<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 28, 1998
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 25, 1998 there were 22,630,326 shares of common stock outstanding.
<PAGE>
ADVO, Inc.
Index to Quarterly Report
on Form 10-Q
Quarter Ended March 28, 1998
<TABLE>
<CAPTION>
Part I - Financial Information Page
<S> <C>
Item 1. Financial Statements (Unaudited).
Consolidated balance sheets -
March 28, 1998 and September 27, 1997. 2
Consolidated statements of operations -
Six months and three months ended
March 28, 1998 and March 29, 1997. 3
Consolidated statements of cash flows -
Six months ended March 28, 1998
and March 29, 1997. 4
Notes to consolidated financial statements. 5
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations. 7
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K. 10
Signatures 11
</TABLE>
<PAGE>
ADVO, Inc.
CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands, except share data)
<TABLE>
<CAPTION>
March 28, September 27,
1998 1997
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents (1) $ 23,325 $ 25,963
Accounts receivable, net 65,083 66,664
Inventories 3,867 4,149
Prepaid expenses and other current assets 3,223 4,759
Deferred income taxes 15,933 14,248
--------- ---------
Total current assets 111,431 115,783
Property, plant and equipment 179,870 166,991
Less accumulated depreciation and amortization (99,986) (90,899)
--------- ---------
Net property, plant and equipment 79,884 76,092
Other assets 21,846 16,678
--------- ---------
TOTAL ASSETS $ 213,161 $ 208,553
--------- ---------
--------- ---------
LIABILITIES
Current liabilities:
Current portion of long-term debt $ 13,163 $ 10,125
Accounts payable 39,824 44,644
Accrued compensation and benefits 23,686 29,245
Other current liabilities 32,616 31,569
--------- ---------
Total current liabilities 109,289 115,583
Long-term debt 171,666 140,666
Deferred income taxes 9,856 9,589
Other liabilities 3,354 2,636
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 28,839,746
and 28,428,952 shares, respectively) 288 284
Additional paid-in capital 167,705 163,317
Accumulated deficit (141,298) (155,113)
--------- ---------
26,695 8,488
Less common stock held in
treasury, at cost (107,699) (68,409)
--------- ---------
Total stockholders' deficiency (81,004) (59,921)
--------- ---------
TOTAL LIABILITIES & STOCKHOLDERS'
DEFICIENCY $ 213,161 $ 208,553
--------- ---------
--------- ---------
</TABLE>
(1) Includes cash and cash equivalents invested with related party of
$11,500,000 at March 28, 1998 and $11,613,000 at September 27, 1997.
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 28, March 29, March 28, March 29,
1998 1997 1998 1997
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Revenues $515,376 $497,625 $253,232 $242,494
Costs and expenses:
Cost of sales 384,234 376,612 189,305 184,275
Selling, general and
administrative 99,644 97,370 50,344 49,386
Provision for bad debts 1,852 1,682 1,127 875
--------- --------- --------- ---------
Operating income 29,646 21,961 12,456 7,958
Interest expense 7,229 7,580 3,668 3,717
Interest income (A) 511 337 257 190
Other expense 281 324 133 172
--------- --------- --------- ---------
Income before income taxes 22,647 14,394 8,912 4,259
Provision for income taxes 8,832 5,614 3,476 1,661
--------- --------- --------- ---------
Net income $ 13,815 $ 8,780 $ 5,436 $ 2,598
--------- --------- --------- ---------
--------- --------- --------- ---------
Earnings per common share (B) $ .62 $ .36 $ .24 $ .11
--------- --------- --------- ---------
--------- --------- --------- ---------
Earnings per common share
- assuming dilution (B) $ .60 $ .36 $ .24 $ .11
--------- --------- --------- ---------
--------- --------- --------- ---------
Weighted average common shares 22,427 24,283 22,435 24,345
Weighted average diluted shares 23,048 24,617 23,037 24,641
</TABLE>
(A) Includes interest income from a related party of $336,000 and $169,000 for
the six months and three months ended March 28, 1998 and $98,000 and
$78,000 for the six months and three months ended March 29, 1997,
respectively.
(B) The Company adopted Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("EPS") during the first quarter of fiscal 1998. Prior
year EPS amounts have been restated to conform to the provisions of the new
statement.
See Accompanying Notes.
- 3 -
<PAGE>
ADVO, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Six months ended
---------------------
March 28, March 29,
1998 1997
--------- ---------
<S> <C> <C>
Net cash provided by operating activities $ 24,424 $ 20,264
Cash flows from investing activities:
Acquisition of property, plant and equipment (11,374) (13,884)
Proceeds from disposals of property and equipment -- 14
Acquisitions, net of cash acquired (10,720) --
--------- ---------
Net cash used by investing activities (22,094) (13,870)
Cash flows from financing activities:
Revolving line of credit - net 41,500 4,000
Payments of long-term borrowings (7,462) (13,930)
Payment of debt issue costs (1,349) --
Proceeds from exercise of stock options 1,818 1,934
Purchase of common stock for treasury (39,476) (986)
Other 1 3
--------- ---------
Net cash used by financing activities (4,968) (8,979)
--------- ---------
Decrease in cash and cash equivalents (2,638) (2,585)
Cash and cash equivalents at beginning of period 25,963 13,303
--------- ---------
Cash and cash equivalents at end of period $ 23,325 $ 10,718
--------- ---------
--------- ---------
</TABLE>
See Accompanying Notes
- 4 -
<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 six month period ended March 28, 1998 are not necessarily indicative of
the results that may be expected for the fiscal year ending September 26,
1998. 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 27, 1997. Certain reclassifications have been
made in the fiscal 1997 financial statements to conform with the fiscal 1998
presentation.
2. Earnings per share
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("EPS").
Statement No. 128 replaced the previously reported primary and fully diluted
earnings per share with earnings per common share (basic) and earnings per
common share - assuming dilution (diluted). Earnings per common 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. Earnings per common share - assuming dilution reflects the
potential dilution that could occur if common stock equivalents, such as
stock options, were exercised. All earnings per share amounts for all periods
have been restated to conform to the Statement No. 128 requirement.
<TABLE>
<CAPTION>
Six months ended Three months ended
------------------- --------------------
March 28, March 29, March 28, March 29,
1998 1997 1998 1997
--------- --------- -------- ----------
<S> <C> <C> <C> <C>
Net income $13,815 $ 8,780 $ 5,436 $ 2,598
Weighted average common shares 22,427 24,283 22,435 24,345
Effect of dilutive securities:
Stock options 600 322 579 283
Restricted stock 21 12 23 13
--------- --------- -------- --------
Dilutive potential common shares 621 334 602 296
Weighted average diluted shares 23,048 24,617 23,037 24,641
--------- --------- -------- --------
--------- --------- -------- --------
Earnings per common share $ .62 $ .36 $ .24 $ .11
--------- --------- -------- --------
--------- --------- -------- --------
Earnings per common share - assuming
dilution $ .60 $ .36 $ .24 $ .11
--------- --------- -------- --------
--------- --------- -------- --------
</TABLE>
- 5 -
<PAGE>
3. Acquisitions
On February 27, 1998, the Company acquired The Mailhouse, Inc., a cooperative
coupon envelope mail company, for approximately $10.7 million. This 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 have been recorded at their estimated fair values. This acquisition did
not have a material pro forma effect on operations for periods prior to the
acquisition.
- 6 -
<PAGE>
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 increased $10.7 million or 4.4% during the second quarter and $17.8
million or 3.6% for the six months ended March 28, 1998 when compared to the
same periods of fiscal 1997. The revenue growth for both the three and six month
periods was primarily driven by rising revenue per piece attributable to the
increases in product weights associated with the Company's preprint customers,
as well as growth in volume. To a lesser extent, price increases also
contributed to the revenue growth for the second quarter of fiscal 1998. Volume
growth is reflected in average pieces per package which increased 2.7% to 8.55
pieces and 3.2% to 8.66 pieces per package, respectively, for the three and six
months ended March 28, 1998 over the same periods in the prior year. The Company
decided to strategically discontinue its 'second in-home-date' program in the
Detroit market and, as such, total packages mailed during the three and six
month period ended March 28, 1998 declined 1.2% and 1.9%, respectively,
offsetting the volume gains to a degree.
As a percentage of revenue, cost of sales decreased approximately 1% to 75% for
the three and six months ended March 28, 1998. The decrease in cost of sales as
a percentage of revenue was the result of efficiencies and cost containment in
the Company's branch operations. In addition, the flow-through of the price
increase favorably impacted cost of sales as a percentage of revenue for the
three months ended March 28, 1998. Both periods experienced increases, in
absolute terms, of $5.0 million and $7.6 million for the three and six month
periods ended March 28, 1998, respectively, when compared to the prior year. The
increases were mainly attributable to higher distribution costs, including
postage costs, associated with heavier pieces mailed by the Company's preprint
customers offset by the branch efficiencies mentioned above. In addition, higher
volume associated with increases in total shared mail pieces delivered for the
second quarter and first half of fiscal 1998, also contributed to higher
distribution costs during the above periods.
Selling, general and administrative costs, including the provision for bad
debts, as a percentage of revenue, decreased slightly to 20.3% and to 19.7%
for the quarter and six months ended March 28, 1998, respectively, as
compared to the prior year. The second quarter and first half of fiscal 1998
experienced absolute increases of $1.2 million and $2.4 million,
respectively, in selling, general and administrative costs when compared to
the same periods of fiscal 1997. Selling expense decreased $ .2 million and
$1.7 million during the second quarter and six months ended of fiscal 1998 as
a result of the strict cost controls in place by the Company. The increases
in general and administrative costs of $1.4 million and $4.1 million for the
three and six months ended March 28, 1998, respectively, were due to the
amortization of costs associated with new financial systems, software
development and other technological enhancements, as well as compensation
related expenses. These increases were somewhat offset by the Company's
strong cost control focus.
As a result of the above, operating income increased 56.5% to $12.5 million
during the second quarter, and 35.0% to $29.6 million during the first six
months of fiscal 1998, compared to the prior year.
Lower interest rates under the renegotiated credit agreement resulted in
slightly lower interest expense amounts for the three and six months ended March
28, 1998 of $3.7 million and $7.2 million, respectively.
The effective income tax rate for the three and six months ended March 28, 1998
and March 29, 1997 was approximately 39% for both periods.
-7-
<PAGE>
Earnings per share - assuming dilution increased to $.24 for the second quarter
of fiscal 1998 representing a 118% increase from the comparable period of the
prior year. For the first half of fiscal 1998, the Company reported earnings per
share - assuming dilution of $.60, representing a 67% increase over the first
half of fiscal 1997. The Company adopted Statement of Financial Accounting
Standards No. 128, "Earnings Per Share" ("EPS") during the first quarter of
fiscal 1998. As such, prior year EPS amounts have been restated to conform to
the provisions of the new statement.
Weighted average common and diluted shares decreased from prior periods
primarily due to the Company's purchase of approximately 1.9 million shares of
its common stock from Warburg, Pincus Capital Partners, L.P ("Warburg") during
the first quarter of fiscal 1998.
FINANCIAL CONDITION
Working capital increased $1.9 million from September 27, 1997. The increase in
working capital from the end of the prior fiscal year mainly reflects a decrease
in accounts payable due to the timing of vendor payments and a decrease in
accrued compensation and benefits due to the incentive compensation payout in
fiscal 1998 which related to fiscal 1997, offset by an increase in taxes payable
associated with the Company's improved year to date earnings. The working
capital ratio increased from 1.00 at September 27, 1997 to 1.02 at March 28,
1998.
Total stockholders' deficiency increased $21.1 million to a net deficiency of
$81.0 million at March 28, 1998. The increase in the net deficiency was
primarily the result of $39.5 million of common stock purchased by the Company,
$37.8 million of which was due to purchases under its buyback program and $1.7
million pursuant to elections by employees to satisfy withholding tax
requirements under the Company's restricted stock and stock option plans. During
the first quarter of fiscal 1998, the Company increased its previously announced
stock repurchase authorization from 2 million to 3.2 million shares. In
connection with the increased authorization, the Company purchased approximately
1.9 million shares of its common stock from Warburg for $34.8 million. The
Company also purchased an additional .1 million shares of common stock for
treasury for $3.0 million on the open market during the first six months of
fiscal 1998. Overall, the treasury stock purchases were offset somewhat by the
Company's net income of $13.8 million for the six months ended March 28, 1998.
PROPERTY, PLANT AND EQUIPMENT
Investments in property, plant and equipment for the six months ended March 28,
1998 totaled $11.4 million. These investments include computerized mail sorters
for the Company's production facilities, acquisitions of computer software and
hardware, as well as costs associated with the development of new software in
order to improve operating efficiencies. The Company expects its capital
expenditure plan for the remaining of the year to be approximately $18.0
million.
The Company has undertaken several projects to improve operating performance and
efficiencies, including several system initiatives. These projects are designed
to address the Company's system needs while simultaneously addressing the Year
2000 issues. To the extent these acquisitions and development of new systems are
being made as an indirect result of Year 2000, they will be capitalized under
the Company's normal capitalization policy.
LIQUIDITY
The Company's main source of liquidity continues to be funds from operating
activities. In addition, the Company has available unused credit commitments of
approximately $98 million which may be used to fund
-8-
<PAGE>
working capital. The net cash provided by operating activities increased $4.2
million to $24.4 million when comparing the first half of fiscal 1998 to the
first half of fiscal 1997. The increase was mainly attributable to the Company's
improved operating results and decreases in accounts receivable due to improved
collections, both offset by changes in accrued compensation and benefits.
The Company experienced a $2.6 million decrease in cash and cash equivalents
during the first six months of fiscal 1998. The decrease is comprised of net
cash provided by operating activities of $24.4 offset by net cash outlays for
investing and financing activities of $22.1 million and $5.0 million,
respectively. Investing activities for the first six months included
expenditures for property, plant and equipment of $11.4 million detailed above
and $10.7 million for the acquisition of The Mailhouse, Inc., a cooperative
coupon envelope mail company made during the second quarter of fiscal 1998. 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.
Financing activities reflect treasury stock purchases of $39.5 million primarily
related to the Company's buyback program, offset by net borrowings of $34.0
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 reducing revolving line of credit. At March 28, 1998 there was $184.8
million of debt outstanding, with $13.2 million classified as current. The
Company anticipates it will be able to meet its long-term debt obligations
through funds generated from operations.
During the second quarter of fiscal 1998 the Company entered into two
separate three year interest rate swap transaction agreements to hedge
notional amounts totaling $100 million. The rate is fixed at approximately
5.7%. These agreements entitle the Company to pay no more or less than the
specified rate plus applicable margin, as defined. The Company believes the
interest rate swap transaction agreements limit substantial risk should
interest rates fluctuate. These agreements had no effect on interest expense
during the second quarter of fiscal year 1998.
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.
YEAR 2000 COMPLIANCE
The Company recognizes that certain of its systems will have potential
operational problems for Year 2000 and beyond. The Year 2000 issue is the result
of computer programs written in two, rather than four, digits to identify the
applicable year. Based on a recent assessment, the Company has determined it
will be required to modify or replace significant portions of its software so
that its computer and production systems will function properly with respect to
dates in the Year 2000 and thereafter. Replacements of systems will be
capitalized under the Company's normal capitalization policy. (See discussion
under Property, Plant & Equipment).
The cost of modifying the required systems to be Year 2000 compliant is
estimated between $7 and $8 million and will be expensed as incurred. These
costs will be partially funded through the shifting of existing resources
through 1999. The Company will utilize both internal and external resources to
complete the Year 2000 modifications.
The Company presently believes that with timely modifications to existing
software and conversions to new software, the Year 2000 issue will not pose
significant operational problems for its computer and production systems and
will not have a material impact on the Company's consolidated financial position
or results of operations. The project is estimated to be completed no later than
September 1999, which is prior to any anticipated impact on its operating
systems. Further, the Company has also made appropriate inquiries of third
parties to determine the extent to which potential problems may arise from
interfaces as a result of the third parties failure to remediate their own Year
2000 issues in a timely manner. Such failures of the Company and/or third
parties' computer systems could have a material adverse effect on the operations
and financial condition of the Company and on the Company's ability to engage in
normal business activities.
-9-
<PAGE>
The estimated cost of the project and date on which the Company believes it will
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events. However, due
to the complexity of the issues and possible unidentified risks there can be no
guarantee that these estimates will be achieved and therefore, actual costs
could materially differ from those estimated.
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 accompanied by cautionary factors which would cause the Company's
actual results to differ materially from those in the forward looking
statements. Such factors include but are not limited to possible governmental
regulation or legislation affecting aspects of the Company's business, changes
in customer demand, postal and paper prices, the efficiencies achieved with
technology upgrades, the amount of shares the Company will purchase in the
future under its buyback program, the successful completion of the Year 2000
transition, and other general economic factors.
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit Index
<TABLE>
<CAPTION>
Exhibit No. Exhibits # of columns Periods covered Restated tag?
---------- -------- ------------ ----------------- ---------------
<S> <C> <C> <C> <C>
27.1 Financial Data Schedule. One Current year-to-date No
figures
27.2 Financial Data Schedule Two Quarters 1 and 3 Yes
of fiscal 1997
27.3 Financial Data Schedule Two Fiscal year end 1997 Yes
and 1996
</TABLE>
(b) Reports on Form 8-K
No report on Form 8-K was filed by the Company with respect to the quarter ended
March 28, 1998.
Omitted from this Part II are items which are inapplicable or to which the
answer is negative for the period covered.
- 10 -
<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 8, 1998 By: /s/ DONALD E. MCCOMBS
--------------------------
Donald E. McCombs
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ADVO INC'S
FORM 10 Q FOR THE QUARTER ENDED MARCH 28, 1998 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-26-1998
<PERIOD-START> SEP-28-1997
<PERIOD-END> MAR-28-1998
<CASH> 23,325
<SECURITIES> 0
<RECEIVABLES> 70,211
<ALLOWANCES> 5,128
<INVENTORY> 3,867
<CURRENT-ASSETS> 111,431
<PP&E> 179,870
<DEPRECIATION> 99,986
<TOTAL-ASSETS> 213,161
<CURRENT-LIABILITIES> 109,289
<BONDS> 171,666
0
0
<COMMON> 288
<OTHER-SE> (81,292)
<TOTAL-LIABILITY-AND-EQUITY> (81,004)
<SALES> 0
<TOTAL-REVENUES> 515,376
<CGS> 0
<TOTAL-COSTS> 384,234
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,852
<INTEREST-EXPENSE> 7,229
<INCOME-PRETAX> 22,647
<INCOME-TAX> 8,832
<INCOME-CONTINUING> 13,815
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,815
<EPS-PRIMARY> .62<F1>
<EPS-DILUTED> .60<F2>
<FN>
<F1>THE EPS-PRIMARY TAG REPRESENTS BASIC EPS UNDER SFAS 128.
<F2>THE EPS-DILUTED TAG REPRESENTS DILUTED EPS UNDER SFAS 128.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ADVO INC'S
FORM 10-Q'S FOR THE QUARTERS ENDED DECEMBER 28,1996 AND JUNE 28, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> SEP-27-1997 SEP-27-1997
<PERIOD-START> SEP-29-1996 SEP-29-1996
<PERIOD-END> DEC-28-1996 JUN-28-1997
<CASH> 5,117 11,932
<SECURITIES> 0 0
<RECEIVABLES> 69,763 67,043
<ALLOWANCES> 4,498 4,756
<INVENTORY> 5,721 3,898
<CURRENT-ASSETS> 96,636 97,810
<PP&E> 147,953 160,571
<DEPRECIATION> 81,462 87,504
<TOTAL-ASSETS> 181,204 188,596
<CURRENT-LIABILITIES> 91,482 97,962
<BONDS> 157,230 146,364
0 0
0 0
<COMMON> 281 284
<OTHER-SE> (77,617) (67,189)
<TOTAL-LIABILITY-AND-EQUITY> 181,204 188,596
<SALES> 0 0
<TOTAL-REVENUES> 255,131 755,868
<CGS> 0 0
<TOTAL-COSTS> 192,338 565,541
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 807 3,674
<INTEREST-EXPENSE> 3,863 11,211
<INCOME-PRETAX> 10,135 29,876
<INCOME-TAX> 3,953 11,651
<INCOME-CONTINUING> 6,182 18,225
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 6,182 18,225
<EPS-PRIMARY> .26<F1> .75<F1>
<EPS-DILUTED> .25<F2> .74<F2>
<FN>
<F1>The EPS-Primary tag represents basic EPS under SFAS 128.
<F2>The EPS-Diluted tag represents diluted EPS under SFAS 128.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATON EXTRACTED FROM ADVO INC'S
FORM 10-K'S FOR THE YEARS ENDED SEPTEMBER 27,1997 AND SEPTEMBER 28, 1996 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> SEP-27-1997 SEP-28-1996
<PERIOD-START> SEP-29-1996 OCT-01-1995
<PERIOD-END> SEP-27-1997 SEP-28-1996
<CASH> 25,963 13,303
<SECURITIES> 0 0
<RECEIVABLES> 71,824 66,894
<ALLOWANCES> 5,160 4,226
<INVENTORY> 4,149 7,518
<CURRENT-ASSETS> 115,783 103,840
<PP&E> 166,991 142,029
<DEPRECIATION> 90,899 77,854
<TOTAL-ASSETS> 208,553 185,126
<CURRENT-LIABILITIES> 115,583 100,079
<BONDS> 140,666 161,125
0 0
0 0
<COMMON> 284 279
<OTHER-SE> (60,205) (85,484)
<TOTAL-LIABILITY-AND-EQUITY> 208,553 185,126
<SALES> 0 0
<TOTAL-REVENUES> 1,016,492 986,162
<CGS> 0 0
<TOTAL-COSTS> 757,413 761,506
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 5,374 3,701
<INTEREST-EXPENSE> 14,820 9,669
<INCOME-PRETAX> 43,716 18,536
<INCOME-TAX> 16,918 7,229
<INCOME-CONTINUING> 26,798 11,307
<DISCONTINUED> 0 (8,199)
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 26,798 3,108
<EPS-PRIMARY> 1.10<F1> .14<F1>
<EPS-DILUTED> 1.09<F2> .13<F2>
<FN>
<F1>The EPS-Primary tag represents basic EPS under SFAS 128.
<F2>The EPS-Diluted tag represents diluted EPS under SFAS 128.
</FN>
</TABLE>
