<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
-------
ADVO, 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>
ADVO, 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 Assets Available for Plan Benefits as of
December 31, 1999 and 1998
Statements of Changes in Assets Available for Plan Benefits for the years
ended December 31, 1999 and 1998
Notes to Financial Statements
Supplemental Schedule:
Schedule I - 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
ADVO, Inc.
401(k) Savings Plan
We have audited the accompanying statements of assets available for plan
benefits of the ADVO, Inc. 401(k) Savings Plan as of December 31, 1999 and 1998,
and the related statements of changes in assets available for plan benefits for
the years then ended. 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 assets available for plan benefits of the Plan at
December 31, 1999 and 1998, and the changes in its assets available for plan
benefits for the years then ended, 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 the 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>
ADVO, Inc.
401(k) Savings Plan
Statements of Assets Available for Plan Benefits
December 31,
---------------------------------
Assets
1999 1998
---- ----
Investments at Fair Value: $ 72,456,454 $ 59,099,200
Receivables:
Employees' Contributions 202,941 104,240
Employer's Contributions 122,482 84,551
------------- ------------
Total Receivables 325,423 188,791
------------- ------------
Assets Available for Plan Benefits $ 72,781,877 $ 59,287,991
============= ============
See accompanying notes to financial statements.
- 3 -
<PAGE>
ADVO, Inc.
401(k) Savings Plan
Statements of Changes in Assets Available for Plan Benefits
<TABLE>
<CAPTION>
Year-ended
December 31,
-------------------------------------
Additions to assets attributed to:
1999 1998
---- ----
<S> <C> <C>
Investment income:
Net realized and unrealized appreciation
in fair value of investments $ 8,323,682 $ 7,474,894
Interest 173,702 564,945
Dividends 2,148,025 1,301,796
Contributions:
Employee 7,286,778 3,371,537
Employer 4,823,681 2,643,384
Participant rollover 280,838 736,369
------------- -------------
Total Additions 23,036,706 16,092,925
Benefit payments 9,542,820 5,036,744
------------- -------------
Net increase in assets available
for plan benefits: 13,493,886 11,056,181
Assets Available for Plan Benefits:
Beginning of the year 59,287,991 48,231,810
------------- -------------
End of year $ 72,781,877 $ 59,287,991
============== =============
</TABLE>
See accompanying notes to financial statements.
- 4 -
<PAGE>
ADVO, Inc.
401(k) Savings Plan
Notes to Financial Statements
December 31, 1999
A. Description of the Plan
-----------------------
The following description of the ADVO, Inc. 401(k) Savings Plan ("Plan")
provides only general information. Participants should refer to the Plan
agreement for a more complete description of the Plan's provisions.
General
-------
The Plan is a defined contribution plan covering all full-time exempt and
non-exempt salaried employees ("participants") of ADVO, Inc. (the "Company") who
have completed one year of service. Effective January 1, 1999, all hourly and
sales associates were eligible to participate in the Plan after completing the
Plan's service requirement.
The Plan is subject to the provisions of the Employee Retirement Income Security
Act of 1974, (ERISA).
Contributions
-------------
Effective January 1, 1999, participants may contribute up to 16 percent of their
annual compensation on a pretax basis, as defined in the Plan. Previously, for
the year ended December 31, 1998, participants were able to contribute 10
percent of their eligible pay. Participants may also contribute amounts
representing rollover distributions from other defined contribution plans.
The Company contributes 100 percent of the first 6 percent of a participant's
pay deferral contributions to the Plan.
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. The Plan currently offers nine investment options:
three collective investment funds, four mutual funds, and two ADVO custom funds
which include a fund with Company stock.
Effective January 1, 1999, the Lord Abbett Developing Growth Fund was added as
an investment option. In addition, two of the investment options at December 31,
1998, were replaced by new funds effective January 1, 1999. The Barclays Global
Investors Asset Allocation Fund replaced the ADVO Fidelity Asset Manager Fund
and the Barclays Global Investors S&P MidCap 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, the
Company's 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 and related
employer matching contributions plus actual earnings thereon.
Payment of Benefits
-------------------
On termination of service, a participant may elect to receive a lump-sum amount
equal to the value of his or her account.
- 5 -
<PAGE>
ADVO, Inc.
401(k) Savings Plan
Notes to Financial Statements
December 31, 1999
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 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.
Expenses of the Plan
--------------------
All costs and expenses of operation and administration of the Plan are paid by
the Company.
Plan Termination
----------------
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA. In the event of plan termination,
participants will remain 100 percent 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 at December 31, 1999 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. During 1998,
the Company created a new plan for one of its subsidiaries which also has the
ability to invest in these custom funds. 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 funds 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>
ADVO, 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 "*".
December 31,
------------------------------
1999 1998
---- ----
Cash $ 97,394 $ --
----
Collective Investment Funds:
---------------------------
Merrill Lynch Income Accumulation Fund 7,117,369 * 7,064,105 *
Barclays Global Investors Asset Allocation Fund 10,449,927 * --
Barclays Global Investors S&P MidCap Stock Fund 2,934,418 --
Mutual Funds
------------
Templeton Foreign Fund 2,710,207 1,859,240
Money Market Fund-MasterWorks -- 3,200,576 *
Barclays Global Investors S&P 500 Stock Fund 21,354,086 * 16,436,134 *
Lord Abbett Developing Growth Fund 1,211,318 --
Merrill Lynch Retirement Reserves Money Fund 3,831,927 * --
ADVO Custom Funds:
------------------
ADVO Fidelity Asset Manager Fund -- 10,104,824 *
ADVO Berger 100 Fund -- 1,703,368
ADVO AXP New Dimensions Fund 17,611,366 * 13,753,959 *
ADVO Stock Fund 3,085,028 3,029,823 *
Participant Loans 2,053,414 1,947,171
----------- ------------
TOTAL $72,456,454 $ 59,099,200
=========== ============
- 7 -
<PAGE>
ADVO, Inc
401(k) Savings Plan
Notes to Financial Statements
December 31, 1999
During 1999 and 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 $ 1,758,299 $ --
Mutual Funds 2,534,038 2,237,907
ADVO Custom Funds 4,031,345 5,236,987
----------- -----------
$ 8,323,682 $ 7,474,894
=========== ===========
D. Differences Between Financial Statements and Form 5500
------------------------------------------------------
The following is a reconciliation of assets available for plan benefits per the
financial statements to the Plan's Form 5500:
December 31,
--------------------------
1999 1998
---- ----
Assets available for plan benefits
per the financial statements $ 72,781,877 $ 59,287,991
Amounts allocated to withdrawn
participants (107,053) (775,722)
--------------- ---------------
Assets available for plan benefits
per the Form 5500 $ 72,674,824 $ 58,512,269
=============== ===============
The following is a reconciliation of benefit payments per the financial
statements to the Plan's Form 5500:
Year Ended December 31,
-----------------------------
1999 1998
----- ----
Benefit payments per
the financial statements $ 9,542,820 $ 5,036,744
Add: Current year amounts allocated
to withdrawn participants 107,053 775,722
Less: Prior year amounts allocated
to withdrawn participants (775,722) (95,083)
------------- -------------
Benefits paid to participants per
the Form 5500 $ 8,874,151 $ 5,717,383
============= =============
Amounts allocated to withdrawn participants are recorded on the Form 5500 for
benefit claims that have been processed and approved for payment prior to
year-end but not yet paid.
- 8 -
<PAGE>
ADVO, Inc
401(k) Savings Plan
Notes to Financial Statements
December 31, 1999
F. Income Tax Status
-----------------
The Plan is qualified under Section 401(a) and Section 401(k) of the Internal
Revenue Code ("IRC") and is, therefore, exempt from federal income taxes based
on a favorable determination letter from the Internal Revenue Service dated
August 23, 1995.
The Plan is required to operate in conformity with the IRC to maintain its
qualification. The Company is not aware of any course of action or series of
events that have occurred that might adversely affect the Plan's qualified
status.
- 9 -
<PAGE>
Schedule I
<TABLE>
<CAPTION>
ADVO, Inc.
401(k) Savings Plan
Employer Identification Number 06-0885252, Plan Number 001
Schedule H, Line 4i - Schedule of Assets Held for Investment Purposes at End of Year
December 31, 1999
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 -- $ 97,394
Collective Investment Funds:
Merrill Lynch Income Accumulation Fund 453,555 units 7,117,369
Barclays Global Investors Asset Allocation Fund 286,928 units 10,449,927
Barclays Global Investors S&P MidCap Stock Fund 90,624 units 2,934,418
Mutual Funds:
Templeton Foreign Fund 241,551 units 2,710,207
Barclays Global Investors S&P 500 Stock Fund 790,014 units 21,354,086
Lord Abbett Developing Growth Fund 59,204 units 1,211,318
Merrill Lynch Retirement Reserves Money Fund 3,831,927 units 3,831,927
ADVO Custom Funds: *
ADVO AXP New Dimensions Fund 462,970 units 17,611,366
ADVO Stock Fund 160,344 units 3,085,028
Participant Loans Bear interest at rates ranging
from 7-10% with varying 2,053,414
maturity dates
---------
TOTAL $ 72,456,454
============
</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.
ADVO, Inc.
401(k) Savings Plan
Date: June 27, 2000 By: \s\ JULIE A. ABRAHAM
------------- ----------------------
Julie A. Abraham
Vice President and Controller
(Principal Accounting Officer)
