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, 2001
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
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(Full title of the plan)
ADVO, Inc.
One Univac Lane,
P.O. Box 755,
Windsor, CT 06095-0755
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(Name of issuer of the securities held pursuant to the plan
and the address of its principal executive offices)
MailCoups, Inc. 401(k) Savings Plan
Annual Report
Index to Form 11-K
Year Ended December 31, 2001
Report of Independent Auditors
Financial Statements:
Statements of Net Assets Available for Plan Benefits as of
December 31, 2001 and 2000
Statements of Changes in Net Assets Available for Plan
Benefits for the Years Ended December 31, 2001
and 2000
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 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, 2001 and
2000, and the related statements of changes in net 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 net assets available for plan benefits of the Plan at
December 31, 2001 and 2000, and the changes in its net 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, 2001, 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 6, 2002
MAILCOUPS, INC.
401(k) SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
December 31,
------------
2001 2000
---- ----
Assets
Investments at Fair Value $805,045 $725,201
Receivables:
Employees' Contributions - 6,954
Employer's Contributions - 1,967
-------- --------
Total Receivables - 8,921
-------- --------
Net Assets Available for Plan Benefits $805,045 $734,122
======== ========
See accompanying notes to financial statements.
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MAILCOUPS, INC.
401(k) SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
Year-ended
December 31,
------------
Additions to assets attributed to: 2001 2000
---- ----
Investment income:
Net realized and unrealized depreciation
in fair value of investments $(69,047) $ (7,123)
Interest 992 893
Dividends 16,305 31,395
Contributions:
Employee 150,729 156,984
Employer 29,949 30,012
Employee rollover 17,875 --
--------- --------
Total Additions 146,803 212,161
Deductions to assets attributed to:
Benefit payments 75,880 149,525
--------- --------
Net increase in net assets available
for plan benefits: 70,923 62,636
Net Assets Available for Plan Benefits:
Beginning of the year 734,122 671,486
--------- --------
End of the year $ 805,045 $734,122
========= ========
See accompanying notes to financial statements.
- 4 -
MAILCOUPS, INC.
401(k) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
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).
Contributions
MailCoups contributes 50 percent of the first 3 percent of a participant's pay
deferral contributions to the Plan. 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 and MailCoups' contributions into various investment options
offered by the Plan. The Plan offers nine investment options: three collective
investment funds, four mutual funds, and two ADVO custom funds, one of which
includes Company common stock.
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. All employer matching contributions vest immediately.
Payment of Benefits
Upon termination of service a participant 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 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 are paid ratably
through monthly payroll deductions.
- 5 -
MAILCOUPS, INC.
401(k) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
Expenses of the Plan
All costs and expenses of operation and administration of the Plan are paid by
MailCoups.
Plan Merger
Effective January 1, 2002, the Plan was merged into the ADVO, Inc. 401(k)
Savings Plan ("ADVO Plan"). MailCoups' associates will be entitled to the
provisions of the ADVO Plan.
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.
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 -
MAILCOUPS, INC.
401(k) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
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.
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,
------------
2001 2000
---- ----
Cash $ -- $ 431
Collective Investment Funds:
Merrill Lynch Income Accumulation Fund 70,699* 23,930
Barclays Global Investors Asset Allocation Fund 90,496* 97,248*
Barclays Global Investors S&P MidCap Stock Fund 125,683* 110,069*
Mutual Funds:
Templeton Foreign Fund 14,919 11,864
Barclays Global Investors S&P 500 Stock Fund 183,467* 215,707*
Lord Abbett Developing Growth Fund 3,463 473
Merrill Lynch Retirement Reserves Money Fund 26,663 19,858
ADVO Custom Funds:
ADVO AXP New Dimensions Fund 141,509* 145,573*
ADVO Stock Fund 115,765* 88,013*
Participant Loans 32,381 12,035
-------- --------
TOTAL $805,045 $725,201
======== ========
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MAILCOUPS, INC.
401(k) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
During 2001 and 2000, the Plan's investments (including investments purchased,
sold as well as held during the year) (depreciated)/appreciated in fair value as
determined by quoted market prices as follows:
Net Realized and Unrealized
(Depreciation)/Appreciation
in Fair Value of Investments
----------------------------
2001 2000
---- ----
Collective Investment Funds $ (7,288) $ 17,011
Mutual Funds (37,441) (50,990)
ADVO Custom Funds (24,318) 26,856
-------- --------
$(69,047) $ (7,123)
======== ========
D. DIFFERENCE BETWEEN FINANCIAL STATEMENTS AND FORM 5500
The following is a reconciliation of net assets available for plan benefits per
the financial statements to the Form 5500:
December 31, 2001
-----------------
Net assets available for plan benefits
per the financial statements $ 805,045
Transfer to the ADVO, Inc. 401(k)
Savings Plan (805,045)
---------
Net assets available for plan benefits
per the Form 5500 $ -
=========
E. INCOME TAX STATUS
The Plan has applied for but 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, including all amendments through December 31, 2001, is qualified and,
therefore, the related trust is exempt from taxation.
-8-
SCHEDULE I
MAILCOUPS, INC.
401(k) SAVINGS PLAN
EMPLOYER IDENTIFICATION NUMBER 06-0885252, PLAN NUMBER 003
SCHEDULE H, LINE 4I-SCHEDULE OF ASSETS ( HELD AT END OF YEAR)
DECEMBER 31, 2001
Description of Investment,
Identity of Issue, Borrower, Lessor including Maturity Date, Rate of
or Similar Party Interest, Par or Maturity Value Current Value
---------------- ------------------------------- -------------
Collective Investment Funds:
Merrill Lynch Income Accumulation Fund 70,699 units $ 70,699
Barclays Global Investors Asset Allocation Fund 2,635 units 90,496
Barclays Global Investors S&P Midcap Stock Fund 3,344 units 125,683
Mutual Funds:
Templeton Foreign Fund 1,613 units 14,919
Barclays Global Investors S&P 500 Stock Fund 10,538 units 183,467
Lord Abbett Developing Growth Fund 229 units 3,463
Merrill Lynch Retirement Reserves Money Fund 26,663 units 26,663
*ADVO Custom Funds:
ADVO AXP New Dimensions Fund 4,849 units 141,509
ADVO Stock Fund 3,357 units 115,765
Participant Loans Bear interest at rates ranging
from 6.00% - 10.50% with varying
maturity dates 32,381
--------
TOTAL $805,045
========
* 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.
MailCoups, Inc.
401(k) Savings Plan
Date: June 19, 2002 By: \s\ SCOTT ESPOSITO
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Scott Esposito
Vice President, Human Resources