FORM 11-K/A
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, 2003
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
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(Full title of the plan)
ADVO, Inc.
One Targeting Centre
Windsor, CT 06095
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(Name of issuer of the securities held pursuant to the plan
and the address of its principal executive offices)
.
ADVO, Inc. 401(k) Savings Plan
Annual Report
Index to Form 11-K
Year Ended December 31, 2003
Report of Independent Auditors
Financial Statements:
Statements of Assets Available for Plan Benefits as of
December 31, 2003 and 2002
Statements of Changes in Assets Available for Plan
Benefits for the years ended December 31, 2003 and 2002
Notes to Financial Statements
Supplemental Schedule:
Schedule I - Schedule H, Line 4i -Schedule of Assets (Held at End of Year)
Signature
Exhibit 23 - Consent of Ernst & Young LLP
Report of Independent Registered Public Accounting Firm
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, 2003 and 2002,
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 the standards of the Public Company
Accounting Oversight Board (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, 2003 and 2002, 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 at end of year) as of December 31, 2003, 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 8, 2004
ADVO, INC.
401(k) SAVINGS PLAN
STATEMENTS OF ASSETS AVAILABLE FOR PLAN BENEFITS
December 31,
-------------------------
2003 2002
----------- -----------
Assets
Investments at Fair Value $97,504,913 $72,360,782
Receivables:
Employees' Contributions 371,539 351,436
Employer's Contributions 244,430 224,675
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Total Receivables 615,969 576,111
----------- -----------
Assets Available for Plan Benefits $98,120,882 $72,936,893
=========== ===========
See accompanying notes to financial statements.
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ADVO, INC.
401(k) SAVINGS PLAN
STATEMENTS OF CHANGES IN ASSETS AVAILABLE FOR PLAN BENEFITS
Year-ended
December 31,
---------------------------
2003 2002
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ADDITIONS TO ASSETS ATTRIBUTED TO:
Investment income (loss):
Net realized and unrealized appreciation
(depreciation) in fair value of investments $ 15,748,276 $(12,509,027)
Interest 193,091 204,022
Dividends 920,124 878,265
Contributions:
Employee 9,148,466 8,815,374
Employer 5,544,696 5,311,522
Employee rollover 771,596 592,884
------------ ------------
Total Additions 32,326,249 3,293,040
------------ ------------
DEDUCTIONS TO ASSETS ATTRIBUTED TO:
Benefit payments 7,142,260 6,967,216
------------ ------------
Transfer In -- 794,937
------------ ------------
Net increase (decrease) in assets available
for plan benefits 25,183,989 (2,879,239)
Assets available for plan benefits:
Beginning of the year 72,936,893 75,816,132
------------ ------------
End of the year $ 98,120,882 $ 72,936,893
============ ============
See accompanying notes to financial statements.
- 4 -
ADVO, INC.
401(k) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003
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 employees ("participants")
of ADVO, Inc. (the "Company"). Participants are eligible to join the Plan on the
first day of the month following the date of hire. Participants are eligible for
the company match on the first day of the month following six months of
continuous employment.
The Plan is subject to the provisions of the Employee Retirement Income Security
Act of 1974 (ERISA).
Contributions
-------------
Participants may contribute up to 16 percent of their annual compensation on a
pretax basis, as defined in the Plan. 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 and the Company's contributions into various investment
options offered by the Plan. The Plan currently offers sixteen investment
options: primarily mutual funds and a fund with Company common stock.
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
-------------------
Upon termination of service, participants may elect to receive a lump-sum amount
equal to the value of their account.
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 are 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.
- 5 -
ADVO, INC.
401(k) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003
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 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 plan's
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.
Transfer In
-----------
Effective January 1, 2002, the MailCoups, Inc. 401(k) Savings Plan was merged
into the Plan. MailCoups, Inc.'s associates are entitled to the provisions of
the ADVO Plan.
Subsequent Events
-----------------
Effective January 2, 2004, the Mail Marketing Systems, Inc. (MMSI) 401(k)
Savings Plan will merge into the Plan. MMSI's associates will be entitled to the
provisions of the ADVO Plan.
Effective May 18, 2004, the Company established a new plan for the benefit of
non-highly compensated sales associates on substantially the same provisions as
the ADVO Plan. As such, the account balances of non-highly compensated sales
associates will be transferred out of the ADVO Plan.
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 which represent the net asset values of 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 by
participants in these funds.
Participant loans are stated at their outstanding principal balances which
approximate fair value.
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
- 6 -
ADVO, INC
401(k) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003
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.
C. INVESTMENTS
The Plan's investments are primarily held by bank-administered trust funds. On
January 1, 2003, Fidelity Investments was appointed the Plan's provider of
record keeping and trust services, replacing Merrill Lynch. 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,
-------------------------------
2003 2002
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Cash $ -- $ 3,217
Collective Investment Funds:
Merrill Lynch Retirement Preservation Trust -- 12,148,405 *
Barclays Global Investors Asset Allocation Fund -- 8,314,611 *
Barclays Global Investors S&P MidCap Stock Fund -- 6,812,202 *
ADVO Custom Funds:
ADVO AXP New Dimensions Fund -- 11,228,010 *
ADVO Stock Fund 8,134,895 * 4,959,684 *
Mutual Funds
Templeton Foreign Fund -- 2,858,711
Barclays Global Investors S&P 500 Stock Fund -- 14,773,382 *
Lord Abbett Developing Growth Fund -- 2,138,499
Merrill Lynch Retirement Reserves Money Fund -- 6,272,877 *
PIMCO Total Return 933,762 --
Calamos Growth Fund- Class A 10,786,265 * --
Strong Advisor Small Cap Value Fund - Class Z 654,706 --
Spartan U.S. Equity Index Fund 19,997,129 * --
Fidelity Equity - Income Fund 355,367 --
Fidelity Balanced Fund 11,613,093 * --
Fidelity Diversified International Fund 4,459,540 --
Fidelity Dividend Growth Fund 14,434,779 * --
Fidelity Small Cap Stock Fund 4,140,533 --
Fidelity Retirement Money Market Portfolio 17,519,259 * --
Fidelity Freedom Income Fund 103,235 --
Fidelity Freedom 2010 Fund 265,902 --
Fidelity Freedom 2020 Fund 462,461 --
Fidelity Freedom 2030 Fund 294,521 --
Fidelity Freedom 2040 Fund 80,870 --
Participant Loans 3,268,596 2,851,184
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TOTAL $ 97,504,913 $72,360,782
=============== ===========
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ADVO, INC
401(k) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003
During 2003 and 2002, the Plan's investments (including investments purchased,
sold as well as held during the year) appreciated (depreciated) in fair value as
determined by quoted market prices as follows:
Net Realized and Unrealized
Appreciation (Depreciation) In Fair
Value of Investments
-----------------------------------
2003 2002
------------ ------------
Collective Investment Fund $ -- $ (2,402,731)
Mutual Funds 13,409,950 (5,646,951)
ADVO Custom Funds 2,338,326 (4,459,345)
------------ ------------
$ 15,748,276 $(12,509,027)
============ ============
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,
---------------------------
2003 2002
----------- -----------
Assets available for plan benefits
per the financial statements $98,120,882 $72,936,893
Transfer from the MMSI
401(k) Savings Plan 932,152 --
----------- -----------
Assets available for plan benefits
per the Form 5500 $99,053,034 $72,936,893
=========== ===========
E. RISKS AND UNCERTAINTIES
The Plan invests in various investment securities. Investment securities are
exposed to various risks such as interest rate, market and credit risks. Due to
the level of risk associated with certain investment securities, it is at least
reasonably possible that changes in the value of investment securities will
occur in the near term and that such changes could materially affect
participants' account balances and the amounts reported in the statement of
assets available for plan benefits.
F. INCOME TAX STATUS
The Plan has received a determination letter from the Internal Revenue Service
("IRS") dated October 30, 2002, stating the Plan is qualified under Section
401(a) of the Internal Revenue Code (the "Code") and, therefore, the related
trust is exempt from taxation. Subsequent to this determination letter by the
IRS, the Plan was amended. Once qualified, the Plan is required to operate in
conformity with the Code to maintain its qualification. The plan administrator
believes the Plan is being operated in compliance with the applicable
requirements of the Code and, therefore, believes that the Plan, as amended, is
qualified and the related trust is tax exempt.
- 8 -
SCHEDULE I
ADVO, INC.
401(k) SAVINGS PLAN
EMPLOYER IDENTIFICATION NUMBER 06-0885252, PLAN NUMBER 001
SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
DECEMBER 31, 2003
Description of Investment,
Identity of Issue, Borrower, Lessor Including Maturity Date, Rate of
or Similar Party Interest, Par or Maturity Value Current Value
------------------------------------------------ -------------------------------- -------------
Mutual Funds:
PIMCO Total Return - Administrative Class 87,186 shares $ 933,762
Calamos Growth Fund - Class A 240,872 shares 10,786,265
Strong Advisor Small Cap Value Fund - Class Z 23,782 shares 654,706
Spartan U.S. Equity Index Fund 507,413 shares 19,997,129
Fidelity Equity-Income Fund 7,143 shares 355,367
Fidelity Balanced Fund 693,319 shares 11,613,093
Fidelity Diversified International Fund 184,890 shares 4,459,540
Fidelity Dividend Growth Fund 528,746 shares 14,434,779
Fidelity Small Cap Stock Fund 242,136 shares 4,140,533
Fidelity Retirement Money Market Portfolio 17,519,259 shares 17,519,259
Fidelity Freedom Income Fund 9,309 shares 103,235
Fidelity Freedom 2010 Fund 20,423 shares 265,902
Fidelity Freedom 2020 Fund 35,519 shares 462,461
Fidelity Freedom 2030 Fund 22,743 shares 294,521
Fidelity Freedom 2040 Fund 10,697 shares 80,870
*ADVO Custom Funds:
ADVO Stock Fund 215,437 units 8,134,895
Participant Loans Bear interest at rates ranging
from 5.00%-10.50% with
varying maturity dates 3,268,596
-------------
TOTAL $ 97,504,913
=============
* Indicates party-in-interest to the Plan.
Cost column is not applicable because all investment programs are fully
participant directed.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
ADVO, Inc. Associate Savings Committee 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 23, 2004 By: \s\ JOHN D. SPERIDAKOS
-------------------------
John D. Speridakos
Vice President and Controller