<PAGE>
FORM 11-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
(X) Annual Report pursuant to Section 15(d) of the Securities Exchange Act of
1934
For the fiscal year ended December 31, 1999
-----------------
or
( ) Transition Report Pursuant to Section 15(d) of the Securities Exchange Act
of 1934
For the transition period from to
--------- ---------
Commission file number 1-11720
-------
MailCoups Inc. 401(k) Savings Plan
--------------------------------------------------------
(Full title of the plan)
ADVO, Inc.
One Univac Lane,
P.O. Box 755,
Windsor, CT 06095-0755
---------------------------------------------------------------
(Name of issuer of the securities held pursuant to the plan
and the address of its principal executive offices)
<PAGE>
MailCoups, Inc. 401(k) Savings Plan
Annual Report
Index to Form 11-K
Year Ended December 31, 1999
----------------------------------
Report of Independent Auditors
Financial Statements:
Statements of Net Assets Available for Plan Benefits as of
December 31, 1999 and December 31, 1998
Statements of Changes in Net Assets Available for Plan
Benefits for the Year Ended December 31, 1999
and Eight-Month Period Ended December 31, 1998
Notes to Financial Statements
Supplemental Schedule:
ScheduleI - Schedule H, Line 4i - Schedule of Assets Held for Investment
Purposes as of December 31, 1999
Exhibit 23 - Consent of Ernst & Young LLP
Signature
<PAGE>
Report of Independent Auditors
To the Plan Administrator of
MailCoups, Inc.
401(k) Savings Plan
We have audited the accompanying statements of net assets available for plan
benefits of the MailCoups, Inc. 401(k) Savings Plan as of December 31, 1999 and
1998; and for the related statements of changes in net assets available for plan
benefits for the year ended December 31, 1999 and eight month period ended
December 31, 1998. These financial statements are the responsibility of the
Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the Plan at
December 31, 1999 and 1998, and the changes in its net assets available for plan
benefits for the year ended December 31, 1999 and eight month period ended
December 31, 1998, in conformity with accounting principles generally accepted
in the United States.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedule of assets
held for investment purposes at end of year as of December 31, 1999, is
presented for purposes of additional analysis and is not a required part of the
financial statements but is supplementary information required by the Department
of Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. This supplemental schedule is the
responsibility of the Plan's management. The supplemental schedule has been
subjected to the auditing procedures applied in our audits of the financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the financial statements taken as a whole.
\s\ Ernst & Young LLP
Hartford, Connecticut
June 22, 2000
<PAGE>
MailCoups, Inc.
401(k) Savings Plan
Statements of Net Assets Available for Plan Benefits
Assets
------ December 31,
----------------------------
1999 1998
---- ----
Investments at Fair Value $ 662,170 $ 414,044
Receivables:
Employees' Contributions 15,155 15,093
Employer's Contributions 1,505 1,793
---------- --------
Total Receivables 16,660 16,886
---------- ----------
Payables:
Excess Contributions Payable 7,344 --
----------- ----------
Net Assets Available for Plan Benefits $ 671,486 $ 430,930
========== ==========
See accompanying notes to financial statements.
-3-
<PAGE>
MailCoups, Inc.
401(k) Savings Plan
Statements of Changes in Net Assets Available for Plan Benefits
Eight-months
Year-ended ended
Additions to assets attributed to: December 31, December 31,
1999 1998
-------------- ------------
Investment income:
Net realized and unrealized appreciation
in fair value of investments $ 83,859 $ 69,198
Interest 840 401
Dividends 19,536 7,496
Contributions:
Employee 156,561 91,367
Employer 16,816 9,847
Participant rollover 5,179 252,979
----------- ------------
Total Additions 282,791 431,288
Benefit payments 42,235 358
----------- ------------
Net increase in net assets available
for plan benefits: 240,556 430,930
Net Assets Available for Plan Benefits:
Beginning of the period 430,930 --
----------- ------------
End of year $ 671,486 $ 430,930
============ =============
See accompanying notes to financial statements.
-4-
<PAGE>
MailCoups, Inc.
401(k) Savings Plan
Notes to Financial Statements
December 31, 1999
A. Description of the Plan
-----------------------
The following description of the MailCoups, Inc. 401(k) Savings Plan ("Plan")
provides only general information. Participants should refer to the Summary Plan
Description for a more complete description of the Plan's provisions. MailCoups,
Inc.("MailCoups") is a wholly owned subsidiary of ADVO, Inc. (the "Company").
General
-------
The Plan is a defined contribution plan covering all full-time employees
("participants") of MailCoups who have completed one year of service. It is
subject to the provisions of the Employee Retirement Income Security Act of
1974, (ERISA). The Plan was established in May 1998, therefore, the financial
statements reflect an eight-month period for 1998.
Contributions
-------------
MailCoups matches 10% of a participant's pay deferral contributions up to a
maximum dollar amount of $1,000. Participants may contribute up to 15 percent of
their annual compensation on a pretax basis.
All investment programs are fully participant directed. Participants direct the
investment of their contributions and the Company's into various investment
options offered by the plan. As of December 31, 1999, the plan offered nine
investment options; three collective investment funds, four mutual funds, and
two ADVO custom funds which include a fund with Company Stock.
Effective December 1, 1999, the Lord Abbett Developing Growth Fund was added as
a ninth investment fund selection. In addition, two investment options were
replaced by new funds effective December 1, 1999. The Barclays Global Investors
Asset Allocation Fund replaced the ADVO Fidelity Asset Manager Fund and the
Barclays Global Investors S&P Midcap Stock Fund replaced the ADVO Berger 100
Fund. All existing balances were transferred to the new funds.
Participant Accounts
--------------------
Each participant's account is credited with the participant's contribution,
MailCoups' matching contribution, and the Plan's earnings. The benefit to which
a participant is entitled is the benefit that can be provided from the
participant's account.
Vesting
-------
Participants are immediately vested in their voluntary contributions plus actual
earnings thereon. Vesting in the MailCoups matching portion of the participants'
accounts plus earnings thereon is based on years of continuous service. A
participant is 100% vested after six years of credited service.
Payment of Benefits
-------------------
On termination of service due to death, disability, or retirement, a participant
becomes fully vested and may elect to receive a lump-sum amount equal to the
value of their account. For termination of service due to other reasons, a
participant receives the value of the vested interest in their account as a
lump-sum amount.
Loans
-----
Participants may borrow from their fund accounts a minimum of $1,000 up to a
maximum equal to the lesser of $50,000 or 50 percent of their vested account
balance. The loans are secured by the balance in the participant's account and
bear interest at a rate commensurate with local prevailing rates as determined
quarterly by the plan administrator. Principal and interest is paid ratably
through monthly payroll deductions.
-5-
<PAGE>
MailCoups, Inc.
401(k) Savings Plan
Notes to Financial Statements
December 31, 1999
Expenses of the Plan
--------------------
All costs and expenses of operation and administration of the Plan are paid by
MailCoups.
Forfeited Accounts
------------------
At December 31, 1999 and December 31,1998, forfeited unvested accounts totaled
$206 and $71, respectively. These accounts will be used to reduce future
MailCoups' contributions or to pay Plan fees and expenses.
Plan Termination
----------------
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue contributions at any time and to terminate the
Plan subject to the provisions of ERISA. In the event of plan termination,
participants will become 100% vested in their accounts. After payment of
expenses, distributions would be made pro rata based on the value of such
accounts.
ADVO Custom Funds
-----------------
Employer custom funds include the ADVO AXP New Dimensions Fund and the ADVO
Stock Fund. Custom funds are unregistered custom separate accounts maintained by
the Trustee and established by the Company for the benefit of the Plan and any
other qualified plan of the Company. Ownership is represented by each plans'
proportionate units of participation.
Although the performance of the custom fund is based on the performance of the
underlying mutual fund or company common stock, the value of a fund unit is
different from the net asset value of the mutual fund or the price of one share
of common stock. Changes in the unit value of the fund will be affected by price
changes in the underlying mutual fund or common stock, earnings, dividends,
interest and applicable fees and expenses of the fund. Additionally, the funds
maintain highly liquid money market instruments which may contribute to
differences in performance between the fund units and net asset value of the
underlying mutual funds or common stock.
B. Summary of Accounting Policies
------------------------------
Basis of Accounting
-------------------
The financial statements have been prepared on the accrual basis of accounting.
Valuation of Investments
------------------------
The fair value of investments in mutual funds is based on the quoted market
prices of the shares held in these funds at year-end.
The fair value of investments in the collective investment fund and the ADVO
custom funds is based on the net asset value ("NAV") of participation units held
by the Plan at year-end. These NAVs are calculated based on the current market
value of the underlying securities and the current number of units held by
participants in these funds.
Participant loans are stated at their outstanding principal balances which
approximate fair value.
-6-
<PAGE>
MailCoups, Inc.
401(k) Savings Plan
Notes to Financial Statements
December 31, 1999
Use of Estimates
----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires plan management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. While management believes that the estimates and related assumptions in
the preparation of these financial statements are appropriate, actual results
could differ from those estimates.
Statement of Position 99-3
--------------------------
The Plan has adopted Statement of Position 99-3, " Accounting for and Reporting
of Certain Defined Contribution Plan Investments and Other Disclosure Matters"
for the presentation of its 1999 and 1998 financial statements. Accordingly,
certain amounts in the 1998 financial statements have been reclassified to
conform with the 1999 presentation.
C. Investments
-----------
The Plan's investments are primarily held by bank-administered trust funds. The
following table presents the fair value of investments. Investments that
represent 5% or more of the Plan's assets available for plan benefits are
separately identified by the following "*".
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
----------------- -----------------
<S> <C> <C>
Cash $ 457 $ --
----
Collective Investment Funds:
---------------------------
Merrill Lynch Income Accumulation Fund 11,705 5,042
Barclays Global Investors Asset Allocation Fund 92,965 * --
Barclays Global Investors S&P MidCap Stock Fund 84,977 * --
Mutual Funds
------------
Templeton Foreign Fund 10,773 6,043
Money Market Fund - MasterWorks -- 9,137
Barclays Global Investors S&P 500 Stock Fund 216,826 * 144,472 *
Merrill Lynch Retirement Reserves Money Fund 11,639 --
ADVO Custom Funds:
-----------------
ADVO Fidelity Asset Manager Fund -- 54,186 *
ADVO Berger 100 Fund -- 52,106 *
ADVO AXP New Dimensions Fund 163,921 * 98,981 *
ADVO Stock Fund 42,915 * 35,181 *
Participant Loans 25,992 8,896
-------------- -----------
TOTAL $ 662,170 414,044
============== ===========
</TABLE>
-7-
<PAGE>
MailCoups, Inc.
401(k) Savings Plan
Notes to Financial Statements
December 31, 1999
For the year ended December 31, 1999 and the eighth-month period ended
December 31, 1998, the Plan's investments (including investments purchased,
sold as well as held during the year) appreciated in fair value as
determined by quoted market prices as follows:
Net Realized and
Unrealized Appreciation
In Fair Value of Investments
----------------------------
1999 1998
---- ----
Collective Investment Funds $ 7,839 $ --
Mutual Funds 19,118 20,210
ADVO Custom Funds 56,902 48,988
---------- ---------
$ 83,859 $ 69,198
========== ===========
D. Income Tax Status
-----------------
The Plan has not received a determination letter from the Internal Revenue
Service stating that the Plan is qualified under Section 401(a) of the Internal
Revenue Code. However, the Plan Administrator believes that the Plan is
qualified and, therefore, the related trust is exempt from taxation.
E. Subsequent Events
-----------------
Effective January 1, 2000, the Company will contribute 50 percent of the first 3
percent of a participant's pay deferral contributions to the Plan. Additionally,
effective January 1, 2000, all employer-matching contributions will be vested
immediately. This change is applicable to new and existing participants in the
Plan. Previously, a participant was 100 percent vested in the employer-matching
portion after six years of credited service.
-8-
<PAGE>
Schedule I
MailCoups, Inc.
401(k) Savings Plan
Employer Identification Number 06-0885252, Plan Number 003
Schedule H, line 4i-Schedule of Assets Held
for Investment Purposes at End of Year
December 31, 1999
<TABLE>
<CAPTION>
Description of Investment,
Identity of Issue, Borrower, Lessor Including Maturity Date, Rate of
or Similar Party Interest, Par or Maturity Value Current Value
----------------------------------- ---------------------------------- -------------
<S> <C> <C>
Cash $ 457
Collective Investment Funds:
Merrill Lynch Income Accumulation Fund 746 units 11,705
Barclays Global Investors Asset Allocation Fund 2,553 units 92,965
Barclays Global Investors S&P Midcap Stock Fund 2,624 units 84,977
Mutual Funds:
Templeton Foreign Fund 960 units 10,773
Barclays Global Investors S&P 500 Stock Fund 8,022 units 216,826
Merrill Lynch Retirement Reserves Money Fund 11,639 units 11,639
*ADVO Custom Funds:
ADVO AXP New Dimensions Fund: 4,309 units 163,921
ADVO Stock Fund: 2,230 units 42,915
Participant Loans Bear interest at rates ranging
from 8.75 - 9.25% with varying
maturity dates 25,992
----------
TOTAL $ 662,170
==========
</TABLE>
* Indicates party-in-interest to the Plan.
Cost column is not applicable because all investment programs are fully
participant directed.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
MailCoups, Inc.
401(k) Savings Plan
Date: June 27, 2000 By: \s\ JULIE A. ABRAHAM
------------- ----------------------
Julie A. Abraham
Vice President and Controller
(Principal Accounting Officer)
