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Last10K.com | 10-K Annual Report Thu Dec 07 2006
EX-99.1 2 a5277035ex991.txt EXHIBIT 99.1 Exhibit 99.1 ADVO Reports Preliminary Fourth Quarter and Fiscal 2006 Results WINDSOR, Conn.--(BUSINESS WIRE)--Nov. 16, 2006--ADVO, Inc. (NYSE: AD) today reported preliminary results for its fourth quarter and full year fiscal 2006. The Company's final results are subject to the completion of year-end audit procedures, and final results will be reported in conjunction with the filing of the Company's Form 10-K for fiscal 2006, expected to be filed in early December. On a preliminary basis, revenue for its fiscal year ended September 30, 2006 was a record $1,443.5 million versus $1,385.6 million in the prior fiscal year, operating income was $37.9 million versus $69.1 million in the prior fiscal year, and diluted E.P.S. was $0.66 versus $1.27 in the prior fiscal year. Fiscal 2006 contained a planned extra week versus the prior year period due to the Company's 52/53 week fiscal year, which occurred in the Company's third fiscal quarter. Full year fiscal 2006 results contained certain non-recurring and incremental costs totaling approximately $15.7 million, or $0.32 in E.P.S. Included in the full year results were litigation and other costs related to the Company's pending merger with Valassis Communications, Inc. (NYSE: VCI) of $7.4 million and a charge of $3.0 million related to the previously announced closure of the Company's Memphis production facility, the newspaper agreements in Southern California, and the outsourcing of the Company's graphics print services. In addition to these costs, the Company incurred incremental year-over-year expenses of $5.3 million related to the adoption of FAS123(R). On a preliminary basis, the Company's fourth quarter revenue was $343.8 million versus $343.2 million in the prior year period, operating income was a loss of ($5.7) million versus an operating profit of $14.1 million in the prior year period, and diluted E.P.S. was a loss of ($0.12) versus a profit of $0.27 in the prior year period. The fourth quarter of fiscal 2006 contained certain non-recurring and incremental costs totaling approximately $7.4 million. The fourth quarter included litigation and other costs related to the pending merger with Valassis of $4.5 million. Also included in the fourth quarter results was a charge of $1.5 million related to the previously announced closure of the Company's Memphis production facility, the newspaper agreements in Southern California, and the outsourcing of the Company's graphics print services. In addition to these costs, the Company incurred incremental year-over-year expenses of $1.4 million related to the adoption of FAS123(R). Additionally, during the Company's fourth fiscal quarter, adjustments were made to client billings which related to advertising distributed during the Company's third fiscal quarter. These billing adjustments related to orders entered in the Company's new SDR enterprise wide order-to-cash system, and were identified during the Company's fourth fiscal quarter. The billing adjustments totaled approximately 1.8% of the Company's quarterly revenue, and reduced fourth quarter revenue and operating income by approximately $6 million. Preliminary fourth quarter operating income as a percentage of revenue declined 5.8 percentage points versus the prior year period. The billing adjustments accounted for approximately 1.8 percentage points of operating margin decline. Incremental costs related to the Valassis merger and litigation accounted for 1.3 percentage points of operating margin decline, and costs related to investment in Company strategic initiatives, specifically the Memphis production facility consolidation, Southern California newspaper agreements and graphics print outsourcing, accounted for 0.4 percentage points of operating margin decline. The adoption of FAS123(R) accounted for 0.4 percentage points of operating margin decline. Fourth quarter operating income as a percent to revenue was also impacted by decreases in zone products revenue (1.6 percentage points), transitional costs related to the Company's conversion to its new enterprise-wide SDR order-to-cash system (approximately 0.9 percentage points), and additional depreciation expense primarily due to placing the Company's new SDR system in service (0.5 percentage points). The Company's preliminary year-end balance sheet showed improvements during its fourth fiscal quarter. As expected, improvements in receivables collections drove increases in cash flow, enabling the Company to pay off the third quarter ending revolver balance of $21 million. This left $125 million of long-term notes outstanding at fiscal year-end, and provided a year-end book cash balance of $38 million. For the full fiscal year capital expenditures were $44 million, down $11 million from the prior year. In the fourth quarter the Company's shared advertising packages grew 1.6% to 1.050 billion, and pieces per package were 8.6, up 2.2%. Total shared advertising piece volumes grew 3.9% to 9.1 billion. This quarterly piece volume result was the highest in ADVO's history, reflecting continuing increases in demand for the Company's products and movement toward more targeted, measurable media across the advertising marketplace. Revenue per piece(a)declined 5.7%, driven by the billing adjustments, decreases in zone product revenue, and to a lesser extent declines in advertising piece weights and revenue per ounce. Fourth quarter total zone products revenue declined $5.7 million year-over-year. Scott Harding, ADVO's Chief Executive Officer stated, "Like other companies in our industry, ADVO's performance was impacted by a decline in industry market conditions. Nevertheless I am proud of our efforts and believe that we are well positioned for success. I am particularly proud of our people as we are weathering the industry downturn in the face of the tremendous distraction and time commitment involved with the Valassis merger announcement, the thousands of hours spent on due diligence and Valassis-imposed integration planning activities, and the enormous burden of the ensuing litigation. Additionally, ADVO associates across our Company put forth a terrific effort during the implementation of our new SDR enterprise wide order-to-cash system. Despite these significant productivity drains, we were able to deliver revenue performance in excess of our peers. Our margins, while down, were consistent with declines realized across the industry." Mr. Harding continued, "This has been a year like no other, with management's time and energy devoted to several major initiatives. As we enter fiscal 2007, we are optimistic about our prospects for profitable growth, including continuing to capitalize on the marketplace trend towards more measurable, targeted media. Importantly, our efforts in 2007 will be focused on generating revenue within our existing in-home network, leveraging our cost base and delivering profitable growth. We are also looking forward to benefiting from the significant strategic initiatives in which we invested in this past year. These include the benefits from our Southern California newspaper agreements, graphics print outsourcing, Memphis facility consolidation, and redesigned Zone Products strategy." Pro forma impact of certain non-recurring expenses, one-time charges, and FAS123(R) adoption on operating income and diluted earnings per share*: Operating Income Diluted E.P.S. (Preliminary) (Preliminary) Twelve Months Ended Twelve Months Ended ------------------- ------------------- ($ millions, except E.P.S.) September September September September 30, 2006 24, 2005 30, 2006 24, 2005 --------- --------- --------- --------- As Reported $37.9 $69.1 $0.66 $1.27 Strategic initiatives charge 3.0 -- 0.06 -- Litigation and merger related expenses 7.4 -- 0.15 -- Incremental FAS123(R) expense 5.3 -- 0.11 -- 3Q05 Realignment charge -- 3.5 -- 0.07 --------- --------- --------- --------- Pro forma ** $53.6 $72.6 $0.98 $1.34 * This non-GAAP financial measure reconciliation is provided because fiscal 2006 preliminary operating income and E.P.S. includes incremental expenses the Company incurred as a result of litigation and other costs related to its pending merger with Valassis, charges related to various strategic initiatives, and the adoption of new accounting rules related to FAS123(R). Management believes that reconciling operating income and E.P.S. in this manner facilitates comparisons to prior period results and assists securities analysts and others when comparing actual results to their expectations. The above non-GAAP E.P.S. calculation should not be considered a substitute for GAAP E.P.S. ** This non-GAAP financial measure does not adjust for estimated negative profit impact of an estimated $6 million in operating income and $0.14 in E.P.S. related to the transition to the Company's new order entry system during fiscal 2006. Key Statistics - Preliminary Fiscal 2006 Results and Growth vs. Fiscal 2005 ---------------------------------------------------------------------- FY06 Excluding 4Q06 FY06 53rd Week (b) ------- ------- -------------- Revenue (millions) $344 $1,444 $1,416 Revenue Growth 0.2% 4.2% 2.2% Advertising Packages (millions) 1,050 4,290 4,206 Advertising Package Growth 1.6% 3.3% 1.3% Pieces per Package 8.6 8.4 Pieces per Package Growth 2.2% 2.5% Advertising Pieces (millions) 9,075 36,195 35,481 Advertising Pieces Growth 3.9% 5.9% 3.8% Revenue per Thousand Pieces(a) $33.80 $36.01 Revenue per Thousand Pieces Growth -5.7% -3.5% % Underweight 21.3% 22.3% Percentage Point Improvement 1.8pp 0.6pp (a) 4Q06 and FY06 revenue per thousand pieces have been estimated to provide materially comparable statistics versus the prior year period. (b) The impact of the 53rd week on revenue, advertising packages and pieces has been estimated to provide materially comparable statistics to the prior year period. The Company will hold a prerecorded analyst conference call to discuss its fiscal 2006 earnings today at 5:15-6:00 p.m. ET. The call in number is 1-800-818-5264, and the replay number is 1-888-203-1112 (access code #7937439). The replay will be available until midnight, December 6, 2006. The call will also be available via webcast through the Investor Relations section of ADVO's website at www.advo.com. This press release may contain certain statements regarding ADVO's business outlook, prospects, future economic performance, anticipated profitability, revenues, expenses or other financial items, future contracts, market opportunities and other statements that are not historical facts, such statements are "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, each as amended. Such forward looking statements are based on current information and expectations and are subject to risks and uncertainties which could cause ADVO's actual results to differ materially from those in the forward looking statements. ADVO's business is promotional in nature, and ADVO serves its clients on a "just in time" basis. As a result, fluctuations in the amount, timing, pages, weight, and kinds of advertising pieces can vary significantly from period to period, depending on its customers' promotional needs, inventories, and other factors. In any particular period these transactional fluctuations are difficult to predict, and can materially affect ADVO's revenue and profit results. ADVO's business contains additional risks and uncertainties which include, but are not limited to: general changes in customer demand and pricing; the possibility of consolidation in the retail sector; the impact of economic or political conditions on advertising spending and ADVO's distribution system; postal and paper prices; possible governmental regulation or legislation affecting aspects of ADVO's business; the efficiencies achieved with technology upgrades; fluctuations in interest rates; the outcome of litigation regarding ADVO's merger agreement with Valassis; and other general economic factors. Additonally, the information in this press release is presented on a preliminary basis, and represents management's best estimate of the Company's results for the fourth fiscal quarter and full fiscal year 2006. The results discussed herein are subject to the completion of the Company's year-end audit procedures, and final results will be reported in conjunction with the filing of the Company's Form 10-K for fiscal 2006. ADVO is the nation's leading direct mail media company, with annual revenues of $1.4 billion. Serving 17,000 national, regional and local retailers, the company reaches 114 million households, more than 90% of the nation's homes, with its ShopWise(R) shared mail advertising. The company's industry-leading targeting technology, coupled with its unparalleled logistics capabilities, enable retailers seeking superior return on investment to target, version and deliver their print advertising directly to consumers most likely to respond. Demonstrating ADVO's effectiveness as a print medium, the company's "Have You Seen Me? (R)" missing child card, distributed with each ShopWise(R) package, is the most recognized mail in America. This signature public service program has been responsible for safely recovering 143 children. The program was created in partnership with the National Center for Missing & Exploited Children and the U.S. Postal Service in 1985. ADVO employs 3,700 people at its 23 mail processing facilities, 33 sales offices and headquarters in Windsor, CT. The company can be visited online at www.ADVO.com. ADVO, Inc. Consolidated Statements of Operations (In thousands, except per share data) Quarter ended Year ended ------------------------ ------------------------ Preliminary* Preliminary* September September September September 30, 24, 30, 24, 2006 2005 2006 2005 ------------ ----------- ------------ ----------- (Unaudited) (Unaudited) (Unaudited) Revenues $343,778 $343,183 $1,443,537 $1,385,642 Cost of sales 281,001 267,260 1,141,283 1,062,382 Selling, general and administrative 68,519 61,856 264,361 254,162 ------------ ----------- ------------ ----------- Operating income (5,742) 14,067 37,893 69,098 Interest expense (2,769) (1,859) (9,455) (6,897) Equity earnings in joint ventures 924 551 3,276 2,029 Other income (expense), net 160 34 351 (306) ------------ ----------- ------------ ----------- Income before income taxes (7,427) 12,793 32,065 63,924 Provision for income taxes (3,798) 4,399 11,268 23,971 ------------ ----------- ------------ ----------- Net income $ (3,629) $ 8,394 $ 20,797 $ 39,953 ============ =========== ============ =========== Basic earnings per share $ (0.12) $ 0.27 $ 0.66 $ 1.29 ============ =========== ============ =========== Diluted earnings per share $ (0.12) $ 0.27 $ 0.66 $ 1.27 ============ =========== ============ =========== Dividends declared per share $ 0.11 $ 0.11 $ 0.44 $ 0.44 ============ =========== ============ =========== Weighted average basic shares 31,474 31,196 31,376 30,998 Weighted average diluted shares 31,474 31,524 31,573 31,378 * The Company's final fourth quarter and year-end fiscal 2006 results are subject to the completion of year-end audit procedures, and final results will be reported in conjunction with the filing of the Company's Form 10-K for fiscal 2006, expected to be filed in early December. ADVO, Inc. Consolidated Balance Sheets (In thousands, except share data) Preliminary * September 30, September 24, 2006 2005 ------------- ------------- ASSETS (Unaudited) Current assets: Cash and cash equivalents $ 37,721 $ 46,238 Accounts receivable, net 210,039 162,542 Inventories 3,948 2,500 Prepaid postage 7,002 10,747 Prepaid expenses and other current assets 6,508 6,360 Federal income taxes receivable 4,677 2,884 Deferred income taxes 13,358 10,996 ------------- ------------- Total current assets 283,253 242,267 Property, plant and equipment 452,885 420,738 Less accumulated depreciation and amortization (258,276) (226,735) ------------- ------------- Net property, plant and equipment 194,609 194,003 Investment in deferred compensation plan 16,462 15,134 Goodwill 22,890 22,824 Other assets 3,424 4,502 ------------- ------------- TOTAL ASSETS $ 520,638 $ 478,730 ============= ============= LIABILITIES Current liabilities: Accounts payable 55,041 55,276 Accrued compensation and benefits 29,951 27,919 Customer advances 25,819 7,302 Federal and state income taxes payable 2,467 325 Other current liabilities 26,699 25,468 ------------- ------------- Total current liabilities 139,977 116,290 Long-term debt 123,974 124,867 Deferred income taxes 23,109 29,641 Deferred compensation plan 17,451 16,172 Other liabilities 12,146 6,475 ------------- ------------- Total liabilities 316,657 293,445 STOCKHOLDERS' EQUITY Preferred stock, $.01 par value (Authorized 5,000,000 shares, none issued) --- --- Common stock, $.01 par value (Authorized 80,000,000 shares, issued 32,075,347 and 31,719,419 shares, respectively) 321 317 Additional paid-in capital 188,841 180,510 Unamortized deferred compensation -- (3,846) Accumulated earnings 24,063 17,182 Less shares of common stock held in treasury at cost (8,949) (8,124) Less shares of common stock held in deferred compensation trust (988) (1,038) Accumulated other comprehensive income 693 284 ------------- ------------- Total stockholders' equity 203,981 185,285 ------------- ------------- TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 520,638 $ 478,730 ============= ============= * The Company's final year-end fiscal 2006 results are subject to the completion of year-end audit procedures, and final results will be reported in conjunction with the filing of the Company's Form 10-K for fiscal 2006, expected to be filed in early December. ADVO, Inc. Consolidated Statements of Cash Flows (In thousands) Year Ended --------------------------- Preliminary * September 30, September 24, 2006 2005 ------------- ------------- (Unaudited) Cash flows from operating activities: Net income $ 20,797 $ 39,953 Adjustments to reconcile net income to net cash flows (used) provided by operating activities: Depreciation 42,968 38,359 Stock-based compensation 7,996 2,666 Amortization of debt issue costs 554 554 Deferred income taxes (9,050) 8,678 Provision for bad debts 6,776 9,610 Equity earnings from joint ventures (3,276) (2,029) Other (32) (10) Change in operating assets and liabilities, net of effects of acquisitions: Accounts receivable (54,452) (22,366) Inventories (1,446) (373) Prepaid postage 3,745 (9,404) Prepaid expenses and other current assets (147) 85 Investment in deferred compensation plan (61) (445) Other assets 636 1,811 Accounts payable (26) 3,254 Accrued compensation and benefits 2,019 (156) Deferred compensation plan 61 445 Customer advances 18,514 (1,353) Federal and state income taxes payable 173 (3,638) Other liabilities 6,364 2,621 Distributions from equity joint ventures 3,164 1,963 ------------- ------------- Net cash provided by operating activities 45,277 70,225 Cash flows from investing activities: Acquisitions, net of cash acquired -- (219) Expenditures for property, plant and equipment (44,051) (54,910) Proceeds from disposals of property, plant and equipment 518 232 Proceeds from sale of aircraft rights -- 2,350 ------------- ------------- Net cash used by investing activities (43,533) (52,547) Cash flows from financing activities: Proceeds from exercise of stock options 3,799 13,406 Tax benefit from stock transactions 562 -- Treasury stock transactions related to stock awards (825) (1,577) Cash dividends paid (13,877) (13,650) ------------- ------------- Net cash used by financing activities (10,341) (1,821) Effect of exchange rate changes on cash and cash equivalents 80 97 Change in cash and cash equivalents (8,517) 15,954 Cash and cash equivalents at beginning of period 46,238 30,284 ------------- ------------- Cash and cash equivalents at end of period $ 37,721 $ 46,238 ============= ============= * The Company's final year-end fiscal 2006 results are subject to the completion of year-end audit procedures, and final results will be reported in conjunction with the filing of the Company's Form 10-K for fiscal 2006, expected to be filed in early December. CONTACT: Investors: ADVO, Inc. Chris Hutter, 860-285-6424 National Vice President, Finance or Joele Frank, Wilkinson Brimmer Katcher Joele Frank / Eric Brielmann, 212-355-4449 or Media: ADVO, Inc. Pam Kueber, 860-298-5797 Vice President, Corporate Communications
The following information was filed by Advo Inc on Thursday, November 16, 2006 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.
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Advo Inc provided additional information to their SEC Filing as exhibits
Exhibit 10.U: Amendment No. 3 To Employment Agreement Between Advo And S. Scott Harding
Exhibit 10.V: Amendment No. 3 To Severance Agreement Between Advo And Jeffrey E. Epstein
Exhibit 21: Subsidiaries Of The Registrant
Exhibit 22: Report Of Inspector Of Election
Exhibit 23: Consent Of Public Accounting Firm
Exhibit 31.A: Certification Of Ceo Pursuant To Section 302
Exhibit 31.B: Certification Of Cfo Pursuant To Section 302
Exhibit 32: Certification Of Ceo And Cfo Pursuant To Section 906
CIK: 801622
Form Type: 10-K Annual Report
Accession Number: 0001193125-06-248731
Submitted to the SEC: Thu Dec 07 2006 5:12:13 PM EST
Accepted by the SEC: Thu Dec 07 2006
Period: Saturday, September 30, 2006
Industry: Direct Mail Advertising Services
External Resources:
SEC.gov
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