<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 26, 1999
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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
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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 July 24, 1999 there were 21,181,910 shares of common stock
outstanding.
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ADVO, Inc.
Index to Quarterly Report
on Form 10-Q
Quarter Ended June 26, 1999
Part I - Financial Information
------------------------------
Page
----
Item 1. Financial Statements (Unaudited).
Consolidated balance sheets -
June 26, 1999 and September 26, 1998. 2
Consolidated statements of operations -
Nine months and three months ended
June 26, 1999 and June 27, 1998. 3
Consolidated statements of cash flows -
Nine months ended June 26, 1999
and June 27, 1998. 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. 11
Signatures 12
<PAGE>
ADVO, Inc.
CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands, except share data)
<TABLE>
<CAPTION>
June 26, September 26,
ASSETS 1999 1998
-------------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 7,858 $ 8,724
Accounts receivable, net 89,678 80,140
Inventories 3,319 3,740
Prepaid expenses and other current assets 5,124 4,886
Deferred income taxes 14,818 13,535
--------- ---------
Total current assets 120,797 111,025
Property, plant and equipment 206,914 189,238
Less accumulated depreciation and amortization (112,634) (103,448)
--------- ---------
Net property, plant and equipment 94,280 85,790
Other assets 20,087 22,391
--------- ---------
TOTAL ASSETS $ 235,164 $ 219,206
========= =========
LIABILITIES
Current liabilities:
Current portion of long-term debt $ 19,238 $ 16,200
Accounts payable 36,010 37,586
Accrued compensation and benefits 22,857 27,473
Other current liabilities 31,806 29,790
--------- ---------
Total current liabilities 109,911 111,049
Long-term debt 179,879 167,766
Deferred income taxes 10,964 12,035
Other liabilities 3,457 3,230
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 29,421,171
and 29,237,700 shares, respectively) 294 292
Additional paid-in capital 176,120 173,433
Accumulated deficit (90,761) (119,473)
--------- ---------
85,653 54,252
Less common stock held in
treasury, at cost (154,700) (129,126)
--------- ---------
Total stockholders' deficiency (69,047) (74,874)
--------- ---------
TOTAL LIABILITIES & STOCKHOLDERS'
DEFICIENCY $ 235,164 $ 219,206
========= =========
</TABLE>
See Accompanying Notes.
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ADVO, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Nine months ended Three months ended
---------------------------- ------------------------------
June 26, June 27, June 26, June 27,
1999 1998 1999 1998
----------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Revenues $ 784,194 $ 784,397 $ 262,058 $ 269,021
Costs and expenses:
Cost of sales 567,365 578,389 186,931 194,155
Selling, general and
administrative 155,577 150,368 49,963 50,725
Provision for bad debts 3,911 2,790 1,389 937
----------- ---------- ---------- -----------
Operating income 57,341 52,850 23,775 23,204
Interest expense 10,616 10,631 3,567 3,402
Interest income 454 774 149 262
Other expense 494 441 174 160
----------- ---------- ---------- -----------
Income before income taxes 46,685 42,552 20,183 19,904
Provision for income taxes 17,974 16,596 7,770 7,762
----------- ---------- ---------- -----------
Net income $ 28,711 $ 25,956 $ 12,413 $ 12,142
=========== ========== ========== ===========
Earnings per common share $ 1.32 $ 1.16 $ .58 $ .54
=========== ========== ========== ===========
Earnings per common share
- assuming dilution $ 1.30 $ 1.12 $ .58 $ .52
=========== ========== ========== ===========
Weighted average common shares 21,783 22,452 21,305 22,502
Weighted average diluted shares 22,057 23,095 21,493 23,189
</TABLE>
See Accompanying Notes.
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<PAGE>
ADVO, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine months ended
-----------------------------
June 26, June 27,
1999 1998
----------- -----------
<S> <C> <C>
Net cash provided by operating activities $ 34,524 $ 32,786
Cash flows from investing activities:
Acquisition of property, plant and
equipment (26,135) (15,799)
Proceeds from disposals of property
and equipment 26 6
Acquisitions, net of cash acquired (300) (10,720)
---------- ----------
Net cash used by investing activities (26,409) (26,513)
Cash flows from financing activities:
Revolving line of credit - net 29,300 37,000
Payments of long-term borrowings (14,150) (9,994)
Payment of debt issue costs -- (1,349)
Proceeds from exercise of stock options 1,443 2,365
Purchase of common stock for treasury (25,574) (45,280)
Other - 1
---------- ----------
Net cash used by financing activities (8,981) (17,257)
---------- ----------
Decrease in cash and cash equivalents (866) (10,984)
Cash and cash equivalents at beginning
of period 8,724 25,963
---------- ----------
Cash and cash equivalents at end of period $ 7,858 $ 14,979
========== ==========
</TABLE>
See Accompanying Notes
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<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 nine month period ended June 26, 1999
are not necessarily indicative of the results that may be expected for the
fiscal year ending September 25, 1999. 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 26, 1998. Certain
reclassifications have been made in the fiscal 1998 financial statements to
conform with the fiscal 1999 presentation.
2. Earnings per share
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.
<TABLE>
<CAPTION>
Nine months ended Three months ended
----------------------------------- ----------------------------
June 26, June 27, June 26, June 27,
1999 1998 1999 1998
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Net income $ 28,711 $ 25,956 $ 12,413 $ 12,142
Weighted average common shares 21,783 22,452 21,305 22,502
Effect of dilutive securities:
Stock options 258 617 173 652
Restricted stock 16 26 15 35
--------- --------- --------- ---------
Dilutive potential common shares 274 643 188 687
Weighted average diluted shares 22,057 23,095 21,493 23,189
========= ========= ========= =========
Earnings per common share $ 1.32 $ 1.16 $ .58 $ .54
========= ========= ========= =========
Earnings per common share -
assuming dilution $ 1.30 $ 1.12 $ .58 $ .52
========= ========= ========= =========
</TABLE>
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<PAGE>
3. Segment Reporting
Statement of Financial Accounting Standards No. 131 "Disclosures about Segments
of an Enterprise and Related Information" establishes standards for the way that
business enterprises report information about operating segments in financial
statements, as well as information about products and services, geographic areas
and major customers. The Company operates principally under one segment, direct
mail marketing, and, therefore, no additional disclosure is required.
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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
- ---------------------
For the third quarter of fiscal 1999, revenues of $262.1 million decreased $7.0
million, or 2.6% from the comparable period of the prior fiscal year. Revenues
for the nine months ended June 26, 1999 and June 27, 1998 remained constant at
$784.2 million and $784.4 million, respectively. The decline in revenues for
both the three and nine month periods was attributable to shifts in product mix
away from heavier weight and higher priced shared mail products, as well as
volume declines. These declines were demonstrated by the 4.4% and 2.3% decrease
in average pieces per package to 8.37 and 8.49 pieces, respectively, for the
third quarter and nine months ended June 26, 1999 and also the 0.1% and 0.4%
decline in shared mail packages delivered for the same periods primarily due to
the Company's strategic elimination of mailings in selected markets. Offsetting
these declines to a degree were pricing gains resulting in the increase of
revenue per thousand pieces to $37.39 for the third quarter and to $37.24 for
the first nine months of fiscal 1999, reflecting a 0.9% increase for both
periods over the same periods of the prior year.
The decrease in revenues for the year to date period ended June 26, 1999
detailed above was virtually offset by the March 1998 acquisition of MailCoups,
the Company's targeted coupon envelope distributor; the growth from the
Company's A.N.N.E. (ADVO National Network Extension) brokered distribution
program; as well as increased targeting revenues associated with the Company's
ATZ (ADVO Targeting Zones) distribution platform. For the third quarter the
decrease in revenues was only partially offset by the revenue growth from these
programs.
Cost of sales decreased $7.2 million and $11.0 million, respectively, for the
current quarter and year to date periods over the comparable periods of the
prior year. As a percentage of revenues, cost of sales decreased 0.9 percentage
points to 71.3% and 1.3 percentage points to 72.4%, respectively, for the three
and nine month periods in fiscal 1999 when compared to the same periods in
fiscal 1998. Both the third quarter and nine month period decreases were the
result of lower postage expense due to the decrease in the number of shared mail
packages distributed and the shift in product mix away from heavier weight
products. Print costs, which is another component of cost of sales, decreased
for the three and nine months ended June 26, 1999 as a result of the printing
associated with the Company's lower turnkey product revenue and lower paper
costs. Continued improvements and efficiencies in the Company's branch
operations have also contributed to the favorable variance in cost of sales. The
above decreases have been partially offset by the increased distribution and
delivery costs associated with MailCoups and A.N.N.E. growth.
Selling, general and administrative expenses (including the provision for bad
debts) for the third quarter of fiscal 1999 decreased slightly, $0.3 million, to
$51.4 million. For the year to date period ended June 26, 1999, selling,
general and administrative expenses increased $6.3 million. The increase in
general and administrative costs for the nine month period of fiscal 1999 is
mainly attributable to Year 2000 remediation costs, as well as, amortization
costs associated with financial systems, software development and other
technological enhancements, and severance charges recorded during the second and
third quarters of fiscal 1999.
As a result of the above, the Company reported operating income of $23.8 million
for the third quarter and $57.3 million for the first nine months of fiscal
1999, increases of $0.6 million and $4.5 million, respectively, over the
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<PAGE>
same periods of the prior year. Excluding the severance charges of $2.3 million
recorded during the current year, operating income increased $6.8 million for
the nine month year to date period. Operating income, as percentage of revenue,
for the three and nine months ended June 26, 1999 increased from 8.6% to 9.1%
and 6.7% to 7.3%, respectively, when compared to the same periods in the prior
year.
Interest expense for the three and nine months ended June 26, 1999 remained
relatively consistent with the same periods of the prior year. The effects of
lower interest rates offset the impact of the increase in the outstanding debt
balance.
The effective income tax rate for the three and nine months ended June 26, 1999
and June 27, 1998 was approximately 39% for both periods.
Earnings per share - assuming dilution increased to $.58 for the third quarter
of fiscal 1999, representing a 11.5% increase from the comparable period of the
prior year. For the first nine months of fiscal 1999, the Company reported
earnings per share - assuming dilution of $1.30, representing a 16.1% increase
over the same period of fiscal 1998. Excluding the severance charges of $2.3
million recorded during the current year, earnings per share - assuming dilution
for the nine month year to date period was $1.37. The increase in earning per
share - assuming dilution was reflective of the Company's improved earnings, as
well as the decrease in weighted average diluted shares as a result of the
Company's common stock buyback program.
FINANCIAL CONDITION
- -------------------
The working capital ratio was 1.10 at June 26, 1999 and 1.00 at September 26,
1998. Working capital increased $10.9 million from September 26, 1998. The
change in working capital was primarily attributable to the increase in accounts
receivable as a result of a new accounts receivable system which was put into
place during the third quarter. Despite the successful implementation,
collection efforts were focused on customer service questions resulting from
enhancements to the monthly statements generated by the new system; therefore,
delaying the timing of customer payments.
Stockholders' deficiency decreased $5.9 million to a net deficiency of $69.0
million at June 26, 1999 from $74.9 million at September 26, 1998. The decrease
in the net deficiency was primarily the result of the Company's net income of
$28.7 million for the nine month period ended June 26, 1999, offset by treasury
stock purchases of $25.6 million. The treasury stock purchases consisted of
$24.5 million of open market purchases associated with the Company's buyback
program and $1.1 million pursuant to elections by employees to satisfy
withholding requirements under the Company's restricted stock and stock option
plans. During the second quarter of fiscal 1999, the Company increased its
authorization under its stock buyback program by 1.0 million shares to be
repurchased through March 30, 2000. As of June 26, 1999, there were 0.6 million
shares remaining to be purchased.
PROPERTY, PLANT AND EQUIPMENT
- -----------------------------
For the nine month period ended June 26, 1999, property, plant and equipment
investments were $26.1 million. These capital expenditures were mainly for the
development of financial and operational software, and the purchase of
computerized mail sorters for the Company's production facilities. Of the total
year to date fiscal 1999 capital expenditures, approximately $1.3 million
relates to the development of the human resource / payroll system, which was
accelerated in order to be Year 2000 compliant. The project was completed during
the second quarter of fiscal 1999. Total capitalized project costs were
approximately $3.5 million since inception in fiscal 1998.
-8-
<PAGE>
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 $64.2 million which may be used to fund working capital.
The net cash provided by operating activities for the nine months ended June 26,
1999 was $34.5 million versus $32.8 million for the same period of fiscal 1998.
The year over year increase was primarily the result of improved operating
results and changes in accounts receivables, accounts payable and accrued
compensation and benefits.
The Company experienced a $0.9 million decrease in cash and cash equivalents
during the first nine months of fiscal 1999. The overall decrease was a result
of cash outlays for financing and investing activities of $35.4 million offset
by cash provided by operating activities of $34.5 million. Investing activities
of $26.4 million consisted primarily of the capital expenditures detailed above.
Financing activities of $9.0 million included treasury stock purchases of $25.6
million partially offset by net borrowings under the credit facility of $15.2
million. In the prior year period, investing activities included $10.7 million
for the acquisition of Mailhouse, Inc. and $15.8 million in capital purchases.
Financing activities for the prior year period included treasury stock purchases
of $45.3 million due primarily to the 1.9 million shares of the Company's common
stock purchased from Warburg, Pincus Capital Partners, L.P., offset by net
borrowings under the credit facilities of $27.0 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 June 26, 1999 there was $199.1
million of debt outstanding, with $19.2 million classified as current. The
Company anticipates it will be able to meet its long-term debt obligations
through funds generated from operations. As of July 24, 1999, the Company had
additional net borrowings of $9.0 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.
YEAR 2000 COMPLIANCE
- --------------------
As discussed in the Financial Report contained in the Company's Annual Report on
Form 10-K for the year ended September 26, 1998, under the caption, "Year 2000
Readiness", the Company outlined its program to become Year 2000 compliant by
discussing the following matters: state of readiness, costs, and risks and
contingency plans. During the first nine months of fiscal 1999, the Company
continued on track with its program to become Year 2000 compliant. Below is a
summary of the matters which have changed since the disclosures made at year
end.
State of Readiness
The Company continues to work on the various identified phases concurrently.
The Company is currently proceeding on schedule in its overall Year 2000 program
and is approximately 85% complete as of July 30, 1999. The Company's information
technology applications and associated technical platforms were completed in
July 1999. The estimated completion date of the project remains no later than
September 1999.
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<PAGE>
Costs
The Company's total cost of modifying the required systems for Year 2000
compliance is currently estimated from inception in fiscal 1998 through
completion in September 1999 to be approximately $12 million and will be
expensed as incurred. Of these costs, $3.2 million were incurred during fiscal
1998 and $1.5 million and $6.2 million, respectively during the three and nine
month periods of fiscal 1999.
Risks and Contingency Plans
The Company continues to develop formal contingency plans for non-compliance and
continues to refine these plans as the Company completes the evaluation,
modification and /or replacement of its Information Technology ("IT") and non-
IT systems and as it receives and evaluates information from third parties.
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 subject to cautionary factors which could 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 and pricing, the possibility of consolidation throughout the
retail sector, 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 and estimated costs
of the Year 2000 program, fluctuations in interest rates related to the
outstanding debt and other general economic factors.
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<PAGE>
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibit Index
Exhibit No. Exhibits
----------- --------
10 Executive Severance Agreement dated January 1, 1999
between ADVO, Inc. and Helen Hodack.
27 Financial Data Schedule.
(b) Reports on Form 8-K
-------------------
A report on Form 8-K dated June 28, 1999 was filed by the Company. The
Form reported under Item 5 thereof, that Robert Kamerschen had retired
as Chairman of the Company's Board of Directors as of June 25, 1999.
Gary Mulloy, the Company's present CEO, was elected to succeed Mr.
Kamerschen as Chairman of the Board.
- -------------------------------------------------------------------------------
Omitted from this Part II are items which are inapplicable or to which the
answer is negative for the period covered.
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<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 9, 1999 By: /s/ JULIE A. ABRAHAM
-------------- ----------------------------
Julie A. Abraham
Vice President and Controller
(Principal Accounting Officer)
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<PAGE>
Exhibit 10
----------
EXECUTIVE SEVERANCE AGREEMENT
-----------------------------
This EXECUTIVE SEVERANCE AGREEMENT (the "Agreement"), is made as of January
1, 1999 by and between ADVO, Inc. (the "Company") and Helen A. Hodack (the
"Executive").
RECITALS:
- --------
A. The Executive is an executive of the Company and has made and is
expected to continue to make major contributions to the short- and long-term
profitability, growth, and financial strength of the Company;
B. The Company recognizes that the possibility of a Change of Control (as
hereafter defined) exists;
C. The Company desires to assure itself of both present and future
continuity of its management and desires to establish certain severance benefits
for key executive officers of the Company, including the Executive, applicable
in the event of a Change of Control; and
D. The Company wishes to aid in assuring that such executives are not
practically disabled from discharging their duties in respect of a proposed or
actual transaction involving a Change of Control.
NOW, THEREFORE, the Company and the Executive agree as follows:
1. Certain Defined Terms: In addition to terms defined elsewhere herein,
---------------------
the following terms have the following meanings when used in this Agreement with
initial capital letters:
(a) "Affiliate" means (i) each entity in which the Company, alone or
together with one or more other Affiliates of the Company, owns not less than
80% of the then outstanding voting securities or, for any entity that is not a
corporation, at least 80% of the then-outstanding capital interests of such
entity and (ii) any additional entity which is deemed by action of the Board to
be an Affiliate for the purposes of this Agreement.
(b) "Base Pay" means the Executive's annual aggregate fixed base
salary from the Company at the time in question.
(c) "Board" means the Board of Directors of the Company.
(d) "Change of Control" means the occurrence during the Term of any
of the following events:
1
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(i) The acquisition by an individual, entity or group (within
the meaning of Section 13 (d)(3) or 14 (d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")), other than Warburg (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of voting securities of the Company where such acquisition causes
such Person to own 30% or more of the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting Securities"); provided
however, that for purposes of this Subsection (i), the following acquisitions
shall not be deemed to result in a Change of Control: (A) any acquisition
directly from the Company, (B) any acquisition by the Company, (C) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or (D)
any acquisition by any corporation pursuant to a transaction that complies with
clauses (A), (B) and (C) of subsection (iii) below; and provided, further, that
if any Person's beneficial ownership of the Outstanding Company Voting
Securities reaches or exceeds 30% as a result of a transaction described in
clause (A) or (B) above, and such Person subsequently acquires beneficial
ownership of additional voting securities of the Company, such subsequent
acquisition shall be treated as an acquisition that causes such Person to own
30% or more of the Outstanding Company Voting Securities; or
(ii) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; and provided, further, that any partner, employee or representative of
Warburg proposed by Warburg to be elected to the Board shall be considered a
member of the Incumbent Board; or
(iii) The approval by the shareholders of the Company of a
reorganization, merger or consolidation or sale or other disposition of all or
substantially all of the assets of the Company or the acquisition of assets of
another corporation ("Business Combination") or, if consummation of such
Business Combination is subject, at the time of such approval by shareholders,
to the consent of any government or governmental agency, the obtaining of such
consent (either explicitly or implicitly by consummation); excluding, however,
such a Business Combination pursuant to which (A) all or substantially all of
the individuals and entities who were the beneficial owners of the Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 60% of, respectively, the
then outstanding shares of common stock and the combined voting power of the
then
2
<PAGE>
outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation that as a result of
such transaction owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Voting Securities, (B) no Person
(excluding any employee benefit plan (or related trust) of the Company or such
corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 30% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination and (C) at least a majority of the members of
the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or
(iv) approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
(e) "Cause" means that, prior to any Termination by the Executive for
Good Reason, the Executive shall have:
(i) committed an intentional act of fraud, embezzlement, or
theft in connection with the Executive's duties or in the course of his
employment with the Company;
(ii) committed intentional wrongful damage to property of the
Company; or
(iii) intentionally and wrongfully disclosed confidential
information of the Company; and any such act shall have been materially harmful
to the Company.
For the purposes of this Agreement, no act on the part of the Executive shall
be deemed "intentional" if it was due primarily to an error in judgment or
negligence, but shall be deemed "intentional" only if done by the Executive not
in good faith and without reasonable belief that the Executive's action or
omission was in the best interests of the Company.
(f) "Date of Termination" means the date of receipt of the Notice of
Termination or any later date specified therein, as the case may be; provided,
however, that if the Executive is Terminated by the Company other than for Cause
or for disability pursuant to Section 2(a) (ii), the Date of Termination will be
the date on which the Executive receives the Notice of Termination from the
Company; and provided further,
3
<PAGE>
if the Executive is Terminated by reason of death or disability pursuant to
Section 2(a)(i) or 2(a)(ii), the Date of Termination will be the last day of the
month in which occurs the date of death or the disability effective date, as the
case may be.
(g) "Employee Benefits" means the perquisites, benefits and service
credit for benefits as provided under the plans and programs maintained by the
Company, including, but not limited to, plans and programs which are "employee
benefit plans" under Section 3 (3) of the Employee Retirement Income Security
Act of 1974, as amended, and any amendment or successor, to such plans or
programs (whether insured, funded or unfunded).
(h) "Good Reason" means the occurrence of any of the events listed in
Sections 2(b)(i) through 2(b)(vii), inclusive.
(i) "Incentive Pay" means an annual amount equal to the aggregate
annual bonus, in addition to Base Pay, made or to be made in regard to services
rendered in any calendar year or performance period pursuant to any bonus plan
of the Company.
(j) "Notice of Termination" means a written notice which (i)
indicates the specific provision in this Agreement relied upon, (ii) sets forth
in reasonable detail the facts and circumstances claimed to provide a basis for
the Termination under the provision so indicated, and (iii) if the effective
date of the Termination is other than the date of receipt of such notice,
specifies the effective date of Termination (which date will not be more than
sixty (60) days after the giving of such notice). The failure by the Executive
to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing that the Executive is entitled to the benefits intended
to be provided by this Agreement will not constitute a waiver of any right of
the Executive hereunder or otherwise preclude the Executive from later asserting
such fact or circumstance in enforcing the Executive's rights hereunder.
(k) "Severance Period" means the period of time commencing on the
date of an occurrence of a Change of Control and continuing until the earlier of
(i) the date which is one and one-half years following the occurrence of the
Change of Control, and (ii) the Executive's death.
(l) "Subsidiary" means an entity, at least a majority of the total
voting power of the then-outstanding voting securities of which is held,
directly or indirectly, by the Company and/or one or more other Subsidiaries or,
for any entity that is not a corporation, at least a majority of the then-
outstanding capital interests of which is so held.
(m) "Term" means (A) the period commencing on the date hereof and
ending on the second anniversary of the date hereof; provided, however, that
commencing on the date one year after the date hereof, and on each annual
anniversary of such date (such date and each annual anniversary thereof shall be
hereinafter referred to
4
<PAGE>
as the "Renewal Date"), unless previously terminated, the Term shall be
automatically extended so as to terminate two years from such Renewal Date,
unless at least sixty (60) days prior to the Renewal Date the Company shall give
notice to the Executive that the Term shall not be so extended, (B) if, prior to
a Change of Control, for any reason the Executive is Terminated or Terminates,
thereupon without further action the Term shall be deemed to have expired and
this Agreement will immediately terminate and be of no further effect, and (C)
in the event of a Change of Control, the Term will, without further action, be
considered to terminate at the expiration of the Severance Period.
(n) "Terminate" and correlative terms mean the termination of the
Executive's employment with the Company and any Affiliate or Subsidiary.
(o) "Warburg" means Warburg, Pincus Capital Partners, L.P., and/or
any of its affiliates.
2. Termination Following a Change of Control: (a) If, during the
-----------------------------------------
Severance Period, the Executive is Terminated, the Executive will be entitled to
the benefits provided by Sections 3 and 4 unless such termination is by reason
of one or more of the following events:
(i) The Executive's death;
(ii) The permanent and total disability of the Executive as
defined in any long term disability plan of the Company, applicable to the
Executive, as in effect immediately prior to the Change of Control;
(iii) Cause; or
(iv) The Executive's voluntary Termination in circumstances in
which Good Reason does not exist.
(b) In the event of the occurrence of a Change of Control, the
Executive may Terminate during the Severance Period with the right to severance
compensation as provided in Sections 3 and 4 upon the occurrence of one or more
of the following events (regardless of whether any other reason, other than
Cause as hereinabove provided, for Termination exists or has occurred, including
without limitation other employment):
(i) An adverse change in the nature or scope of the
authorities, powers, functions, responsibilities, or duties attached to the
position with the Company; which the Executive held immediately prior to the
Change of Control;
(ii) A reduction in the Executive's Base Pay as in effect
immediately prior to any Change of Control, or as it may have been increased
from time to time thereafter;
5
<PAGE>
(iii) Any failure by the Company to continue in effect any plan
or arrangement providing Incentive Pay in which the Executive is participating
at the time of a Change of Control (or any other plans or arrangements providing
substantially similar benefits) or the taking of any action by the Company, any
Affiliate or Subsidiary which would adversely affect the Executive's
participation in any such plan or arrangement or reduce the Executive's benefits
under any such plan or arrangement in a manner inconsistent with the practices
of the Company prior to the Change of Control;
(iv) Any failure by the Company to continue in effect any
Employee Benefits in which the Executive is participating at the time of a
Change of Control (or any other plans or arrangements providing the Executive
with substantially similar benefits) or the taking of any action by the Company,
an Affiliate or Subsidiary which would adversely affect the Executive's
participation in or materially reduce the Executive's benefits under any
Employee Benefits or deprive the Executive of any material fringe benefit
enjoyed by the Executive at the time of a Change of Control;
(v) The liquidation, dissolution, merger, consolidation, or
reorganization of the Company or transfer of all or substantially all of its
business and/or assets, unless the successor or successors (by liquidation,
merger, consolidation, reorganization, transfer, or otherwise) to which all or a
significant portion of its business and/or assets have been transferred
(directly or by operation of law) assumed all duties and obligations of the
Company under this Agreement pursuant to Section 9;
(vi) Without limiting the generality or effect of the foregoing,
any material breach of this Agreement by the Company or any successor thereto;
or
(vii) Any action by the Company which causes the Executive's
services to be performed at a location which is more than thirty five (35) miles
from the location where the Executive was employed immediately preceding the
date of the Change of Control.
(c) Any Termination will be communicated by Notice of Termination
hereto given in accordance with Section 10 of this Agreement.
3. Severance Compensation: (a) If, following the occurrence of a Change
----------------------
of Control, the Executive is Terminated by the Company during the Severance
Period other than in the circumstances set forth in Section 2 (a) (i), 2 (a)
(ii), or 2 (a) (iii), or if the Executive Terminates for Good Reason:
(i) The Company will pay to the Executive in a lump sum in cash
within five (5) business days after the later of the date on which the Company
receives the determination of the Accounting Firm required in Section 4 hereof
or the Date of Termination the aggregate of the amount (the "Severance Payment")
equal to one and one-half times the sum of (A) the Executive's Base Pay at the
highest rate in effect at any time within the 90-day period preceding the date
the Notice of Termination was given or,
6
<PAGE>
if higher, at the highest rate in effect at any time within the 90-day period
preceding the date of the first occurrence of a Change of Control, and (B) an
amount equal to the greatest amount of Incentive Pay received by the Executive
during any calendar year or portion thereof from and including the third
calendar year prior to the first occurrence of a Change of Control; and
(ii) For the period of one and one-half years from the Date of
Termination, the Executive shall be eligible for participation in and shall
receive all benefits under such benefit plans, practices, policies and programs
of the Company that provide medical, prescription dental, or life insurance
coverage, with the costs of such participation to be paid by the Company to the
same extent as prior to the Executive's Termination. In the event that such
continued participation is not allowed under the terms and provisions of such
plans or programs, then in lieu thereof, the Company shall acquire individual
insurance policies providing comparable coverage for the Executive; provided
that if any such individual coverage is unavailable, the Company shall pay to
the Executive an amount equal to the contributions that would have been made by
the Company for such coverage on the Executive's behalf if the Executive had
remained in the employ of the Company for the period referred to in the
preceding sentence.
(b) There will be no right of set-off or counter-claim in respect of
any claim, debt, or obligation against any payment to or benefit for the
Executive provided for in this Agreement.
(c) Without limiting the rights of the Executive at law or in equity,
if the Company fails to make any payment or provide any benefit required to be
made or provided under this Agreement (including under this Section 3 or Section
6) on a timely basis, the Company will pay interest on the amount or value
thereof at an annualized rate of interest equal to the so-called composite
"prime rate" as quoted from time to time during the relevant period in the
Northeast Edition of The Wall Street Journal. Such interest will be payable as
-----------------------
it accrues on demand. Any change in such prime rate will be effective on and as
of the date of such change.
(d) Notwithstanding any other provision hereof, the parties,
respective rights and obligations under this Section 3 and under Sections 4 and
6 will survive any termination or expiration of this Agreement following a
Change of Control or any Termination following a Change of Control for any
reason whatsoever.
4. Excise and Other Taxes. The Executive shall bear all expense of, and
----------------------
be solely responsible for, all federal, state, local or foreign taxes due with
respect to any payment received hereunder, including, without limitation, any
excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended (the Code); provided, however, that all payments under this Agreement
shall be reduced to the extent necessary so that no portion thereof shall be
subject to the excise tax imposed by Section 4999 of the Code but only if, by
reason of such reduction, the net after-tax benefit received by the Executive
shall exceed the net after-tax benefit received by the Executive if no such
7
<PAGE>
reduction was made. For purposes of this Section 4, "net after-tax benefit"
shall mean (i) the total of all payments and the value of all benefits which the
Executive receives or is then entitled to receive from the Company that would
constitute "parachute payments" within the meaning of Section 280G of the Code,
less (ii) the amount of all federal, state and local income taxes payable with
respect to the foregoing calculated at the maximum marginal income tax rate for
each year in which the foregoing shall be paid to the Executive (based on the
rate in effect for such year as set forth in the Code as in effect at the time
of the first payment of the foregoing), less (iii) the amount of excise taxes
imposed with respect to the payments and benefits described in (i) above by
Section 4999 of the Code. The foregoing determination will be made by a
nationally recognized accounting firm (the "Accounting Firm") selected by the
Executive and reasonably acceptable to the Company (which may be, but will not
be required to be, the Company's independent auditors). The Executive will
direct the Accounting Firm to submit its determination and detailed supporting
calculations to both the Company and the Executive within fifteen (15) days
after the Date of Termination. If the Accounting Firm determines that such
reduction is required by this Section 4, the Company shall pay such reduced
amount to the Executive in accordance with Section 3 (a). If the Accounting
Firm determines that no reduction is necessary under this Section 4, it will, at
the same time as it makes such determination, furnish the Company and the
Executive an opinion that the Executive will not be liable for any excise tax
under Section 4999 of the Code. The Company and the Executive will each provide
the Accounting Firm access to and copies of any books, records, and documents in
the possession of the Company or the Executive, as the case may be, reasonably
requested by the Accounting Firm, and otherwise cooperate with the Accounting
Firm in connection with the preparation and issuance of the determinations and
calculations contemplated by this Section 4. The fees and expenses of the
Accounting Firm for its services in connection with the determinations and
calculations contemplated by this Section 4 will be borne by the Company.
5. No Mitigation Obligation: The Company hereby acknowledges that it
------------------------
will be difficult, and may be impossible, for the Executive to find reasonably
comparable employment following the Date of Termination. The payment of the
severance compensation by the Company to the Executive in accordance with the
terms of this Agreement will be liquidated damages, and the Executive will not
be required to mitigate the amount of any payment provided for in this Agreement
by seeking other employment or otherwise, nor will any profits, income,
earnings, or other benefits from any source whatsoever create any mitigation,
offset, reduction, or any other obligation on the part of the Executive
hereunder or otherwise.
6. Legal Fees and Expenses: If the Company has failed to comply with any
-----------------------
of its obligations under this Agreement or in the event that the Company or any
other person takes or threatens to take any action to declare this Agreement
void or unenforceable, or institutes any litigation or other action or
proceeding designed to deny, or to recover from, the Executive the benefits
provided or intended to be provided to the Executive hereunder, the Company
irrevocably authorizes the Executive from time to
8
<PAGE>
time to retain counsel of the Executive's choice, at the expense of the Company,
to advise and represent the Executive in connection with any such
interpretation, enforcement, or defense, including without limitation the
initiation or defense of any litigation or other legal action, whether by or
against the Company or any member of the Board, officer, stockholder, or other
person or entity affiliated with the Company, in any jurisdiction. The Company
will pay and be solely financially responsible for any and all attorneys' and
related fees and expenses incurred by the Executive in connection with such
litigation.
7. Employment Rights: Nothing expressed or implied in this Agreement
-----------------
will create any right or duty on the part of the Company or the Executive to
have the Executive remain in the employment of the Company, or any Affiliate or
Subsidiary prior to or following any Change of Control.
8. Withholding of Taxes: The Company may withhold from any amounts payable
--------------------
under this Agreement all federal, state, city, or other taxes as the Company is
required to withhold pursuant to any law or government regulation or ruling.
9. Successors and Binding Agreement: (a) The Company will require any
--------------------------------
successor (whether direct or indirect, by purchase, merger, consolidation,
reorganization, or otherwise) to all or substantially all of the business and/or
assets of the Company, by agreement in form and substance satisfactory to the
Executive, expressly to assume and agree to perform this agreement in the same
manner and to the same extent the Company would be required to perform if no
such succession had taken place. This Agreement will be binding upon and inure
to the benefit of the Company and any successor to the Company, including,
without limitation, any persons acquiring directly or indirectly all or
substantially all of the business and/or assets of the Company, whether by
purchase, merger, consolidation, reorganization, or otherwise (and such
successor will thereafter be deemed the "Company" for the purposes of this
Agreement), but will not otherwise be assignable, transferable, or delegable by
the Company.
(b) This Agreement will inure to the benefit of and be enforceable by
the Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, and/or legatees.
(c) This Agreement is personal in nature and neither of the parties
hereto will, without the consent of the other, assign, transfer, or delegate
this Agreement or any rights or obligations hereunder except as expressly
provided in Sections 9 (a) and 9 (b). Without limiting the generality or effect
of the foregoing, the Executive's right to receive payments hereunder will not
be assignable, transferable, or delegable, whether by pledge, creation of a
security interest, or otherwise, other than by a transfer by will or by the laws
of descent and distribution and, in the event of any attempted assignment or
transfer contrary to this Section 9 (c), the Company will have no liability to
pay any amount so attempted to be assigned, transferred, or delegated.
9
<PAGE>
10. Notices: For all purposes of this Agreement, all communications,
-------
including, without limitation, notices, consents, requests, or approvals,
required or permitted to be given hereunder will be in writing and will be
deemed to have been duly given when hand delivered or dispatched by electronic
facsimile transmission (with receipt thereof orally confirmed), or two business
days after having been mailed by United States registered or certified mail,
return receipt requested, postage prepaid, or one business day after having been
sent by a nationally recognized overnight courier service addressed to the
Company (to the attention of the General Counsel of the Company) at its
principal Executive office and to the Executive at the Executive's principal
residence, or to such other address as any party may have furnished to the other
in writing and in accordance herewith, except that notices of changes of address
will be effective only upon receipt.
11. Governing Law: The validity, interpretation, construction, and
-------------
performance of this Agreement will be governed by and construed in accordance
with the substantive laws of the State of Connecticut, without giving effect to
the principles of conflict of laws of such State, to the extent not preempted by
applicable federal law.
12. Validity: If any provision of this Agreement or the application of
--------
any provision hereof to any person or circumstances is held invalid,
unenforceable, or otherwise illegal, the remainder of this Agreement and the
application of such provision to any other person or circumstances will not be
affected, and the provision so held to be invalid, unenforceable, or otherwise
illegal will be reformed to the extent (and only to the extent) necessary to
make it enforceable, valid, or legal.
13. Non-Exclusivity of Rights: Nothing in this Agreement will prevent or
-------------------------
limit the Executive's present or future participation in any benefit, bonus,
incentive, or other plan or program provided by the Company or any Affiliate or
Subsidiary for which the Executive may qualify, nor will this Agreement in any
manner limit or otherwise affect such rights as the Executive may have under any
stock option or other agreements with the Company or any Affiliate or
Subsidiary. Amounts or benefits which are vested or which the Executive is
otherwise entitled to receive under any plan or program of the Company at or
subsequent to the Date of Termination will be payable in accordance with such
plan or program, except as otherwise expressly provided in this Agreement;
provided, however, that any amounts received by the Executive pursuant to this
Agreement shall be in lieu of any benefits which the Executive is entitled to
receive or may become entitled to receive under any reduction-in-force or
severance pay plan or practice which the Company now has in effect or may
hereafter put into effect, any other benefits to which the Executive may be
entitled under any individual agreement of employment with the Company which
would provide a benefit to the Executive upon the occurrence of a Change of
Control of the Company, and any severance benefits required under federal or
state law to be paid to the Executive.
14. Miscellaneous: (a) No provision of this Agreement may be modified,
-------------
waived, or discharged unless such waiver, modification, or discharge is agreed
to in
10
<PAGE>
writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto or compliance with
any condition or provision of this Agreement to be performed by such other party
will be deemed a waiver of similar or dissimilar provisions or conditions at the
same or at any prior or subsequent time. No agreements or representations, oral
or otherwise, express or implied with respect to the subject matter hereof have
been made by either party which are not set forth expressly in this Agreement.
References to Sections are to references to Sections of this Agreement.
(b) The Executive and the Company acknowledge that this Agreement
supersedes any other agreement between them concerning the subject matter
hereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
ADVO, Inc.
By: /s/ GARY M. MULLOY
------------------------
Gary M. Mulloy
By: /s/ HELEN A. HODACK
------------------------
Helen A. Hodack
11
<PAGE>
Following is an amendment to Paragraph 1(d) Change of Control of Helen A.
Hodack's Executive Severance Agreement. The amendment was signed and dated May
26, 1999 by and between ADVO, Inc. and Helen A. Hodack.
(d) "Change in Control" means the occurrence during the Term of any of the
following events:
(i) Any Person (other than the Company, any trustee or other fiduciary
holding securities under any employee benefit plan of the Company, or any
company owned, directly or indirectly, by the stockholders of the Company
immediately prior to the occurrence with respect to which the evaluation is
being made in substantially the same proportions as their ownership of the
common stock of the Company) acquires securities of the Company and immediately
thereafter is the Beneficial Owner (except that a Person shall be deemed to be
the Beneficial Owner of all shares that any such Person has the right to acquire
pursuant to any agreement or arrangement or upon exercise of conversion rights,
warrants or options or otherwise, without regard to the sixty day period
referred to in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 30% or more of the combined voting power
of the Company's then outstanding securities (except that an acquisition of
securities directly from the Company shall not be deemed an acquisition for
purposes of this clause (i));
(ii) During any period of two consecutive years, individuals who at the
beginning of such period constitute the Board, and any new director (other than
a director designated by a person who has entered into an agreement with the
Company to effect a transaction described in clause (i), (iii) or (iv) of this
paragraph) whose election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of the
two-year period or whose election or nomination for election was previously so
approved by excluding for this purpose any such new director whose initial
assumption of office occurs as a result of either an actual or threatened
election contest (as such terms as used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other actual or threatened solicitation
of proxies or consents by or on behalf of an individual, corporation,
partnership, group, associate or other entity or Person other than the Board,
cease for any reason to constitute at least a majority of the Board;
(iii) The consummation of a merger or consolidation of the Company with any
other entity, other than (i) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving or resulting entity) more than 50% of
the combined voting power of the surviving or resulting entity outstanding
immediately after such merger or consolidation or (ii) a
12
<PAGE>
merger or consolidation in which no premium is intended to be paid to any
shareholder participating in the merger or consolidation;
(iv) The stockholders of the Company approve a plan or agreement for the sale
or disposition of all or substantially all of the consolidated assets of the
Company (other than such a sale or disposition immediately after which such
assets will be owned directly or indirectly by the stockholders of the Company
in substantially the same proportions as their ownership of the common stock of
the Company immediately prior to such sale or disposition) in which case the
Board shall determine the effective date of the Change in Control resulting
therefrom; or
(v) any other event occurs which the Board determines, in its discretion,
would materially alter the structure or its ownership.
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ADVO, INC'S
FORM 10-Q FOR THE NINE MONTH PERIOD ENDED JUNE 26, 1999.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-25-1999
<PERIOD-START> SEP-27-1998
<PERIOD-END> JUN-26-1999
<CASH> 7,858
<SECURITIES> 0
<RECEIVABLES> 94,667
<ALLOWANCES> 4,989
<INVENTORY> 3,319
<CURRENT-ASSETS> 120,797
<PP&E> 206,914
<DEPRECIATION> 112,634
<TOTAL-ASSETS> 235,164
<CURRENT-LIABILITIES> 109,911
<BONDS> 179,879
0
0
<COMMON> 294
<OTHER-SE> (69,341)
<TOTAL-LIABILITY-AND-EQUITY> 235,164
<SALES> 0
<TOTAL-REVENUES> 784,194
<CGS> 0
<TOTAL-COSTS> 567,365
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3,911
<INTEREST-EXPENSE> 10,616
<INCOME-PRETAX> 46,685
<INCOME-TAX> 17,974
<INCOME-CONTINUING> 28,711
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,711
<EPS-BASIC> 1.32<F1>
<EPS-DILUTED> 1.30<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>
