= =======
</TABLE>
(A) The three and six month periods ended March 27, 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.
